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10 Financial Planning Strategies for Small Businesses

Starting and growing your own business from the ground up is challenging but incredibly fulfilling. There is no clear start or end line and no clear set path. Each entrepreneur needs to find their own way to attain their goals. However, it’s not always a smooth ride.

Running a small business invariably brings along ups and downs. From recessions and economic downturns to natural disasters, wars, and illnesses that disrupt supply chains and labor schedules, business owners often face uncomfortable situations. During these periods, survival purely depends on the strength of their financial plan and ability to think on their feet. With unpredictable global conditions, it’s not surprising that the failure rate for small businesses continues to rise.

A new tie-up, client, or order can give you a rush of satisfaction and add to your revenue. On the other hand, sudden expenses or losses can leave you uncertain and worried about your business’s future. Unless, of course, you have solid financial planning strategies. Plans crafted after thorough research and educated foresight can deliver your business through tough times. These strategies can be the key to surviving and thriving in your business – rain or shine!

In this article, we take a  look at what goes into business financial planning and then consider strategies you can employ to safeguard your business through unpredictable times.

What is Financial Planning in Business?

Small business financial planning simply involves drafting an overview of the financial condition of your business and the projections for its growth in the near future.

A financial plan is a critical component of your business plan. It ties together with your operational plan, marketing plan, and mission statement. These documents enable business owners, managers, employees, and potential investors to understand how the business earns its income and spends its accumulated capital.

Based on its financial planning strategies, one can evaluate how well the business’s financial health is. Based on that manage finances more effectively. More importantly, financial planning for small businesses gives insight into the organization’s ability to survive and thrive in current market conditions.

Why is Financial Planning Important?

Mark Daoust, President, and CEO of Quiet Light Brokerage, Inc, says, “It can sometimes be difficult for business owners to evaluate their own progress, especially when starting a new company. However, a financial plan can help show increased revenues, cash flow growth, and overall profit in quantifiable data.”

Financial planning for small business owners has many advantages because it:

  • Establishes clear company goals
  • Monitors sensible cash flow management
  • Identifies necessary cost reductions
  • Enables smart budget allocation
  • Facilitates crisis management
  • Stimulates smooth fundraising for working capital
  • Boosts transparency with stakeholders and staff

10 Strategies for Financial Planning

As a business owner, financial planning should ideally start when you lay the foundations of your organization. After that, it serves as a blueprint for all the other verticals you oversee, including operations, human resources, accounts and taxation, regulatory compliance, product development, and marketing.

Here are a few tried and tested financial planning strategies that have worked well for various business models and can help build a solid financial foundation for your business.

1. Establish Data Sources to Track Numbers

Performance can be tracked most effectively through reliable, high-quality data. Several reports can be generated to provide a bird’s eye view of your business. A well-rounded assessment forms the basis for small business financial planning.

While there is no formal requirement for the layout and variables of the reports you need for a comprehensive evaluation, standard financial documents for small businesses include the following:

  • Personal financial statements.
  • Expenses and budgets, including the fixed and variable costs borne by the business. Lower fixed costs signify a lower risk for the organization.
  • Income statements showcase the actual revenue collected from the business through sales.
  • Sales projections for your expected sales growth in the near future.
  • Estimates of assets and liabilities.
  • Break-even analyses to estimate how long it will take your business to recover startup costs or expenses borne during ongoing projects.
  • Cash flow statements determine how much money you’re taking in and paying out. This will help you have a fair idea of how much money you have and how long it will likely last.
  • Supporting documents, including life insurance policies, real estate deeds, tax statements, bank statements, register receipts, and accounting ledgers.

2. Stay Updated on Financial Trends

New rules and regulations are always passed and implemented in the business world. From minimum wage requirements and taxation limits to health insurance for employees and new building standards, keeping track of the current mandates can help you plan your business expenditures effectively.

Some changes may not be made compulsory by government or regulatory agencies, like the shift towards digital payments and protection against fraud. However, because of their popularity, your customers may learn to expect this as the new normal.

Keeping in touch with these trends also helps you plan and budget for desired alterations in your business mode or delivery. The decision to add on required changes or recommended improvements can either positively or negatively impact your financial plan. Hence, the earlier you begin business financial planningthe easier it will be to implement the changes when the time comes.

3. Estimate Expenses

As part of your financial planning strategy, an annual evaluation of the expenses incurred can divide these costs into fixed or variable factors. Fixed expenses like rent, mortgages, and employee benefits are likely recurring costs. Variable expenses include gas and electricity or credit card processing fees, which may fluctuate over the year.

Calculating your annual outgoings can help you estimate how much you need in your rainy-day fund to ensure you have enough emergency capital to cover your expenses. At the same time, leaving yourself enough wiggle room is essential to allow for business growth or emergency expenses.

4. Adopt a Taxation Plan

Ensure that your financial planning strategy includes your personal and business taxation plans to benefit you and your company.

5. Mitigate Risks

As individuals, we tend to plan our finances to protect our family members, heirs, or personal property in case of early death, disability, or illness. However, financial planning for small business owners includes creating a separate contingency fund to avoid business disruptions, like:

  • Interruption of the business due to natural or man-made disasters.
  • The death or disability of a person is key to the success of the business.
  • Loss of business property.
  • Worker’s compensation coverage.
  • Lawsuits against the company due to negligence or defective products.

6. Optimize Revenue Streams

As you look over your annual income reports, you can gain insight into the activities that led to improved revenue and double down on them to raise profits as part of your financial plan.

7. Diversify Investments

As a business owner, it may be very tempting to continuously re-invest your profits into your business. However, considering volatile global markets, it may be prudent to consider alternative avenues for investment. A diverse portfolio will ensure access to a consistent income stream, even if your business encounters a difficult period.

8. Plan for Retirement

Small business owners need to plan for their retirement early on. Unfortunately, many owners overlook this financial planning strategyas they assume that the business would act as a source of capital to fund their retirement needs. However, as a business owner, you should prepare for when you may not have the energy or the time to work on business growth or for emergencies that cause losses in income. Include tax-advantaged ways to save for your retirement in your financial plan as your business grows.

9. Appoint Successors

As your business grows into a valuable asset, simply handing it down to your heirs, family members, or trusted employees may not be enough to transfer the company in the event you retire or pass away. Apart from naming your successors, you would also need a current estimate of the business’ market value.

Thorough financial planning for your small business should also involve a detailed plan about the best ways to ensure business continuity after death, reduce estate taxes, or provide liquid assets to your heirs instead. For example, the business may need to be reorganized, or you may be advised to set up insurance trusts and charitable trusts to take advantage of IRS-sanctioned discounts for gift and estate taxes.

10. Establish an Exit Plan

If you wish to sell your company, look at the selling price of other similar businesses in the market to get an estimate of the market value for your organization. Your financial plan can also include factors like which employees would be retained and what payment or employment terms you would accept in case of a sale.


Financial planning strategies are a critical part of any business plan. They make it easier to assess the performance and potential of your business. In addition, financial planning provides business owners with a clear roadmap to achieve successful outcomes by understanding their financial situation. Using these financial planning strategies can set your business for success by helping you stay focused, hit your targets, and earn the revenue you need to achieve your business goals.