Business planning and budget

You need to be realistic when business planning & budgeting

Money makes the world - and your business - go around, and if the flow of money suddenly ceases, so does the growth of your business. Now, we know that your business idea is your baby and that you have high hopes and will work hard to succeed. But, just as your dedication is really important to make it happen, so is your sense of reality in terms of turning your business into a success. Even if you are only you in your company and a plan might not seem relevant to you, it’s still a very good idea to have one in place. It will help you maintain focus and make it a whole lot easier when you approach a bank or an investor and that’s why we suggest you need to put down in writing your business plan and your budget.

Planning will give your business idea wings!

In a 2014 study from Washington University data showed that 64% of the surveyed business owners with a business plan subsequently grew their business. In comparison, just 43% of those with no business plan could say the same.*

*Source: new window

Learn why planning is important

Meet 5 Scandinavian entrepreneurs each with their own unique goals, each within their individual line of business and each with a clear vision for their business idea. Let their personal experiences be your inspiration. You will learn that nothing is set in stone and that knowing your market and customer’s needs is crucial.
Meet entrepreneurs

The 8 Step Business Plan

Isn’t it so, that for most things in life, you need a plan, right? So, naturally, having a business plan, when you want to start your own business, is essential. 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 work out a business plan. We have worked out an 8-step business plan guide for you, which contains the key elements you must have in place. 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. 

Got questions regarding starting your business?

Feel free to book a meeting with a business advisor at Nordea.

Contact us

How to make 1+1 = 3

One thing is planning a budget; it’s a different matter keeping to it. We had a talk with a Nordea advisor and an entrepreneur. Their experiences will teach you, that a well-planned budget will always make keeping to your budget easier. It all boils down to your ability to look ahead before charging forward.

Read the article

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

You can make it easier on yourself by using our template when making your budget. 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 is where you break down your revenue and cost per month. By subtracting each month’s cost from each month’s revenue you will get your company’s cash position each month and see how much you’ll be able to pull as a salary for yourself. If you are just starting 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 – 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.

Learn from 4 Scandinavian entrepreneurs each of their individual industry, about the challenges of getting paid for your hard work as a founder. Their answers may surprise you, and hopefully their advice will be a huge help for you, when the time comes and you want to pay yourself a decent salary.

Before you approach banks and investors

Find out what banks and investors expect from you as a founder of a new company, and what ultimately might make or break a deal.

Read more about dealing with finances