Beginner’s Guide to Conducting Financial Viability Assessments
When you start a new business or undertake a new investment, ensuring it does not fail is essential. Blackacre Surveyors’ experts know that without performing a Financial Viability Assessment, your investment is just a guess and an act of bravado – you don’t want that, do you? Get ready for this Financial Viability Assessment guide, with essential steps to get you started.
What Is A Financial Viability Analysis?
A Financial Viability Assessment is a document that should determine whether your project can generate enough funds from revenue to cover costs, without unreasonably consuming your time and resources. Suppose you understand issues such as cash flow and profitability, the capital you need, and the potential market. In that case, deciding whether to proceed with your project as it is or amend it until it gets the all-clear should be fairly simple. With inexperienced users, it’s essential to take this in small chunks. Let’s see how to make your business successful financially.
How to Run a Financial Health Check
Learn Your Business Model
But you’ll want to understand your business model before you get too close to numbers. Which services or goods are you planning to provide? Who’s your market? How are you going to get to them? How will you price them? These are the keys to building an effective business plan and setting up the structure for your Financial Viability Assessment.
Calculate Initial Costs and Capital Investment
You must figure out how much you need to get off the ground for your business. It is the direct expenses (equipment, stock, and materials) and the indirect expenses (licences, marketing, and staffing). Most startups don’t understand their startup cost, which can create a cash flow issue. At Blackacre Surveyors we advise you to keep a running list of everything you’ll need to start with, ensuring you do not go too far to get all the details right the first time.
Forecast Revenue Opportunities
Now that your costs are known, it’s time to calculate your revenue. Are you making money from selling products, subscriptions, or consulting? What will be the number of times revenues are earned? You’ll get a strong financial picture using your potential sources of income. So, try different scenarios – best, worst, expected – and you’ll be set for different results.
Determine Operating Costs. Analyse Operating Costs
Think about your operating costs. These are the costs of keeping the business running daily (rent, salaries, utilities, maintenance, etc). To develop sound financial projections, you must understand what portion of those costs are fixed (e.g., independent of overall sales volume) and variable (change in step with changes in the production level).
Find Your Break-Even Mark
Your break-even point is where your company makes its way through the operation without profit. This important metric tells you what you must sell to be profitable. This will enable you to determine if your time and effort investment is by your financial targets.
Evaluate Competition and Market Trends
Your Financial Viability Assessment must account for market dynamics, a competitive environment, and economics. By doing some market research, you can fine-tune your revenue projections and identify potentially problematic areas for your business.
Conduct Sensitivity Analysis
Sensitivity analysis is a complex but crucial part of your Financial Viability Analysis. It simulates the effect of various factors, such as the fluctuation of prices or costs, on your finances. Simulation will help you predict problems and improve pricing, cost management, and expansion plans.
Why Financial Viability Audits are Crucial
Risk mitigation: Track risks early and correct them before launch.
Making Data-Based Decisions: Understand the financial situation to make the right scaling or investment decisions.
Raising Capital: An effective FVA is a powerful way to raise capital because it shows stability and future development.
Long-Term Planning: Establish realistic goals and plans for the future, ensuring sustainability and profitability.
Conclusion
Would your business idea be financially feasible? Supposing you are an aspiring entrepreneur or business leader that has already started an enterprise, you need to make sound financial choices. Financial Viability will unquestionably put you in the right direction.
Blackacre Surveyors are dedicated to putting you on the path to financial well-being. Want to move to the next level? Call 0203 476 9561 today for professional advice and support in your Financial Viability Assessment. Contact us and let’s get ready for a great future!