These businesses focus heavily on developing intellectual property (“IP”), launching products and generating revenue. Behind the scenes, they deal with operational and regulatory challenges that often result in overlooked financial strategies. At Crowley Law LLC, we understand how vital a strong financial plan is for achieving business goals. We help startups connect with our network of financial planning experts who can help them simplify their financial planning process and establish a foundation for sustainable growth.
A financial strategy explains how a company plans to manage its finances to meet its goals. This strategy is captured in a financial plan, which outlines the steps and actions needed to bring it to life.
A financial plan is a key component of any business plan. It ensures that financial objectives align with broader business goals. Its main components include a business description, personnel plan, financial statements, key performance indicators (“KPIs”) and risk analysis.
Whatever strategy you choose, a well-structured financial plan is essential to execute any strategy effectively. We recommend incorporating the following components into any financial plan:
An income statement documents a business’ expected net loss or profit over a specific period, providing insights into financial health.
A balance sheet outlines a business’s expected assets, liabilities and stockholder equity.
A cash flow statement illustrates how much cash is expected to come in and go out of a company within a specific period, capturing the liquidity for the covered period.
A personnel plan details planned staffing, helping guide recruitment and remuneration.
Business ratios, including working capital, assets to sales, return on equity and net profit margin, capture a business’s expected financial health.
Sales forecasts specify the expected cash flow from market offerings, directly indicating an organization’s overall health.
These financial projections help a business understand its cash flow by showing the difference between profitability and cash position.
Income projections indicate the money an organization expects to make in a specific period, typically a year.
Break-even analysis helps determine the required sales revenue to cover all fixed and variable expenses.
The financial planning process can vary between companies depending on factors like the type of services or products, business scale and funds needed. Notwithstanding, we recommend following these universal steps:
You should select an ideal business structure, either a limited liability company (“LLC”), corporation or partnership. Each structure has unique financial and tax implications that will impact your initial capital needs, liability and tax obligations.
You should identify and clearly document what you are trying to achieve with your finances. This can include raising capital, attaining profitability or supporting research and development (“R&D”).
After establishing financial goals, you should create a budget to determine your revenue streams, track spending and set financial limits. Having a budget will also help you make informed decisions about your cash and effectively pitch your company to venture capitalists, buyers or partners.
A strategic plan focuses on what your organization wishes to accomplish and the resources needed to achieve its goals. For example, the plan can indicate the need to hire additional personnel or purchase more equipment.
You should derive logical projections from financial data, primarily the anticipated expenses and sales. These projections rely on the predetermined goals to estimate the underlying costs, facilitating informed investment planning.
Data from cash flow statements and balance sheets should be used to determine worst-case scenarios, such as unexpected business failure or the exhaustion of financial resources. This information will help set contingencies to facilitate quick adjustments to the adverse eventualities.
Once you have officially registered your business, analyze the actual results in your financial plans, focusing on business ratios, income projections and cash flow statements. Regularly assessing performance will help you identify potential problems early.
Creating a financial strategy and plan can often be daunting for a first-time founder or a new founding team. Legal and financial guidance is critical to help create a solid and legally compliant financial foundation. Crowley Law LLC is ready to be your legal counsel and networking resource as you seek to secure your financial future. Some of our services include:
We help life sciences and other technology founders decide between structures like LLCs, corporations or partnerships. We offer advice on each structure’s impact on capital needs, liability and tax obligations.
We assist life sciences and other technology startups in accessing appropriate experts to help in planning how they will be funded initially and in future stages. This includes setting up compliant fundraising structures, such as equity or debt financing and preparing and negotiating necessary documentation like term sheets and stock purchase agreements that align with State and Federal regulations.
Our team of attorneys can help business founders draft founder agreements, vesting schedules and other equity-related contracts, help prevent future disputes and ensure that the financial strategy is informed by each stakeholder’s interests
We help life sciences and other technology startups budget for legal requirements such as licenses, IP protection and ongoing compliance. This helps avoid unexpected costs that can cause financial strain.
We offer early legal guidance on exit strategies, helping align the initial financial structure with potential long-term goals and optimize for a future sale or transition.
Many financial management strategies are available to businesses. Some of the most essential options you should know include:
Useful in balancing the advantages and disadvantages or risks associated with equity and debt capital.
The process of strategizing how to invest capital primarily for long-term success.
Strategies that help manage your company’s needs, procurement, allocation and future cash requirements.
A business plan is essential for raising finance, as it provides potential investors, lenders and stakeholders with a detailed overview of the business’s goals, strategies and financial viability. Some of the key roles of a business plan include:
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