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Small Business Financials (Step By Step Video + Guide)

Small Business Financials (Step by Step Video + Guide)

Small Business Financials: Setting Up For Success

Welcome to the first of our 10 part series, Idea to Income, where we cover small business financials.

I’ll be your host along the journey. Normally I’ll interview subject matter experts about their respective fields. We’ll utilize their expertise to help you make informed decisions to ultimately launch and scale a successful business.

Today though, we’re talking finance, and that’s my lane.

In this section we will review:

  1. Building a business budget
  2. Preparing your personal financial runway for launch
  3. Profitably pricing your product or service
  4. Developing a high-level business plan

I have also provided you a customizable worksheet to fill in as you progress.

Click here to download your worksheet

You’ll need it as you progress through the supporting video:

Small Business Financials - Know your numbers and set profitable pricing

Our video will provide all of the information. For those of you who prefer to read, please find the most pertinent material below:

Do you have a hobby or a business?

Costs to open and operate

As you’ve prepared to launch your business, you’ve probably come across the term “know your numbers” repeatedly. Given the widely touted failure rate of most new businesses, it is especially important that you have a keen grasp on your small business financials BEFORE you launch the business. Progressing through these steps will help you determine whether you have an idea worth pursuing, or something perhaps better left as a passion project.

The first tab of the provided template provides a preliminary budget for your consideration. Importantly, you will notice two key aspects of your small business financials the budget addresses:

  1. How much money do you need to launch?
  2. How much money do you need to sustain operations?

The upfront costs to launch the business will likely come from savings or outside financing – such as a bank or investor. By identifying the upfront costs required to launch, you’re going to know exactly what you need and why you need it. Of course this information should give you peace of mind if you are bootstrapping, but the process becomes especially important in preparing to ask for outside financing.

Any lender wants to hear a well thought out strategy for what you will be doing with their money.

The ongoing costs of operations eventually should be covered by the revenues of the business. Early on however, you may have a lag period in which expenses exceed revenues as the sales of the business are ramping up. As we progress through the entire template, you’ll be able to plan out how much of a cash runway you want to set aside to fill this potential gap.

Of course, please go ahead and make the template your own. I’ve added common lines items I run across when working with businesses just to stimulate the thought process for you, but change these items to be relevant to your business model.

Lastly, please recognize that some of the costs of operating your business will be variable – meaning they will not stay fixed but grow as your revenue increases. As you eventually get into more comprehensive projections, accounting for variable expenses will be essential. At this early stage however, a more “basic” budget template like this will help us determine if the idea is at least worth pursuing.

Fun note: fans of “The Office” will remember the Michael Scott Paper Company did not effectively account for variable costs.

Action item for tab one of your small business financials template:

  1. Rewrite the template to match your business model so that you have conviction around how much money you need to launch and operate the business.


Preparing your personal finances

Probably to no surprise, your personal finances are going to play a critical role in the success of your business.

We are used to living in the age of Amazon where we expect things to happen immediately, but the simple fact of the matter is starting and launching a successful business takes time. Revenues might not appear overnight. There’s a natural progression that’s going to take place.

Set yourself up for success and account for this reality with your small business financials by scrutinizing your personal budget. The longer you can go without taking a salary, or taking as high of a salary from the business, the better.

Importantly go through your personal budget and try to reduce spending in any non-critical areas before taking this journey. The last thing you want is to jump into business and two years from now, just as all that hard work is about to pay off and your business is turning the corner, you need to give up because you ran out of money from living your normal lifestyle.

Tab two of the template provides you a personal budget that you can work through to identify your expenses.

Additionally, I put together a section for you to list out your savings. This will be helpful to monitor as you prepare to launch.

What savings are you utilizing to start this business? How much are you comfortable using to cover those upfront costs and then potentially to fill any sort of gap that may exist during that initial ramp up period?

List out the accounts and monitor them. I’d also highly encourage you to get your significant other involved and onboard if you have one. Even if they are not directly involved in the business, at this early stage much of what you do will impact them. Solid communication from the start will be a blessing.

The template will help you determine how many months of runway you have to cover the expenses outlined with your personal savings.

Action items for tab two of your small business financials template:

  1. Review your personal budget and identify ways you can cut back spending upon the launch.
  2. List out your savings and monitor your “launch runway” – many successful entrepreneurs encourage three years of runway.


Projections and pricing

At this point, we have a clear line of sight into the costs to open and operate the business. We know exactly what our personal expenses are, and we have enough savings built to provide a runway in case we’re not able to draw the salary that we’re used to.

Now, we should start projecting financials for the business. Let’s make sure this idea can be profitable and provide you a legitimate income. The best part of going through the sequence in this way is that we are going to be able to back into answering one of the hardest questions for new business owners – what do I price my product or service at?

Whether you are a service business or a product business, the third tab in the template will help you.

Many new business owners suffer from imposter syndrome and after just launching a business it is common to see discounted prices as they grapple with determining their “value”. Thankfully, because you’ve gone through your upfront and ongoing expenses, you know exactly how much revenue you need to break even. You also know exactly how much revenue you need in order to draw your desired salary.

Armed with this information, you can now back into your pricing with these simple questions.

How much of my product or service do I need to sell per month? How much volume do I expect to sell? What price makes those figures match?

If you are coming up with a price that seems too low – lucky you. You may have found a special business here.

If you are coming up with a price that seems too high (more likely), ask yourself if there is anything you can change in your model to command that higher price point (add more value?), or allow you to conduct more volume. And if you can’t, then you likely do not have a viable business on your hands.

With confidence in your pricing, you’re going to have very clear intentions as you launch the business. You’re going to be able to be very specific in who you’re targeting. Importantly, you’re not going to shy away when people ask your price because you have conviction in how you got to that number.

Within the third tab of your small business financials template, you can input the figures of how much volume you expect and at what price point to see your projected revenue.

Additionally, I built the template to pull the previous work you did so you will also see the upfront and ongoing business expenses, as well as the savings and personal budget expenses loaded in. 

I also built the line item “Living Expenses Target Savings” to show the number of months in cash reserve to be set aside. In this instance, I used a 6 month reserve. As mentioned though, you may want to conservatively think about how do you make that a three year reserve which could come from decreasing expenses, increasing supplemental income, or increasing cash reserves. That way you’re not going to have the business get derailed because of your personal spending. Instead, you can tap into the reserves you’ve set aside.

Another savings line item you can add is if you have a significant other whose salary may help offset expenses. I was very fortunate to have that when I launched my business for example.

Ultimately, if you have a surplus you should be feeling excited because you have an idea that is financially viable and your personally prepared for! Keep in mind that like the budget tab, this tab is intentionally simplified. We are still at the idea stage and are weeding out the ideas that aren’t worth pursuing. With conviction in your numbers, and a surplus ready, it’s time to create a high level business plan.

Action items for tab three of your small business financials template:

  1. Input expected volume and price to be charged
  2. I added a 10% annual growth rate, but that can be adjusted to match your expectations


One page business plan

The last tab contains one of my favorite one page business plans from the exceptional book, Traction.

I have run into so many people that have showed me their 40 page, five year business plans. All of that detail at this stage frankly is not necessary. A lot of the things in that business plan are going to change. Instead, we want to focus on our go to market strategy. How are we going to approach customers? A lot of times you’ll hear them described as an avatar.

  • Whose your dream client to work with or sell your product to?
  • Where are they?
  • What do they appreciate?
  • How are you wowing them?
  • What are you doing that is making you stand out from your competitors?

This is really where you’re starting to get into that competitive analysis and figuring out what makes you different. Why are they picking you versus the person down the street? Or now in this virtual and global marketplace, you might compete with businesses all over – why you?

Action items for tab four of your small business financials template:

  1. Complete core values
  2. Complete competitive market analysis
  3. Identify ideal client



Doing the homework and understanding your small business financials will empower you to make informed and confident decisions. This becomes especially critical as you have many priorities competing for your time and attention after launching. 

If you need additional help or want to dive deeper into more complex projections with our one-on-one services, please contact us for a free discovery session!

Thank you for watching and/or reading. To continue along with our series, be sure to subscribe to our Youtube series and sign up for our blog to stay updated!

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