One of the most important tools available to the businesses in the Scandia family office is the power of planning. Annual projections can help assess the financial health of your company each year. Whether you are seeking funding from a family office like Scandia or any other financial backer in 2022 or simply planning your budget – projections are absolutely necessary.
Even if you have an accountant or accounting team, make sure that someone in senior leadership always reviews actuals. Look at your 2021 income and expense reports. In addition to looking for anything that stands out, this is an easy starting point to create your 2022 projections.
Are you close to landing a new client? Have you added to your sales team? Sit down with your staff and analyze what you expect whether it be an increase, decrease, or remaining flat. Income statements provide an estimate of the net income of your business. If you are a new business, reach out to partners like your investors or Scandia and we can help you put together a plan based on benchmarks from your industry.
Just as important as estimating your income is providing an estimate of expense in 2022. Is there a large project on the horizon? Perhaps you are purchasing a new building or performing renovations? Whatever the case may be, you can always look at your 2021 expenses as a starting point. Remember to include the expenses related to your salaries and benefits, day-to-day operations such as rent and utilities, cost of supplies and materials and any anticipated increases or supply issues, cost of services/software, and the maintenance and upkeep of your facilities, fleet and equipment.
Consider Market Factors
Are you in a volatile industry? Are you anticipating supply chain disruptions? Or maybe you will benefit from the current environment because you can continue to get products to market despite disruptions. Don’t forget to reach out to your suppliers and make sure you are prepared for any increases in the costs of goods or services.
Evaluate Assets & Liabilities
Perhaps 2022 is the year to pay off an outstanding business debt. Build in contingencies and funds for things like this or replacing aging equipment or upgrading software.
Every business should always have reserves for operating in case of an emergency or issue. How many months can your business sustain itself if there is a drop in income or disruption?