Most businesses fail because of poor financial management or a lack of planning. Often companies prepare business plans with the sole objective of raising funds or becoming eligible for any one of the start-up funding options in India. More often than not, the business plan that was used to help raise finance is put aside, and instead of walking the path, different objectives start getting precedence. The business plan ends up becoming just another document gathering dust.
When it comes to addressing business success, developing and implementing sound financial and management systems internally, or using the right professional support to enable the same for you, is vital.
To move forward in this direction, the first task would be to start updating the original business plan. This gives the company a chance to revisit all the objectives that were initially set and do a quick SWEAT analysis.
While reviewing the financial structure of start-up firms one must consider the following:
Cash flow
This is the balance of all of the money flowing in and out of the business. Make sure that the forecast is regularly reviewed and updated.
Working capital
Have the requirements changed? If so, explain the reasons for any movement. Compare this to the industry norm. If necessary, take steps to source additional capital.
Cost base
Keep the costs under constant review. Make sure that the costs are covered in your selling price – but don’t expect customers to pay for any business inefficiencies. If required, conduct a zero-based budget to address any aspects that have been missed.
Borrowing
What is the position of any lines of credit or loans? Are there more appropriate or cheaper forms of finance that the business could use?
Growth
Do you have plans in place to alter the financing to accommodate the changing needs and growth of the business? Understand the equity fundraising process in order to assess if this is a possible option.
Growth Business Plan
Once the above has been completed, companies should proceed to draw up a Growth Business Plan.
FAQ
What does financial structuring mean in business?
Financial structuring refers to designing a company’s capital, debt, cost base, working capital, and cash flow framework so that its resources are arranged optimally. It underscores the importance of financial structuring in ensuring the business plan stays relevant and financial obligations are met.
Why is financial structuring important for companies?
The why financial structuring matters is because it helps firms manage risk, maintain liquidity, align their funding mix with growth ambitions, and ensure costs are covered without inefficiencies. Effective structure provides stability and clarity for stakeholders.
How does financial structuring affect business growth?
Proper financial structuring paves the way for scalable expansion by ensuring working capital, borrowing options, and cash flow forecasts support evolving operations. One of the benefits of financial structuring in business is that it enables companies to adapt financing to growth needs without over-leveraging or straining resources.
What are common financial structuring strategies?
Common strategies include optimizing borrowing vs equity financing, implementing zero-based budgeting to re-examine cost base, regularly reviewing cash flow forecasts, and ensuring working capital requirements align with industry norms. These tactics reflect the importance of financial structuring in maintaining financial health and operational flexibility.
How can financial structuring attract investors?
Investors are drawn to companies that demonstrate transparency in how funds are managed, clear forecasting of cash flows, and balanced capital structures. Highlighting why financial structuring matters and showcasing the benefits of financial structuring in business—like predictable returns and controlled risk—boosts investor confidence.
