As a thriving agency owner, steering through the complex maze of numbers is no small feat. It’s an ecosystem teeming with bills, expenses, forecasts, and reports that may drain your business if left unaddressed.
Yet, a clear financial road map not only steers your business in the right direction but fuels growth and innovation.
If you’re in search of that metaphorical crystal ball to glimpse the future of your finances, then you’re not alone. Only 27% of businesses have a cash forecast, leaving an alarming majority navigating without a compass. (Source: Accounting WEB)
Building a sound financial plan is akin to charting a map for your business journey. It’s not merely about surviving but thriving.
In this blog, we’ll take you through the approach to understanding your numbers and building a financial plan that ensures growth and stability.
1. Goal Setting: Your Agency’s True North
For any business owner, it is essential to know where you are headed and what your business’s goals are. No doubt, this is likely something you have already thought about, but ensure that you define your goals and set:
Monthly, quarterly, and yearly objectives.
Clear, written targets.
Constant monitoring and reassessment
2. Set Cash Flow Expectations: The Fuel for Growth
Projecting your cash flow is particularly important when you are building a plan to increase your revenue. Consider what the acceptable level of expenses will be and know how much cash you will need to generate for the level of the revenue that you would like to achieve in any year.
3. Transparency and Teamwork: Your Allies in Success
How often do you share your goals and finances with your team members? You are not alone in this journey. You need your team on board and involved every step of the way if you wish to achieve your financial goals.
4. The “What-If” Scenarios: Preparedness Pays
Every high-growth business needs to be prepared and braced for multiple scenarios. For any financial plan, you’ll need to consider:
A base scenario.
A best-case scenario (stretch goals)
A worst-case scenario.
If the pandemic has taught us anything, it’s that we don’t know what might happen and when. Uncertainty is almost a constant in the business world.
5. Analysing the Past, Present and Projecting Goals: A Necessity
It might seem frustrating and confusing to analyse and track your current financial situation, let alone work to create a plan for the future. Examining past performance and historical trends is a crucial part of the process.
Look back to work forward, collect historical data, and analyse what happened in your business to know what you can change going forward.
The first and most important aspect of building your business plan is to look back at your past data, collect the relevant data, and utilise it to build your plan.
Without looking back, you cannot effectively work on your future projections.
Even if you believe 2022 was an unprecedented year, the highs and lows of the year did alter the course of your business and thus will be helpful to you to understand what 2023 and the years ahead look like for you. Plus this is how you’ll be able to spot any previously missed opportunities and identify growth areas for your agency.
Ask powerful questions, to facilitate the process:
- What’s the potential of your business?
- What’s impacting your revenue and profit growth?
- What’s impacting your overhead levels?
- What are your percentage targets for next year?
- Do you notice any loss-making services and products that are hiding behind profit and a briefly good economy?
- Do you know which service or client produces the highest profit margin in your business?
- What’s the ROI on your sales and marketing costs?
What will your team look like in the next 1-3 years?
And finally, what’s your exit strategy in the long-term?
Creating a financial plan is more than a mere task; it’s a process that converts seemingly complex numbers into clear, actionable strategies.
Understanding your goals, cash flow, teamwork, and “what-if” scenarios are essential components of this transformation. Our services, including financial consulting and outsourced finance department tailored for agencies, can provide you with the critical insights, support, and expertise you need.
Don’t let financial complexity hamper your growth.