Economic viability is essential when starting a business. It is determined by the amount of money you need to start the business, the costs associated with the business, how much products you want to sell or offer, and how much financing is. In this article, we explain what a three-year funding plan is and the key points to consider.
3 Year Funding Plan: Definition
The 3-year financing plan is the document that compiles all the financial information of the company over a three-year period. It is used to identify and evaluate the different resources available to ensure the economic viability of an enterprise over the next three years. Its development must be based on the fixed costs of a company, i.e. expenses that arise regardless of sales volume, such as rental of premises.
In addition, variable costs (or related to the total sold), such as the raw material acquired to manufacture a product must be considered. In the financial field, it is considered the best tool to carry out the economic planning of our company.
What you need to know to develop a 3-year funding plan
To complete this type of funding plan, you must take the following steps:
Gather the necessary information
The 3-year funding plan is a fairly complex document in its structure. To create it, you need to get information from different departments of the company. For example, you need to understand what will be the prices of goods or services during the planned period, whether there would be an increase/decrease, under what conditions.
On the other hand, you need to focus on the cost of your product. It is also necessary to know how much it costs to attract customers and how much it is planned to spend during the planned period.
Entrust the development to a specialist
If the business is small, the 3-year financing plan is fully developed by the financier, who communicates directly with business units. Sometimes small entrepreneurs use planning specialists. In this case, it is important to provide complete information and understand each figure with a specialist so that the plan is correct.
Be objective
Objectivity will be your best ally in developing your funding plan. In this first step, you need to make a conscious list of what you want to achieve with your business. At this point, you also define the profits you hope to have in the future, profitability, liquidity and leverage.
Plan capital availability
You need to predict how much money you will need during these three years to grow your business. It is at this stage that we begin to weigh the different funding options and find the most appropriate according to the needs and objectives of the project.
Consider the risks
Even if the project goes smoothly, even though it has been easy to get from investors, things can still get complicated. By having an emergency plan for unexpected events, you will show your investors that you can manage the project properly and they will continue to support you.
