Starting any business requires a leap of faith.
All the research, planning and preparation in the world can only go so far.
There are always unknowns – in our personal lives, in consumer habits, and in the economy. In some cases (as revealed by the pandemic events of 2020), a combination of all three can hit at once!
While we can make educated guesses about the future, there is always risk involved in financial planning. But that doesn’t mean we should bury our heads in the sand. Developing a financial plan is vital – especially in uncertain times.
But, how can you plan for things that you may never have considered before?
Read on for our best advice on developing a financial plan for the unknown.
How To Develop A Financial Plan For The Unknown
Plan For The Worst
Some of the biggest financial mistakes occur when people haven’t prepared for the unexpected.
No, it can seem strange to plan for something that might never happen. Or something that could happen, but not in the way that you thought it would. But, it’s really helpful to conduct scenario planning to consider what could potentially go wrong for your business.
Think about what you would do if an important supplier fell through, a natural disaster impacted your delivery systems, or you fell ill.
While you don’t want to focus too much on what could go wrong, having a plan of action in mind can save you a lot of stress and help you react quickly if the worst does happen.
One of the most fundamental necessities in financial planning is an emergency fund. Decide how much money you would need to keep your business running for 3-6 months, then make it a priority to put that money aside. Resist the urge to dip into it for anything other than an emergency!
Focus On What You Can Control
How can you get your finances under control when there are too many factors outside of your control?
Well, the first thing to do is to let go of the things you can’t influence, and focus on the things you can. You may not be able to fix the economy or open the borders, but you can review your spending, cut costs, or apply for financial support if needed.
Don’t wait for the worst to happen before implementing these measures. Have a backup financial plan in place listing all the ways you could cut costs or apply for support. Even better, start implementing cost-saving initiatives now and funnel the extra money to your emergency fund.
Set Short-Term Goals
Do you have a five or ten-year plan in place for your business? Great. Long-term goals are essential; keep them in mind, but be prepared to narrow your focus to smaller hurdles in uncertain times.
Creating a budget can be challenging when the goalposts are constantly moving. Instead of stressing about the lack of progress towards those long term goals, keep it simple. Move your timelines around, plan for the foreseeable future (even a month at a time, if that’s what it takes) while keeping one eye on the bigger picture.
Don’t forget to celebrate the wins when you achieve your short term goals too. Every little win adds up and builds your business success.
The official party line of 2020 was “pivot”. Many businesses had to pull a Ross Gellar and pivot the heck out of their offerings. While the next unexpected thing to pop up may not be as drastic as a pandemic, but it is still good to have flexibility in mind.
Don’t be afraid to review and refine your plan as you go. When developing a financial plan, you’re making some assumptions about how things will turn out, but as we well know, change is inevitable.
Think of your financial plan as a work in progress. Adjust it as necessary and learn as you go.
Sometimes there’s no way of seeing what’s coming. But in some cases, there are clues. Even before the pandemic reached New Zealand, there were hints of the havoc it could reap on the world.
Keep yourself up to date with local and world events. You might spot problems before they hit, giving yourself time to review your financial plans.
Enlist The Right Support
Heading into unfamiliar territory with your business? Facing challenges can be daunting at the best of times, but even more so when things are uncertain. Developing a financial plan for the unknown is much less intimidating when you have an experienced professional to help guide you.
A fresh set of eyes can help you identify risks and figure out the right direction for your business.
A bookkeeper is the perfect starting point for supporting the financial unknown. As they handle your financial records on a daily basis they are in a great position to look at the wider picture your business is painting. With some expert advice and quick tips, they can help you keep on top of known financial issues and even the unknown.