How to Write an Effective Business Plan for Small Business: The Financial Strategy

The successful operation of a business depends on having a well-crafted financial strategy. A financial strategy provides direction for allocating resources, monitoring progress and evaluating results. A good financial strategy should be included in any comprehensive business plan.

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Last Updated on January 2, 2023 by Treana Wunsch

This is article number 14 in my How to Write an Effective Business Plan series. Each post guides you through writing a section of your business plan. I was going to write a paid ebook but decided to give the information for free. It’s comprehensive and may not be free for long. 

In this article, I go over how to research and write the Financial Strategy section of your business plan. If you want guidance on writing your own business plan, follow the series from the beginning.

Or if you just want me to write it for you, click here.

Financial Strategy

macbook pro with financial data shown on screen
Photo by Austin Distel on Unsplash

The successful operation of a business depends on having a well-crafted financial strategy. A financial strategy provides direction for allocating resources, monitoring progress and evaluating results. A good financial strategy should be included in any comprehensive business plan.

No matter what type of business you are managing, developing a sound and effective financial strategy is essential for long-term success. It will provide insight into the company’s financial forecast and outline plans to improve it going forward.

A proper analysis of your current finances will help you identify potential opportunities and establish goals that can be achieved through careful budgeting and decision-making. Creating a clear vision of your company’s future direction can help ensure the success of your operations in the long run.

Define Financial Goals

A financial strategy is a vital part of any business plan. It outlines the short-term and long-term goals for your finances, as well as the steps to achieve them. To make sure that your financial strategy is effective, it’s important to first define your goals.

The best way to start defining financial goals is by analyzing your current financial situation. Take into account all of your income and expenses, including any debts or investments you may have. Once you have an understanding of where you currently stand, you can then establish realistic objectives that will help guide the rest of your plan.

Your financial goals should be both specific and attainable. Make sure they are measurable so you can track progress over time. Consider factors such as cash flow, budgeting needs and profit margins when setting these objectives for yourself or your business.

For example, a small business owner might set a financial goal of achieving a 10% increase in profits over the next year by increasing efficiency and reducing costs.

Identify Financing Sources

coins falling out of tipped over jar
Photo by Josh Appel on Unsplash

Creating a financial strategy for your business plan is essential for the successful implementation of your company’s goals. A key component of this strategy is identifying financing sources that will allow you to achieve the desired outcome. To help create an effective financial strategy, here’s a look at potential financing sources and how they can be used to fuel success.

One option is using personal or investor funds, either from oneself or external investors. This can provide an injection of cash resulting in increased buying power or capital investments that improve operations. Alternatively, businesses may borrow money from banks, credit unions, alternative lenders and other finance companies which offer lines of credit and loans with varying amounts and terms depending on the type of business and its financial stability. Another option includes government grants available for specific projects and industries such as technology development or healthcare research.

To get a more detailed look at funding options in Canada, check out my article How to Get Funding to Start a Small Business in Canada.

Calculate Cash Flow

firmbee com jrh5lAq mIs unsplash
Photo by on Unsplash

Whether you are looking to start a new business or just want to expand your existing one, you need an effective financial strategy. Calculating cash flow is essential for any business plan and helps to ensure that your finances are secure and manageable. Cash flow planning involves forecasting both incoming and outgoing income in order to properly manage budget allocation. It is important to understand the concepts of cash flow in order to make informed financial decisions for your business.

Cash flow can be calculated by identifying all sources of income, such as investments, loans or sales revenue, as well as expenditures like payroll expenses or taxes. Once you have identified these components of cash flow, you can use a variety of tools and techniques in order to calculate the net amount of money coming into or out of the company over a given period.

Once your business has been launched, subscribing to a bookkeeping platform is essential to ensure you are keeping proper records and are not panicking at tax time. It will also calculate your monthly cashflow for you. Quickbooks Online is the one I use because it is user-friendly, cuts your bookkeeping time in half and is reasonably priced with multiple plans as your business needs change.

Review Business Metrics

If you can't measure it, you can't improve it.

Reviewing business metrics is an essential part of any effective financial strategy. It is important to look at the quantitative data that provides insight into how well a company’s operations, investments and financing activities are performing. Metrics can be used to assess the performance of different departments or teams within the organization, as well as provide benchmarks and trends that guide future decision-making processes.

Business metrics come in many forms and it is important to have the right metric for each task. Most businesses focus on profitability, cash flow and return on investment (ROI) as their core measurements of success. Other metrics may include customer satisfaction scores, sales volumes, revenue growth rates, cost ratios and market share information. Regularly tracking these key performance indicators (KPIs) will help identify areas where improvements are needed and strategies can be developed to reach desired goals.

If you are just starting a business, you most likely won’t have any business metrics to go by yet so you will have to research other businesses similar to yours to get the data you need.

Develop Budgeting Plan

planner and budget documents on grey desk
Photo by NORTHFOLK on Unsplash

Creating a budgeting plan is an essential part of the business planning process. It allows you to estimate your costs and expenses so that you can plan for the future with confidence. A financial strategy will help you make sure that your business remains profitable and successful in the long run.

Writing a financial strategy involves breaking down all aspects of your spending and income, including both revenue sources and fixed costs. It should also include projections for both potential investments and liabilities over time. To develop an accurate budgeting plan, you’ll need to consider areas such as marketing expenses, personnel costs, facility upgrades, technology needs, debt repayment schedules, tax implications, etc. Additionally, it’s important to assess how changes in the economy or industry may affect your cash flow over time.

Execute and Monitor Plan

Writing a financial strategy for a business plan is an important step in the planning process. It provides direction to the company’s financial goals and objectives and helps guide decisions related to operations and investments. To ensure success, once the financial strategy has been written, it must be executed and monitored.

The execution of a financial strategy includes implementing processes that can measure progress toward the stated goals. This could consist of developing systems to track cash flow or creating reporting tools that provide visibility into key performance indicators (KPIs). Additionally, in order to effectively execute the plan, any necessary resources such as personnel or technology must be identified and allocated accordingly.

To monitor the progress of the plan, regular review meetings should take place with relevant stakeholders.

Putting it All Together

Once you’ve researched and developed your Financial Strategy, you’ll need to summarize it in your business plan. Indicate how much money you’ll need to start your business and how you plan to acquire it. You’ll also want to detail out how and when you plan to pay any funding back. 

You can use bullet points, tables, and graphs. As long as potential investors can see that you have thoroughly planned everything out. Here is what a Financial Strategy might look like in a business plan. This is from my Classic Business Plan Template.


That's All Folks...

Having a financial strategy included in your business plan is an essential element of success. It provides clarity on how you expect to achieve your goals and objectives as well as a roadmap for making sure they are met. Effective planning and implementation of these strategies will help ensure that your business is flourishing and has the resources it needs to succeed.

Creating an effective financial strategy requires research and a deep understanding of the strengths and weaknesses of your organization, along with current market trends. You should consider the impact different strategies may have on both short-term and long-term growth, as well as cash flow management, financing options, budgeting, risk management, investment opportunities, taxation policies, legal requirements and more. Once you have identified the most suitable strategies for your business plan then it is important to set out clear goals that are measurable against results over time – this will provide accountability throughout the process.

I’m currently developing a Financial Forecast Spreadsheet. I plan to have this ready to purchase for my next post. It is a great tool to calculate all the financial data you need to write the Financial Strategy. It’s also beneficial to include it in the Appendices of the business plan. The next (and last) post in this series will be about the different appendices you can include in your business plan package. Stay tuned…

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