Every business needs three fundamental elements to thrive

While nobody starts a business with the intention of being consumed by for little financial return, many find themselves in that situation sooner or later. The key to breaking free from this cycle lies in establishing these three essential components and regularly reviewing them:?

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1. Business Plan: Think of this as a concise document detailing your business goals and what you want to achieve. It answers critical questions such as:

Time: How much time do you aim to invest in your business??

Money: What level of income is required to sustain your desired lifestyle??

Peace of Mind: Do you want to be plagued by worries about HMRC in the dead of night??

Exit Strategy: How and when do you plan to exit the business??

2. Interim Management Information: This involves assessing your current position comprehensively. It goes beyond mere turnover figures to include aspects like current profitability, business valuation, and outstanding debts.?

3. Forecast: Building upon the business plan and current status, a forecast lays out the financial trajectory towards your goals.?

However, the key fundamental lies in consistent monitoring and accountability. At a minimum, quarterly reviews are recommended. During these reviews, interim financial reports are reviewed against the forecast. Any disparities discussed: Why is the actual not aligning with the projection? What actions can be taken? Is an adjustment to the forecast necessary??

Consider a client who faced dire straits during the COVID-19 pandemic: business plummeted, debts soared. Through careful planning and quarterly assessments, a strategic roadmap was devised. With ongoing reporting and accountability, the client is now on track to settle debts and achieve desired income levels for their family.?

Similarly, another client is aiming for an exit strategy. The forecast involved reducing their involvement in day-to-day operations and increasing recurring revenue streams. Quarterly reviews ensure progress toward this goal, with adjustments made as needed.?

In essence, think of this process as a road trip: the plan is your destination, interim reports mark your current location, and the forecast acts as your sat nav. Regular comparisons help navigate obstacles efficiently, ensuring you reach your destination without unnecessary detours.?

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