Everyone knows that business owners constantly face new challenges, and running a profitable business as a woman is demanding. In 2022, a lot happened in one year – economic downturns, high inflation rates (For instance, Nigeria’s urban inflation rate was 22.09% in December), the Ukraine war and the resulting supply chain issues, market volatilities, and other unexpected challenges threw a wrench in many business owners’ financial plans.
A study showed that women entrepreneurs are more likely to experience financial stress than their male counterparts. And during these uncertain times, it’s more important than ever to be proactive and plan for the future. Financial planning is vital for any business that wants to survive and thrive in the new year.
It is important to talk about assessing your current financial situation, setting financial goals, and building a financial plan to help you navigate uncertain times. How do you ensure your business is financially secure and show the world that women mean business? The first step is to have a good understanding of your business’s financial performance over a year.
This can be done by:
- Reviewing financial statements: Regularly reviewing financial statements such as the balance sheet, income statement, and cash flow statement can provide insight into a business’s financial performance. These statements provide information on your business’s assets, liabilities, revenue, expenses, and cash flow. By regularly reviewing these statements, you can identify trends and make informed decisions about their financial health.
- Using financial ratios: Financial ratios, such as the debt-to-equity ratio and the return on investment (ROI), can help you understand your business’s financial performance to your industry or other benchmarks. By calculating these ratios and comparing them to industry standards or previous periods, you can see how your business performs financially.
- Monitor key performance indicators (KPIs): Tracking key performance indicators (KPIs) is a great way to get a sense of your financial performance. These KPIs include revenue, profitability, customer satisfaction, and employee retention. By regularly tracking these KPIs, you can identify areas of strength and areas for improvement.
- Seeking guidance from a financial advisor: Working with a financial advisor or accountant can provide valuable insights into your business’s financial performance. These professionals can help you understand your financial statements, calculate financial ratios, and provide recommendations for improving financial performance.
As you assess your financial situation, look for areas where you may be able to cut costs or increase income.
Setting SMART financial goals and prioritising them
Setting financial goals for your business can be a powerful way to achieve financial success and stability. By setting clear and achievable goals, you can establish a roadmap for your business and track your progress over time. After you have assessed your financial situation, you’ll be better equipped to set realistic and achievable goals. SMART goals are specific, measurable, attainable, relevant, and time-bound. For example, instead of developing a vague goal like ‘increase revenue,’ set a specific goal like ‘increase revenue by 40% within the next year.’ By setting clear goals, you’ll be able to track your progress and make adjustments as needed.
Don’t stop at setting goals alone; you have to prioritise your financial goals. Focus on a few key goals is essential rather than tackling too many at once. Consider your short-term and long-term goals and prioritise them accordingly. Consider the resources and time required to achieve each goal. Once you’ve set your financial goals, it’s time to develop a plan to achieve them.
Know that financial planning is an ongoing process
After you understand your business’s financial situation well and have set SMART financial goals, you need to build a plan around them. This might include identifying new sources of revenue, cutting costs, or investing in new opportunities. Your financial plan should consider your business’s current financial situation, goals, and any uncertainties you may face. You should also consider strategies for managing financial risks, such as diversifying investments and protecting against loss.
Remember that building a financial plan is an ongoing process. It’s essential to regularly review and update your financial plan to ensure you are on track to achieve your goals. As a business owner, to navigate these uncertain times, you need to stay on track, set milestones and track your progress.
Finally, be prepared to adapt your plan as your circumstances change or new challenges arise. It’s essential to be flexible and open to changing your financial plan. Financial planning is crucial for the success of your business, especially during uncertain times. You need to run a lean company, find ways to cut costs, extend your runway, and optimise to build a profitable business by focusing on your unit economics.
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The post Ifeoma Uddoh: How Women Entrepreneurs Can Navigate Uncertain Times with a Financial Plan appeared first on BellaNaija - Showcasing Africa to the world. Read today!.
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