When you're kicking off that business you've always dreamed of, we bet you didn't imagine you'd be crunching numbers or scouring spreadsheets. The reality is, whether you're steaming milk at your cafe or designing the next Tesla, your business needs the clarity and direction that comes from proper financial planning and forecasting. Knowing where you're at lets you know where you can go, and how you'll get there. Yet, many kiwis still operate without a formal financial roadmap for their small business. Let's change that.
We know it sounds super boring. Think of profit as your dream destination - your financial plan template is your compass to get there. You need to know what your current financial position is, and map out how you'll gather, manage, and allocate your resources to get to those golden sand beaches. It's about making informed financial decisions to drive your business forward, and avoid expensive layovers along the way.
We (hope) we've all got ambitious goals for our businesses. Dominating the market, building a strong brand identity, giving your hard-working employees a raise. A strategic financial plan creates the framework that turns dreams into reality. Mapping out your projected financial results and required resources lets your team visualise their role in pushing the business towards its financial targets.
Cash flow issues can sink businesses faster than almost any other challenge. Your financial plan forces you to document how much you need to cover liabilities and identifies areas where spending can be optimised to maintain positive cash flow. You can identify patterns and prepare for seasonal fluctuations, making sure you always stay afloat no matter the weather.
More pirate chat… when sales are a little rocky, and story economic conditions brew, businesses without financial contingency plans often make panicked decisions out of desperation. A well-constructed budget and financial plan gives you a comprehensive understanding of your financial state, letting you build realistic business budgets that allocate resources effectively. This isn't just about survival, it's about maintaining control during uncertainty and steering your business to capitalise on opportunities when conditions improve.
The New Zealand tax system, as tricky as she is, offers various advantages for businesses that plan ahead. With a proper strategy, you can implement tax planning strategies that manage your liabilities and minimise the amount you owe. You can save boat loads on annual tax obligations compared to businesses who are reactive to taxation.
Every business faces unexpected challenges. Equipment breakdowns, global pandemics - the unexpected can strike at any time. A financial plan helps you work toward building emergency cash reserves to cover costs during hard times. Financial experts generally recommend that you reserve three months of operating expenses for the unexpected. By incorporating this into your financial risk management plan, you'll create a structured approach to building this safety net, rather than scrambling for pennies in a crisis.
Define what you want to accomplish in clear, measurable terms. These goals should align with your broader business objectives while remaining financially specific. E.g. instead of aiming to 'grow the business', set targets like 'achieve a 15% increase in revenue'. Consider both short-term financial goals (12 months) and long-term financial planning (3-5 years). This way, you're more likely to achieve sustainable growth.
Your balance sheet gives you a snapshot of your business' financial health. Even if you're just starting out, create a projected balance sheet forecast based on reasonable assumptions to identify potential financial strengths and weaknesses before they impact your business. Key metrics to focus on include:
Understanding your break-even point is fundamental to profitability planning. Calculate: fixed costs / (average selling price - variable costs). This provides the minimum revenue needed to cover expenses, providing a clear target for your sales. Businesses that know their break-even points make better pricing decisions and more accurate financial projections.
Your sales forecast predicts your revenue for the coming year. Develop this by considering:
Expense forecasting requires you to account for both fixed operational costs and variable expenses that fluctuate with business activity. If you're planning major investments like new products or team expansion, these will significantly impact your expense profile. Categorise expenses into:
Cash flow forecasting plans exactly when money enters and exits your business, helping you identify shortfalls before they actually happen. The timing element is crucial. You need to track:
In New Zealand, where natural disasters can cause significant disruptions, it's wise to stash a dedicated emergency fund to cover unplanned expenses or business disruptions without derailing the business objectives. Allocate a percentage of monthly profits toward building this reserve until you reach your target amount.
Don't do all the boring stuff, like calculating your insurance costs and reading this article, to not use what you've learned. Create clear responsibilities to reach your financial targets, and lock in regular reviews to track your performance. Implementation involves:
Tracking your performance against the plan provides valuable insights into business health and growth opportunities. This includes:
The most effective financial plans evolve as market conditions change and new opportunities emerge. Schedule plan reviews at least quarterly, with more comprehensive reassessments annually. Consider:
Creating and maintaining a successful business financial plan isn't about satisfying banks or investors - it's about giving your business a clear direction to head towards for sustainable success. This can make the difference between barely surviving and genuinely thriving. Remember, financial planning for your startup or small business isn't a one-time exercise but an ongoing process that evolves with your business. Start where you are, use the best financial planning tools available, and commit to the process.
Starting a business isn’t just about taking risks—it’s about understanding them, managing them, and transforming them into opportunities for growth.
What's life like at one of NZ’s fastest growing tech companies?
We’d love you to, but you don’t have to. And in some cases, you definitely shouldn’t. Find out why.
Whether you’re a startup, growing team or planning global domination, Emerge works to make your business finances more efficient at every stage of your journey.
Available on
© 2024 Emerge Group Limited. All rights reserved.
Emerge is not a registered bank.
We are a registered financial services provider (FSP1000546).
