You have heard many times the importance of creating a financial plan for growth, but the big question is: where should you begin?
That's why we've put together this guide to help you create a financial plan that takes into account the social impact you want to create through your business for good.
Why Do You Need A Financial Plan For Growth?
Before we start with the 'how,' let's tackle the 'why.'
We have to face the facts. More and more women are the primary breadwinners for their families, or are aiming to become financially independent. Many women also found businesses that aim to invest not just in their businesses for more profit, but into the planet and its people.
We have a long way to go before we can create equality for women worldwide. As it stands, Women are more likely to be financially vulnerable than men (24% versus 17%) – meaning they struggle in nearly all areas of their financial lives. 58% of women defer to their spouses regarding money, saying that their spouse knows more.
Creating that better future involves empowering women to be more financially literate and helping them create sustainable businesses that scale and grow. Growing an ethical company also means it can create a positive impact on more people and support more communities that need it.
Furthermore, having a well-structured plan has an invisible benefit: it can boost your confidence. Leading studies on why women struggle with financial literacy indicate that it's not that we don't know what to do: it's a lack of confidence. It's not unusual to think we don't know the answer when, in fact, we already have the knowledge. Lack of confidence is stopping women from taking an active role in managing their money. Having a plan helps us stay on track with our goals.
Because you are not a traditional, profit at all cost type of founder, the one big reason you need to have a financial plan is for you to align the financial resources to the impact strategy.
It’s not about profit alone, but it’s about how to know what resources you have and how much impact you can achieve in the near and long-term future.
Every business, including a social impact business, doesn’t have unlimited resources, if you choose to move forward without a solid and well-thought-out-plan, likely you will waste precious resources.
What Goes Into A Financial Plan For Sustainable Growth?
Now that we've established why you need a financial plan, what are the right steps to build a financial plan
Step 1: Historical Information
Do you know the financial position of your business over the last few years? We are not talking about how much your business has grown in terms of revenue.
Instead, look deeper under the hood. The balance sheet.
How much your business owns and owes, how your business has performed over the years, how have you funded your business over the years, and how strong is your business working capital position.
From this historical information, you can learn what works and what didn’t work so you can build the right financial plan.
Step 2: Assess Your Business Model
Do you have a solid business model that will allow you to create profit that supports your mission? This means you need to be clear on the following:
Target market
Cost of acquisition
Pricing structure
Direct costs to create and deliver your products or services
Strong gross margin that can support the business fixed operating expenses
Profitability goal
Step 3: Determine the Capital Gap
What impact strategy do you want to achieve in year 1, 2, 3 and so on? How much capital do you need for each impact strategy? Does the business generate enough profit to support this impact strategy? Do you need external capital? If so, then should it be a debt or equity capital?
Step 4: Track Your Progress and Adjust
Finally, track your progress on a monthly basis and adjust your financial plan as needed. A financial plan is not set in stone, instead it has to be a dynamic following your business up and down. Create “What-If” analysis each time you wonder about new opportunities.
Tips For Creating A Solid Plan For Sustainable Growth
Creating a financial plan for growth can be a daunting task. Here are some tips to help you get started:
Start Early. Don’t wait until the last minute to start creating your plan. Begin developing it as soon as possible to have plenty of time to adjust and refine it.
Be clear and specific. When setting goals and KPIs, ensure they are clear and specific. Specific and achievable goals will help you focus on what you need to do. It can also help you measure success more accurately.
Use technology. There are many tools available today that can make tracking progress easier. Take advantage of them to save time and energy. You can check out Jirav here.
Take advantage of expert help. If you don't have the expertise to create a financial plan yourself, it may be best to reach out to a professional for help.
For example, you can outsource fractional CFO services. A fractional CFO can help you develop a tailored plan suited to your business needs.
Have A Virtual Fractional CFO Create Your Financial Plan
We know there's a huge difference between having a handbook on how to do something and doing it yourself. Sometimes, it's better to have someone who's already been there do the work instead of trying to do everything yourself. But you don't want just anyone to handle your finances — you want someone who understands why you do the work you're doing.
That’s us. As a certified B Corp, Profit Reimagined dedicates itself to furthering the causes of mission-driven businesses. Our virtual fractional CFOs take the time to understand the why behind your how. Who do you want to help? What good do you want to create?
Then we determine your best financial strategy — a strategy and plan aligned to your purpose. Book a call with Profit Reimagined today to learn how we help women in business like you. You can also visit our site to see what we stand for.