Here Is an Easy Way to Determine How Much Business Funding You Need in Year 2 of Your Business

Wednesday 15th September, 2021

Going into year two of business can be challenging due to the increasing factors you need to consider. It would be best if you made the right decision to boost your productivity while focusing on your long-term goals.

Still, you need to know how much money you will need for different business activities, the expected revenue, as well as the overall finance costs to ensure you remain on track. The projections could save you future headaches. Here is a guide to help you seamlessly get into your year two of business while enhancing your business productivity and better client experience.

Determine Expected Expenses

It would be best to carry out an expense forecast on every ongoing operation over the following months and years. There are various expenses, with the most important ones being rent, insurance, advertising, vehicles, employee wages, legal fees, and accounting.

You can forecast your expense based on the first year’s records, making the process easy. Make room for changes that will likely affect your business, like increasing costs or employing additional staff.

You should split all the records on your income statement from other personal expenses. Have a separate business bank account and organize the expenses by level of priority. It would also be best to keep a detailed report of all costs carried out in the past year.

Business Expected Revenue

Your expected revenue is the sum of values you wish to get at the end of the second year multiplied by its probability. In year two, the likelihood of sales and growth should go higher since you have already appealed to customers using your services and products. The customers act as brand ambassadors, and your employees are familiar with the business processes.

At this point, you need to maximize the number of sales to increase revenues. You can manage this by estimating the number of products the business will produce for manufacturers.

You can manage the expected revenue by reaching out to potential customers in your locality to gather more market data. It would be best to operate within the limits of your goals while ensuring your competitors are not offering similar services and better services.

The business data from year one and the one you collect before year two will help predict your expected revenue and set the pace for higher production.

How Much Financing Suffices for Continued Growth 

In year two, most ongoing businesses have access to traditional business financial institutions. At this point, you need to refine your business plan to ensure you meet your financing goals. The business plan is a crucial piece when solving the funding puzzle. It helps you know how much money you need, where the money will go, and how long you will get it back after successful sales.

The type of business you are running determines where and how to look for money for your second-year investments. When your business has seen rapid growth in the first year, you may go for more extensive lending options that will enable you to achieve higher production. However, keep it small if the business is experiencing slow growth and the expected revenue is not higher than in the first year.

Getting the finances you need for two years may require taking some risks. You are looking into diversifying your products and reaching out to more customers. Commercial lenders such as banks can be a good option when it comes to financing your ongoing business. However, these loans should help improve the ongoing business projects. If you need to start any new projects using the loan, carry out extensive research to succeed effectively.