Business planning and budget

You need to be realistic when planning & budgeting your business

Money runs the world - and your business. If the flow of money suddenly stops, so does the growth of your business. We know that your business idea is very important to you and that you have high hopes and will work hard to be successful. To succeed, besides passion you will need a sense of reality in terms of turning your business into a success. 

Even if there won’t not be other employees besides you in the company and a plan might not seem relevant to you, it’s still a very good idea to have one. It will help you maintain focus and make it a whole lot easier when you approach a bank or an investor. Therefore, we suggest that you create your business plan and your budget in writing.

Planning will give your business idea wings!

The 8 Step Business Plan

Isn’t it so, that for most things in life you need a plan? So, naturally it is essential to have a business plan, when you want to start your own business. No matter the size of the business you have in mind, you have to sit down and work out a plan for where you are coming from, where you are going and where your business will be in 5 years. 

It might not be the first thing you think of, when starting your business – but down the line the time invested into creating a business plan will be well spent. You are much more likely to succeed, if others need to invest time or money in your business, when you have your entire plan in writing. 

There are hundreds of ways to make a business plan. We have worked out an 8-step business plan guide for you which contains the key elements. For each of the 8 steps in the business plan template we have listed the most important questions you need to address in your business plan. When you have your business plan and later your SWOT analysis you are ready to move forward.

Step 1: Executive Summary

This is your entire business plan in a nutshell: Mission, vision, and purpose. A one- or two-page summary that is often easier to write once you have finalized the other 7 steps. Be sure to dream a bit, imagine the future and think big.

Step 2: Business Description

This is the backbone of your plan. Describe what makes your business unique, which needs in the market your business fulfills and how. And, on what grounds will your business make a profit and become a success?

Step 3: Target Market

Describe who your customers are and the location of your market. Will it be B2C or B2B? Is your business strictly local or do you have global ambitions? Be as detailed and factual in your target and market description as possible.

Step 4: Competition

No matter if you have a first-mover business idea or are entering an already existing market, you will face competition. When you have made your SWOT analysis, you can use it as inspiration to describe strengths and weaknesses and determine your competitive advantages.

Step 5: Operations

Outline the administrative side of your business: How you operate, where’s your office, do you have a staff or will you use freelancers? What about equipment and maintenance? Also, describe any legal relationships and details about suppliers and credit policies. Every thinkable expense related to your business is relevant when describing your operations.

Step 6: Management

Are you managing everything yourself? Do you have advisors, a board or staff? Are friends or family helping you out? Describe how those involved in your company contribute, their experience and level of competences as well as the hierarchy in terms of management.

Step 7: Sales & Marketing

Describe how you plan to market your business. What strategy do you propose? What channels are suited to reach your target group and target market? You could use social media to reach your target audience or educate your potential customers with content through online landing pages or email dialogue. 

You don’t have to be a marketing specialist, but you must show that you know how to reach and build your market. A marketing strategy has the fundamental goal of increasing revenue and growing your business. Remember, a marketing strategy includes both short- and long-term initiatives that all together contributes to the goals of your business.

Step 8: Financial Summary

This is not your budget. It’s a record of the financial dealings within your company, i.e. current or future funding and investments as well as your current financial status. Describe what investments you need funding for and how expenses and earnings balance out at the end of each month. When doing the financial summary take one year at the time and describe the development in your finances over time – if any.

IMPORTANT! No plan should ever be set in stone. Markets and trends change constantly. Be flexible. Always have a Plan B ready. And make sure your Plan B is not based on the parameters that caused your Plan A to fail. In other words, your idea may still be great, but maybe you need to rethink your target group, distribution setup or manufacturing process. Or maybe you need a business partner instead doing it all solo. 

Rules of thumb for business budgets

  1. If you are a single person company you should include your private economy.
  2. Make sure to double the miscellaneous part to anticipate any surprises.
  3. Double down on your earnings for the first six months – better safe than sorry.
  4. If you have inventory, stock, security or materials include it in your budget.
  5. If you have expenses for water, heating or electricity include it in your budget.
  6. If transport, packaging or distribution is related to your business include it.
  7. Always hire an accountant to go through the details and result of your budget when in doubt.

Make your budget

When creating a budget, using our template will make it easier. In the template you can add additional earnings or expenses if relevant for your business. The content of your budget always depends on the type and size of your business. Your budget sheet is a great tool to keep track and follow your business earnings and expenses. Remember to update it if your financial situation changes. The template consists of three different budgets:

  • Monthly budget elaborates your revenue and costs per month. By subtracting each month’s cost from monthly revenue, you will get your company’s cash position and see how much you’ll be able to pull as a salary for yourself. If you are just starting a business you haven’t got historic revenue figures to refer to. Instead you need to give your best guess as to how much revenue you expect. Also remember to add all expenses - both fixed operating costs (such as rent, insurance, payroll etc.), and variable expenses, which are directly related to revenue volumes (such as materials, packaging, shipping etc.). Revisiting this budget regularly will help you to determine whether your business is on the right track.
  • Yearly budget showcases the actual expenses (fixed and variable) and revenue from operating a full year. Use last year’s budget to make projections for the coming year. The yearly budget is the total overview of your business, from revenue to expenses, and also the budget your business advisor in the bank will focus on when helping you with your business.
  • Balanced budget sheet summarizes your company’s assets, equity and liabilities at a specific point of time. It shows investors how much your company owns versus owes and how much is invested by shareholders. Assets are measurable things of value, equity covers shareholder’s capital and retained earnings and liabilities is what your company owes such as taxes, debts and salaries. Remember that assets must always equal equity plus liabilities.