Planning the future of your company is all fun and games until it comes down to the numbers. That moment when you need to take all that talk about how massive your market is or how many deals you have in the pipeline and put pen to paper, or, in this case, fingers to keyboard. This is where having some sort of framework to build from is a difference maker. Before we get into what that framework is, let’s cover some of the basics.

The basics of business financial planning: Assumptions

We all make assumptions with our business and it’s important to track them and hold ourselves accountable to them. The most important thing about these assumptions is to be realistic with them. If you are launching a new product or are planning a growth year and you haven’t done it before or haven’t thoroughly tested the market, marking down a ridiculous rate of return would be classified as unrealistic. Or saying that the margins on a new product will be 90% when your company has been running at 30% since inception or your margin improvement plan will cut expenses by 50%. At some point in our careers, we’ve all seen these outrageous claims, and have maybe even made them ourselves (I’m in both camps). 

Map out your sales revenue and operating expenses

Know what you are getting into when you are mapping out your sales and your expenses. It’s good to be optimistic about these numbers and set lofty goals but we all have that internal “bullshit” meter and we all know when we’re at that point. Understand that every industry is different and your Total Addressable Market, or TAM, may change through the lifetime of your business. Market share is something all companies discuss and work towards, but touting a potential “market share” that is based on an inflated TAM can get you in trouble. 

Plan for your people expense

One of the largest expenses of any company is the people, and that is one expense you need to get right. The larger a company gets revenue wise, the larger the company gets people wise to support that. Pretty simple right? You would think so. I’ve seen countless companies draw up these plans that are all about massive growth and 200% returns with little to no expense increases, including their people. Be honest and fair with your projections and be honest and fair with what you need to get you there. 

Get your baseline down

The recipe for building your assumptions is this: set your current baseline of where you’re at today, set your realistic goal of where you want to be, identify your company needs, and fill the gap with realistic assumptions to get you there. In theory, it’s a very simple concept. In practice, it’s one that is fraught with danger and one that us as entrepreneurs must be realistic with and not succumb to the sirens of what could be. 

4 things to keep in mind when planning assumptions:

1. Be realistic with revenues and expenses

2. Understand your Total Addressable Market

3. People planning the right way means budgeting for it

4. Be honest and realistic with your projections

Every business needs to have at least some sort of a forecast, no matter the industry, size, or stage the company is in. It’s important to not only know what money is coming in and what money is going out, but when it happens. I’ve worked with a number of businesses that are in a constant cash crunch because of unfavorable payment and receivable terms and receivable terms and a lot of clients 

Get tactical and prioritize areas of improvement

Q4 usually hits with little notice and we rarely seeing it coming, nonetheless being actually prepared for it, and that’s OK. The important thing is not to be blindsided by the end of the year looming upon us and to take some time to assess what this means. Take a look at your employees, your vendors, your customers, your partners, and notice how everything is operating as a whole. If there are areas that need improvement, prioritize them and start putting those plans in motion so you can tackle the new year prepared and with all your ducks in a row. Small businesses aren’t easy to run and the employees involved are what make it happen so take notice if there are any potential burnouts and address them. Don’t be afraid of Q4, take advantage of it.

Cash positioning

Getting more tactical, you need to get your cash right. It’s important to make the most of your cash positioning when it comes to your taxes. If your company files taxes on a cash basis, which is most likely the situation, then the more cash you receive, the more taxes you’ll have to pay, and the more cash you pay out, the less taxes you’ll owe. Deferring cash payments into 2023 can be a smart decision if you are able to do so and can do so legally. Have that conversation with your customers and if they are fine with deferring payment, then you won’t have to pay taxes on those receipts until the following tax year. And on the flip side, if you can accelerate payments, such as invoices, premiums, dues, etc., then you’ll be able to maximize your deductions. Not to mention, your vendors will love you. 

Doing this is all about optimizing your cash flow and keeping the most money in your bank account for the longest period of time so you can put it to work. In the end, it’s all the same but a dollar in the bank today is more valuable than a dollar in the bank tomorrow.  

When should you start fundraising?

Fundraising for anything can be an intimidating and frustrating process, especially when it’s your first time around. There are so many variables that you have to take into account: When should I start fundraising? Who should I talk to? What valuation should I use? How much money should I raise? What kind of money should I take? And about a million other things. 

A lot has changed - due diligence is key

The first thing to keep in mind is that the entire fundraising environment has changed over the last several years. VCs and PEs used to be the main source of capital for growing companies and even then, there only used to be a few main players to choose from. With the rise in popularity of startups, has come the rise in popularity of angel investors and family offices. This means that you can pick and choose who you involve in your company and should take advantage of that. The number one advice I can give to anyone raising money is do some real diligence before you take anyone’s money because, as the saying goes, doing business with someone is like marrying them. 

Start raising a round before you THINK it's time

The best way to ensure you aren’t forced into a position of taking a deal you aren’t comfortable with, you need to start raising money at the right time. One of the most frequent questions I get from entrepreneurs is “when should I start fundraising?” Most likely way before you think you need to. Entrepreneurs, more often than not, underestimate the time it takes to fundraise and how many obstacles they’ll encounter during this process. As a general guideline, seed rounds can take up to 3–6 months to close and Series A rounds can take up to 9–12 months to close. Keep in mind, every company is different and depending on what the “industry of the month” is, this could vary.

A cliche in the startup world is that the CEO should always be fundraising, and I agree with that, but not why everyone else does. The best source of fundraising is sales and the CEO needs to be out there selling their company to everyone and anyone because you never know when it might lead to something. I’ve seen several million dollar Series A rounds get filled in a matter of weeks because of all the heavy lifting done during the hunt for the seed round.

Keep your cool

By far the most important thing to remember when you are fundraising is, don’t get frustrated. There will be deals that fall through, investors that verbally committed who back out, and partnerships that seem to disappear into thin air. Believe in yourself, believe in your team, believe in your product, and do right by your customers and everything else will fall in place.

Manage your cap table

One of the many mysteries of starting and running a company is the capitalization table, most well known as the cap table. The second a company is formed and shares are issued, whether to one person or to many, a cap table needs to be created. This is where business owners track who owns how much of the company and how the “fully vested” cap table looks. Cap tables can get pretty involved and complicated so it’s important to understand the basics. 

A very underrated aspect of cap table management is keeping it clean. When someone starts a venture, they’re often given money by their close friends and family. This can get a little out of hand when you’re taking small increments of money from a lot of people just to get off the ground. 

VCs and PEs love to say they want to see traction, and of course, after hearing that, we think to ourselves, “if I had traction, I wouldn’t need your money anymore.”  

Write off the deadbeats

You know that customer invoice that’s been sitting there for ages and you keep praying it’s going to get paid some day? It isn’t. Write it off and move on. And while you’re at it, write off all those other ones sitting there that won’t get paid either. It’s going to hurt taking those on the chin but time heals all wounds and hopefully you’ve learned a valuable lesson. 

Go home and relax

Let’s face it, sometimes it can be difficult to gain and keep momentum on new projects. Focus on finishing what you have going on and have your team focus their efforts into what they can finish and do well. Most importantly, take some time off and reset yourself. Overworked and stressed out employees do more harm than good so make sure you do that yourself and get refreshed.


To learn more about how Clockwork helps small businesses realize and work towards a better financial future, create your account to start a free 14-day trial (no credit card required). Connect your QuickBooks Online or Xero account to create your first financial model in minutes.

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