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Keys to Success

Watch this video for a walkthrough of some of the most important keys to success when it comes to creating your financial plan.
Just giving you a little bit of advice, some keys to success that I’ve seen over the many years of running a business. First thing is, prepare the financials yourself, or at a minimum, at least participate in the process of getting them prepared. I don’t want you just to hand them off to somebody else, they hand them back. You don’t even understand them. You don’t know what they mean. That’s not going to do you any good. You might have a set of financials that you can take to an investor. That’s great. But if you don’t understand them, you’re going to get decimated when you actually go and start trying to talk about them. Know the details.
I think in running business today, every CEO, I don’t care how big the company is, knows much more about the details of their company than anything else. I don’t care if you’re United Airlines, and you’re a fortune 50 company, or you’re a small startup, I’ve watched these CEOs, big and small companies, and they actually know the details of the business. The ones that are successful really do. So I want to make sure that you know the details as well. Know your assumptions. All a financial plan is a set of assumptions. So for everything you put in the plan, you’ve got to back it up. Don’t guess. In other words, this this is a common problem.
Oh, I think my revenue’s going to be this this month, and this this month. My expenses may be this or this. No. Actually know what your expenses are. Know what your revenue is. And you need to justify this with data. So instead of just creating a guesstimating model, you actually create what we call a justified model. Everything in the financial plan is justified, because it’s backed by data. Now in addition, your financials are a living, breathing document. And so they need to be revised on an ongoing basis. In fact, your forecast actually gets revised usually every month. And that’s something that’s important for you to know. Stick to the standards.
Don’t create new ways of reporting and creating a P&L or a cash flow statement. There are already accepted standards out there, and make sure you stick to the standards. And use them to run your business. Review them monthly. Review your forecasts as needed. And revise that forecast as you go along, because your business is constantly changing. So we need to make sure that we do this, and do this well. Next, I want to make sure that if you don’t know all your numbers, you don’t know all the financials, you can’t justify everything, I know sometimes people get worried about this. Then they just freeze.
And they go, oh, I’m not going to do them because I don’t know, and I have to be perfect, and they have to be right. I say, guesstimate. Because you have a lot more information in your brain. Even if you don’t know exactly what the numbers are going to be, I’d rather you guesstimate than not do anything at all. Right? So it’s good to develop a three-year plan. I always recommend developing three years in your financial statements. That’s kind of the standard. That’s what people expect. But you might be saying to yourself, hey, Ken, I don’t know what’s going to happen next week, let alone three years from now. That’s fine.
Let’s get the first month, get the first quarter, get the first year figured out, and if you have to guesstimate here and there, that’s OK. I’d rather you do that than nothing. And then we start, kind of as we get further out, it’s certainly OK to take liberties around guessing at things, because your assumptions will become a little weaker in terms of whether they’re going to be true or not. You’re not going to know that until we get there. Right? But the first year you should have really solid. And then finally, I want to make sure your financials tell a story. It’s very important. As you start to craft your financials, they’re going to paint a picture.
And financials, to people who really understand how to read financials, they create a picture. They create an understanding of what that business is going to be. So construct them as if you’re telling a story through this whole thing. So let me share with you an example about how a company adapted their plan. The company’s name is 800 Razors dot com. And they were founded in 2013. And what they were founded on was the principle of selling razors direct to consumer, 50% cheaper, and free shipping. And it worked. They were growing like crazy. And then all of a sudden, the big boys came in, dropped their prices, and they had to shift their entire financial model.
So thank goodness they had initial financial model. They were able to run their business. And then they knew exactly how to pivot the business, change the model, and they were successful after they did that, because they were able to adjust all of their financials accordingly in order to make this new business strategy effective. So you just have to understand that you need to be flexible in your business. As your business strategy changes, so will your financial model.
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