How to Create a Financial Plan for you Business

by | Jun 5, 2020

How to Create a Financial Plan for you Business

In our previous blog, I covered why it’s critical to have a financial plan in your Business. It gives you the ability to plot a course to success, measure your progress along the way and you can use it as the epicenter of your strategic planning.

Here are the key steps to creating one:


  1. Have the right systems in place first. Xero setup, weekly bookkeeping, the correct account codes for your business, and everything reconciled. You need actual data of the last 3 months at least to start a financial plan (for an existing business) and if that data is wrong, out of date or allocated to the wrong codes (or the codes aren’t appropriate to your business) it won’t allow you to project forward accurately.  
  2. Understand and upskill yourself around financial intelligence. This is the most important point here. As a business owner you shouldn’t delegate responsibility to your accountant or your finance team to understand the financial statements in your business. These are the scoreboard in the game of business. If you can’t read the score, you can’t win the game. It’s critical to be able to read them and understand what you need to change to improve profits, cash flow, and the numbers don’t lie!  
  3. Set up your BHAG* and 3 years worth of financial goals, start with top-line sales, profit, and cash targets for each year for 3 years. Then break down the next 12 months in quarters with targets for each quarter.  
  4. Then think about what industry you are in and what your key sales drivers are, for example, a business to business coach that uses ad spend to drive traffic to a landing page selling a coaching program and an online course. Their plan will start with sales targets and reverse back to how much they need to spend on ads to generate those sales based on landing page conversion, ad conversion, and ad costs.  
  5. Once you know this you can predict the cost of sales, and use a capacity model to plan the cost of any staff, plus add in any other direct costs like software. 
  6. Then you can look back at the last 3 months and 12 months averages for overheads (fixed costs), think about the structure of the business to support the sales and cost of sales you predicted in steps 3 to 5 and extend forward the overheads (fixed costs like rent, telephone, etc). Do they need to change as the business grows? 
  7. Now put all these targets into a google sheet model that has a column for each month, and goes forward 3 years. Each year has a total and it also shows the last 3 months and 12 months averages for income and costs plus the actual last 12 months (15 columns including last years total)

*Big Hairy Audacious Goal (25 years or more)

If you want a walk through for your business and access to a template for this then book a call with me to chat about it.

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