Financial Plan Definition

A financial plan is a comprehensive overview of your financial goals and the steps you need to take to achieve them. Since everyone’s financial situation is unique, every financial plan will look a bit
different. However, almost all plans will include your financial and life goals, an analysis of the current state of your finances, projections of your future wealth and a road map to how you’ll achieve
the goals you’ve set.

A financial plan gives a clear vision of the overall operating income and expenses of the business to distinguish if the company will gain profit and will be successful in the business world.

Financial planning is the process of estimating the capital required and determining its competition. It is the process of framing financial policies in relation to procurement, investment and
administration of funds of enterprise.

Objectives of Financial Planning

Financial Planning has got many objectives to look forward to:

a. Determining capital requirements – This will depend upon factors like cost of current and fixed assets, promotional expenses and long-range planning. Capital requirements have to be
looked with both aspects: short term and long-term requirements.
b. Determining capital structure – The capital structure is the composition of capital, i.e., the relative kind and proportion of capital required in the business. This includes decisions of debt-
equity ratio- both short-term and long-term.
c. Framing financial policies with regards to cash control, lending, borrowings, etc.
d. A finance manager ensures that the scarce financial resources are maximally utilized in the best possible manner at least cost in order to get maximum returns on the investment.

Importance of Financial Planning

 Financial Planning is process of framing objectives, policies procedures, programs and budgets regarding the financial activities of a concern. This ensures effective and adequate financial and
investment policies. The importance can be outlined as:

1. Adequate funds have to be ensured.

2. Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.
3. Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.
4. Financial Planning helps in making growth and expansion programs which helps long-run survival of the company.
5. Financial Planning reduces uncertainties with regards to changing market trends which can be faced easily through enough funds.
6. Financial planning helps in reducing the uncertainties which can be a hindrance to growth of the company. This helps in ensuring stability and profitability in concern.

The primary objective of doing business is to make money, a technopreneur will probably look for investors that could provide them with capital investment to rum or to start the business
idea that they had generated during the idea generation phase.

Most prospective investors are not looking for an opportunity to support the financial plan of a specific person or groups. It is precisely advisable that those prospective investors will recognize that
the technopreneur have a passion for what they are doing.

Types of Investors

The six different investors types, ordered by expected time of encounter from earliest to later fundraising stages, include:

1. Angel investors – Angel investors are individuals willing to make highrisk investments in early-stage ventures. Typically, these individuals have had successful entrepreneurial experience in
the areas of investments they consider. They usually are motivated by their desire to stay engaged in their past area of successful but are not willing to follow the tough lifestyle they
experienced during their entrepreneurial days.
2. Public funding agencies – Public funding agencies with the mandate and authority to fund business ventures to achieve economic development, environmental, cultural, or social policy
objectives formulated by policy makers at various levels of government are good sources of funding, particularly at the early stages.
3. Venture capital companies - Venture capital companies are specifically established to invest in high-risk ventures that offer potentially high returns. VCists (VCs) raise funds to capitalize
investments funds that they manage. Their investors entrust them to identify investments opportunities matching specific criteria and expectations, which govern the fund managers’
investment decisions.
4. Private equity (PE) firms – Private equity (PE) firms are specifically established to invest in relatively mature ventures that have at least a modest financial or operational track record while
still offering relatively attractively terms in an intermediate time frame (i.e., one to five years).
 5. Strategic investors – Strategic investors are defined by their investment intentions more than any factors. They could be a member of any of the previous types of investors we have
discussed; however, more often they are larger companies operating or investing in the same industry or a complementary one or market as your venture. Very often they are not in the
business of investing in smaller ventures but may believe an investment in your business would offer them some strategic value.
6. Banks – If you have reached a position to deal with banks, you have reached financial nirvana, as banks offers lowest costs of capital. A famous saying goes “A bank will only lend you
money when you do not need it.”

Aside from the six types of investors, the startup community contemplated the following options to raise a capital for your startup business based on Sarath, CP, a digital strategist and growth
hacking specialist worked for both startups & big brands and helped them to build a strong brand presence and achieve growth.

1. Finding your own idea:

This way of raising funds is the most common among startup’s early stages. Founders of the team members put their money together for their startup. Professional investors in the
market prefer this way of raising funds.

You must have some savings or assets that would be used for the

business startup. Funding your own startup is one way of telling your potential investors, how serious you are about this venture. Putting your money in the project shows that you are
willingly taking the risk of putting the money that you have worked hard for at stake, supporting your idea with the faith you have in your company.

2. Crowdfunding:
These are various types of crowdfunding. You have to select which one is the best for your business such as rewards or equity-based crowdfunding. It is an excellent way to gather
funds for startups with artistic projects or even to raise capital to finance the manufacturing of new technology at a large scale.

Any option you choose this option is of low risk as if you want to put the product in the market and also get funds to finance your product and make it the reality. This is also
advantageous to get feedback from the early adopters of your prototypes.

3. Friends and Family:

One of the best places to raise funds is from your own house. As your family is well aware of your talents, they will be willing to support you regardless of what you want to do. Family
and friends are the only ones who know your potential and will be willing to give you money to start your business.

This may seem like a great way of gaining investment partners, but everything has its drawbacks. Acquiring loans or investment form family or friends may be advantageous to some
businesses as they have faith in your talents and your success. But for others that require expert assistants or guidelines, angel investors are the best way as your family might not have
those experiences which are needed.
4. Taking a Loan:
Another way to get your startup financed is a business loan from the bank. It is one way of keeping the initial control of the business in your own hand. Taking a loan for startups
might be healthy but only to those who have full confidence that the business will prosper in the first run without difficulties. Again, it depends on you and the type of business you want to
incorporate.

But while considering the loan check the interest rates and also if you have a collateral to give. Crosscheck with all the facts, whether you are able to comply with all the terms of
the loan.

5. Enter Competitions:
For gaining publicity, you can enter competitions if you believe that your idea is capable enough. Entering these contests will be very helpful to you as in one hand if you win the
competition you will get a source of finance, and on the other hand, you gain publicity for your product and people will be waiting for it to hit the market (it acts as advertisements).

This is a low-risk option as you get your ideas out in front of investors and if it is good, you can win the competition and get money rewards to finance the startup of your business
to succeed. If you are not able to make it and win the cash prize, being on that completion acts as an advert for you and angel investors may contact you to invest in your idea. Both ways
it’s a win for you.