Simplified Projections & Budgets For An SME Owner Or Solo Entrepreneur
As mentioned in LAST WEEKS ARTICLE, many SME owners and solo entrepreneurs don’t set specific financial targets for their business.
Why – it takes time, you’re busy, you have a million other things to get done right now than take time out, you aren’t sure how much to aim for, you’re not sure how much you can achieve or simply, you don’t want to (to name a few).
Yet if you were employed, you’d want to know how much you’d be paid this year or this month. Financial planning for your business is simply that, in my opinion. Knowing where you are and what you want to earn for this year.
Ironically, for an SME owner or solo entrepreneur, it can actually be a lot easier to put together your targets. It can be done very simply in an hour or two. [Obviously, these would be rough estimates, but it’s much better to have something rather than nothing to aim for]
Approach for setting your targets (very simplified)
– Start with last years financial statements
– How much were your annual costs?
– How much was your annual salary and profit?
– Any costs increasing in 2019 that you know of? (e.g. Rent change / salary increases?)
– How much would you like for a salary during 2019?
– Divide your costs by 12 (monthly costs) You have to make this amount each month to meet your targets
– List the work to be done (prioritise your tasks) by weeks and month
– List the value of work beside each job
– When prioritising work or listing what must be done each week (scheduling), focus on high value items as a priority.
– Review monthly to see if you’re on track, ahead or behind. Adjust your targets or work plan accordingly.
Always ensure you focus on cash generating activities during your day. See HERE for more information on this topic.
If you’re struggling with your financial forecast, ask your accountant to go through your targets with you for an hour some day soon. Knowing where you want to go and knowing if you’re on track, with a simplified strategy is a great starting point.
Have a wonderful week.
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[28 January 2019]