Planning for 2020
It is the start of a new year and a new decade. By now you should have a plan in place that will act as a blue print for what you want to accomplish this year from a financial standpoint.
Your financial plan starts with a forecast of your revenue which is influenced by the trend in the last two to three years, the amount you expect to grow from 2019, the state of the economy and the state of your industry. In addition you need to take into account the strategies for growth you intend to employ for this year, such as potential areas of diversification or acquisitions that you might pursue.
Once the revenue goal has been established, you can estimate the direct expenses in order to arrive at your expected gross profit. The two primary drivers of your income statement forecast are now in place; revenue and gross profit.
Forecasting the indirect, or operating expenses is next to arrive at operating profit. Resist the temptation to simply use the prior year as a starting point for estimating these expenses. Imagine each one at zero and then build up from there. It's called "zero-based budgeting."
The balance sheet comes next and once that is forecast, you will be able to calculate your projected financial ratios and cash flow. With this information you are going to be very well-received when discussing your financial requirements at the bank.
This all may sound a little daunting but fortunately I have developed a workbook that will make it very straight forward. Click on the following link to download either Business Mastery for general businesses or Move Mastery for moving businesses.
Simply input your historical financial data and then go to the forecasting tabs. If you have any questions email me and I am happy to help.
There is also a place on those workbooks to add your particular industry ratio averages. If you would like that information email me at dave@60minutecfo.com and I will be happy to send it to you.
I urge you to join the two percent of all businesses that establish a financial plan, and make sure your vision is 2020. It is going to help you make this a particularly Happy New Year!