In: Finance
Why is developing a financial plan so important to an entrepreneur about to launch a business?
The following are the reasons why a financial plan is important for an entrepreneur about to launch a business: | ||||||||||
1) An entrepreneur has to manage cash flows. As soon as the business is launched, | ||||||||||
there will be income and expenses. The entrepreneur has to manage the expenses. | ||||||||||
2) An entrepreneur also has to manage his/her investments. In other words, the profits | ||||||||||
from the business have to be invested properly. | ||||||||||
3) The entrepreneur has to decide how much risk to take. Specifically, the entrepreneur will | ||||||||||
have to do an analysis to decide what capital investments to make. | ||||||||||
4) The entrepreneur has to ensure that the return from the business is more than the cost | ||||||||||
of capital so that the business is financially viable. | ||||||||||
5) The entrepreneur will also have to pay taxes every year, so every year the entrepreneur | ||||||||||
will have to file a tax return. |