The Importance of Creating a Financial Strategy for Your Business
As a business owner, the money that you earn if the lifeblood of your company. There is lots to consider when looking at the financial aspects of your business; and in order to succeed, it’s important to ensure that you have considered every single financial outcome that can happen when you spend, earn or save money.
Whether your business is big or small, you need to have a financial strategy set in place. This will help you to expand your business and will help you to outline the steps you need to take and the financial goals you need to achieve in order to grow.
What is strategic financial management
Create a plan with your outlined objectives for your business and you can then create a consistent financial strategy to ensure that this is taken care of. Strategic financial management is the process that allows for the financial aspects for your business plan, like your business expenses and revenue, wages and so on, to be accounted for.
First and foremost, your business goals should be set up so that you have a clear goal to aim for and a clear path to follow. Once you have this strategy in place, it will be easier to create a clear path for your financial goals.
As well as having a set financial goal, you will also need to consider what is going on in the world and how this could affect you financially. There is a lot of discussion about Brexit and the prospect of no-deal at the moment. Whether your business is based in the UK, the EU or the US, you will need to consider this.
If the UK leaves the EU without a deal, then there is a high prospect that this could cause a recession in the UK. This will have global ramifications for businesses based in the UK, and UK trading partners and everything in between. This will also have an impact on your recruitment strategy which is also linked to how well your business will perform financially.
Why do you need a financial strategy
Starting a business without having a set financial strategy is like starting a car without putting petrol in it, the outcome will be undesirable. Many businesses fail within the first two years of opening, so it’s important to make sure that you have a plan in place to prevent this from happening to your business.
A well-planned financial strategy can help to elevate your business and can give you an advantage over your competitors. This will also help to keep you focused and on the right track to success. Many business owners get blind-sighted by the little things and this can often lead to the business taking different turns and making dire financial decisions.
Areas to consider when making a financial plan
When considering your financial strategy, there are two things that need to be considered and they are your revenue and your expenditure. It’s important to break down your expenditure into different categories, which we will now demonstrate for you.
Your employees are essentially the bread and butter of your company when they succeed, so do you. Recruitment is a large portion of the expenditure that you will encounter as a business owner. As mentioned previously, a hard Brexit could also mean that recruitment either becomes tighter, or it could become harder to recruit from overseas.
Businesses such as IAS and publications such as Entrepreneur are trying to raise awareness for this, in order to aid your recruitment strategy and prevent any drastic financial loss in the wake of this.
Client retention is becoming more and more important, as we are living in a world where every industry that is lucrative, is becoming more and more saturated. Clients can be easily tempted by your competitors, so it’s important to do your research and to stay ahead of the market.
Once you have your clients on board, it’s important to set up a growth strategy to work in line with your financial plan. Either invest in a business development adviser or network with people to expand your business and your financial income.