“A budget should reflect the values and priorities of our nation and its people.” -Mary Landrieu
And your budget, the financial road map, should reflect the values and priorities of your beer business.
Creating a financial road map is essential for the success of your business in 2024.
In this post, I’ll share the 6 Steps to Create a Financial Road Map, and provide resources to help guide you through the process.
- Use Financial Planning Best Practices
- Build the Sales and Margin Plan
- Create the Operating Expense Plan
- Outline the Capital Expense Plan
- Summarize Loan Schedules and Debt Payments
- Implement Proven Tactics to Train Department Managers
Resources
- Listen to the financial planning module from the Beer Wholesaler Financial Training Program
- Get 1-on-1 help to build your financial road map
6 Steps to Create a Financial Road Map
#1 Use Financial Planning Best Practices
- Begin with the end in mind
- Do you need to hit a certain profit as a % of sales? Make that your target, and work backwards from there.
- Start and finish on time
- Deadlines are the key. Set a deadline. Let everyone know. Stick to it.
- Know your audience
- Owners, investors, bankers. They may have different needs. Make sure these needs are known and in the plan.
- Create actionable plans
- What, exactly, will you do in order to achieve the numbers on the financial road map? Write it down. Take action.
- Involve your managers
- If you want your managers to buy-in to the budget, they need to be involved in the planning. Involve them.
#2 Build the Sales and Gross Profit Plan
- Leverage reports and templates
- My favorite way to do this is to run a sales and gross profit report by supplier, by brand, by package
- Then dump this great data into Excel and build a monthly and annual plan for the new year
- Use key metrics
- Sales growth % by supplier, brand, package
- Gross profit % by supplier, brand, package
- The trend is your friend
- Look at year over year trends – which suppliers, brands, packages are growing?
- Look at monthly trends. Did a new package sell great for a couple months and then flame out? Take note of this when projecting the new year.
- Don’t forget new suppliers, brands, and SKUs
- What new items are you taking on in the new year?
- What items are you getting rid of? Build this into your new plan.
#3 Create the Operating Expense Plan
- Use strategy, goals, and objectives
- You’d think the strategy people would talk to the finance people, but sometimes…
- Make sure the costs associated with strategic changes, goals and objectives are in the plan. Think: opening a new market, adding new sales people, acquiring a big brand.
- Review departmental needs and initiatives
- Ask key questions of managers: what safety issues do we need to address? What will this cost?
- What tools, resources or training does your team need to be their best in the new year? Build this into the plan.
- Make the costs justify their existence
- Don’t forget about the Zero Based Budget mindset. Every cost must justify its existence, not the other way around.
- Clarifying questions: Will the customer notice if we cut this cost?
#4 Outline the Capital Expense Plan
- Teach them ROI
- People love to buy new things (trucks, forklifts, cars, computers). I love those things, too. But will the purchase of these items deliver an ROI?
- Show your managers how to calculate the ROI, return on investment of a purchase. If there’s no ROI, do not buy.
- Insist on alternatives
- Before pulling the trigger on that $150,000 delivery truck, does it make good financial sense to refurbish or repair the one we have?
- Consider leasing options as well. I’m a fan of the purchase, but sometimes, a lease option makes sense. Run the numbers, do the math, and make an informed business decision.
- Use a model to capture the needs
- A simple spreadsheet can go a long way. Use this one.
#5 Summarize Loan Schedules and Debt Payments
- Make a list of loans and payments
- If you have multiple loans, create a document that summarizes the terms and details. Use this one.
- Don’t forget any new loans
- Look to your Capital Expense plan. How are you going to pay for those new trucks? Loans. Get them on the schedule.
- Build an amortization schedule
- This is a payment schedule. It’s show the monthly payments along with the break-out of principal and interest.
- These are easy and fun to build, and very useful in planning out interest expense and cash flows.
#6 Implement Proven Tactics to Train Department Managers
- Give budget responsibility
- Define what managers will be responsible for, set expectations, and provide access to data
- Education and training are key
- Financial literacy training, business literacy training, systems to communicate and control the flow of expenses
- Reporting tools
- Every department manager should have 2-3 key metrics to track
- Monthly department P&Ls so that managers can understand the costs flowing through their department, their ‘mini business’
Need More Resources to Build Your Financial Road Map?
- Listen to the financial planning module from the Beer Wholesaler Financial Training Program
- Get 1-on-1 help to build your financial road map
