January 10, 2018

Planning For Growth (3 of 5)

For the third day of this series we’re going to look at everyone’s favorite thing – cash.

The question here is simple – and yet incredibly complex – do you have enough cash to grow? You can plan, hope, and work as hard as possible but ultimately it is going to take cash to grow your business and you need to know how much and where you plan on getting that cash from.

How do you know how much cash you need? This is where creating a cash forecast can be critical. In said forecast you will draft our what you anticipate your monthly base expenses will be (such as kitchen rent) and then add to that the associated costs that would come along with growth. For example, if you are anticipating that your business would grow from 1000 units a month in January to 10,000 units sold a month in December that is going to come with an increase in ingredient and packaging costs (as well as potentially an increase in kitchen rent if you need to pay for more time in the kitchen and/or an increase in production labor).

You build those addition costs into the spreadsheet to get an overall idea of how much you anticipate spending each month as you work to grow your business.

Now, the good news is that you likely (hopefully) won’t just be shoving money out the door every month. Ideally you will also have sales to offset at least some of those expenses. Include in your spreadsheet what you anticipate your monthly revenue from sales will be based on your prior sales history. When the expenses are subtracted from your sales you can see where your business may run into cash shortfalls and, from that, you can start planning for how you are going to get the cash you need to grow at the time you need it.

* TYPE ‘PLANNING FOR GROWTH’ INTO THE SEARCH BAR AT THE TOP OF THE SCREEN TO VIEW THE OTHER ARTICLES IN THIS SERIES

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