As an aspiring small business owner, you’ve been self-funding your vision. You also know that, at some point, you will need to find the right funding to take you to the next level. It is important to start managing your business finances for growth from the beginning. Building your vision includes building a strong financial foundation. You have to position your business to secure funding, and sound financial records are a part of that positioning. In this blog, I’ll show you how to start managing your business finances and provide actionable tips to help you position your business for funding and long-term success.
Understanding Your Finances
Let’s start by reviewing the basics. Before you can effectively manage your finances, it is essential to understand your business’s financial status. This includes your revenues, expenses, profits, and cash flow. You can create a simple spreadsheet to start tracking these expenses. I know a few of you will tell me that you prefer paper and pencil or you have a notebook, however, try and trust me on this – you need a spreadsheet, or at the very least some type of financial tracking system that will compensate for human error. You can try a spreadsheet, like this one. You will need to make a copy to use it. If you are ready to take the plunge with an online system, here is the one I used to get started. It’s free and pretty user-friendly (I’m not affiliated).
If you haven’t opened a business banking account, do that today. It is a mistake to put this off until you have “significant funds or sales”. Start practicing this muscle early and often. Separate and manage your business finances in a separate account. There are plenty of banks that have low opening deposit requirements.
Managing Your Finances
The next step to managing your business finances is to create a budget using the spreadsheet you created in step one. The budget is a financial plan that outlines your expected revenue and expenses over a specific period. It is important to note that the budget I’m referring to here is your working budget, not the budget you created for your business plan. This is where you are going to record what you spend on your business and the amount of money you have invested in your business to cover those expenses.
If you are self-funding your business (and if you are a forced entrepreneur you most certainly are) use this process to manage the integration of your personal life with your business life. Starting a business is a stressful journey and finances will play a large part in that stress. Create a process that helps you manage early financial concerns by determining how much of your personal finances you can comfortably contribute to your growing business. In the beginning, you will want to do this by month to account for unknown changes in your environment. Life is complex and by accounting for these complexities in your budget, you can still grow your business without worrying that you are taking something away from your personal life.
Use the sample budget I linked earlier and put the amount you’ve determined in the first line of the Income section titled “Personal Investment”. Complete the rest of the budget by replacing the sample numbers with your actual numbers.
Positioning your Small Business for Funding
Business funding refers to the financial capital that businesses use to start up, expand, or operate their businesses. There are many different types of business funding, including loans, grants, and investments. Each type of funding has its own set of qualifications and criteria, however, the most important step is making sure your business has sound financial practices.
Why Good Financial Management Practices Matter for Small Businesses
Good financial management practices are critical for any business, regardless of its size. They help you make informed business decisions and ensure that your business remains financially healthy.
But for small businesses, good financial management practices are especially important. This is because small businesses often operate on tight budgets and have limited resources. Without good financial management practices, small businesses are more likely to run into financial problems, which can lead to missed opportunities for growth and even business failure. In addition to creating a budget, here are some other tips to help you position your business for success.
Create a Financial Plan
One of the first steps in good financial management is to create a financial plan. A financial plan outlines your business’s financial goals, strategies for achieving those goals, and the resources required to implement those strategies.
The financial plan is more than a budget. It can help you identify potential funding sources and determine how much funding you need to achieve your goals. It can also help you determine the most effective use of funding and ensure that you have the resources to repay any loans or investments.
Monitor Cash Flow
Cash flow is the lifeblood of any business. Without sufficient cash flow, businesses can’t pay bills, purchase inventory, or invest in growth opportunities.
Small business owners should closely monitor their cash flow to ensure that they have sufficient cash on hand to meet their business’s needs. This means tracking inflows and outflows of cash, predicting future cash needs, and having a plan in place to manage any cash shortfalls.
Small business owners often find themselves bailing out their businesses by covering expenses as they come up. Determining the amount of your personal investment and sticking to that number is an example of monitoring cash flow. The financial plan then helps you identify potential cash flow problems before they become critical and take steps to address them.
Maintain Accurate Financial Records
Accurate financial records are essential for good financial management. Small business owners should keep track of all financial transactions, including sales, expenses, and investments. Simply put, keep track of everything you spend or receive as it relates to your business.
When you have a clear understanding of what’s going in and what’s going out, you can better understand your business’s financial health, identify areas for improvement, and make informed business decisions.
Accurate financial records are also important when seeking funding. Investors and lenders will want to review a business’s financial records to determine its financial health and potential for growth.
Seek Professional Help
You don’t have to go it alone when it comes to financial management. Seeking professional help from an accountant or financial advisor can provide valuable insights into a business’s financial health and strategies for improving it. Learn early that you don’t have to know it all, however, you do need to know how to get the help you need.
Professional help can also be valuable when seeking funding. Accountants and financial advisors can help small business owners prepare financial statements and projections that demonstrate their business’s potential for growth and profitability.
Build a Strong Credit History
A strong credit history is essential for small businesses seeking funding. Lenders and investors will review a business’s credit history to determine its creditworthiness and potential for repayment.
Small business owners can build a strong credit history by paying bills on time, maintaining low credit card balances, and avoiding opening too many new credit accounts at once. They can also establish relationships with banks and lenders to demonstrate their creditworthiness and increase their chances of securing funding.
Diversify Your Funding Sources
Small business owners should not rely on a single source of funding. Instead, they should diversify their funding sources to reduce their risk and increase their chances of securing funding.
Diversifying funding sources can include seeking loans from multiple lenders, seeking investments from multiple investors, and exploring alternative funding sources such as crowdfunding or grants.
By diversifying funding sources, small business owners can improve their financial stability and position themselves for future growth opportunities.
Conclusion
Good financial management practices are critical for small business owners seeking funding. By creating a financial plan, monitoring cash flow, maintaining accurate financial records, developing a budget, seeking professional help, building a strong credit history, and diversifying funding sources, small business owners can position themselves for funding opportunities and take their businesses to the next level.
While implementing these practices may require some effort and investment, the benefits are well worth it. Good financial management practices can improve a business’s financial health, increase its chances of securing funding, and ultimately lead to long-term success.
So if you’re a small business owner looking to position your business for funding, start implementing these financial management practices today. With the right strategies in place, you can achieve your business goals and take your business to the next level.
Strategies for Developing a Compelling Grant Proposal
The key to developing a compelling grant proposal is a thorough program planning process. The key to writing a compelling grant proposal is writing compelling project plans. In this article, I’ll show you how to build a program planning process to simplify the grant application process.
Strategy 1: Understand your Participant’s Needs and Priorities
Your program will not be successful if it doesn’t meet the needs of your target population. Be sure to use data from a needs assessment that has been approved by participants with lived experience. If the needs assessment you choose doesn’t independently verify or mention that the process includes the input of participants with lived experience, you can conduct a local focus group to vet the assessment.
Using data from the needs assessment, write a profile describing the demographic, financial, environmental, cultural, and historical experiences of the participants. Be sure to use strengths-based, person-centered language when writing about your target population.
Finally, write a problem statement. Explain why your organization exists, or more specifically, why it needs to exist. What specific problem are you solving with your project? Does your organization serve young girls? There are hundreds of organizations already serving young girls. It’s ok to choose a population that is already being served; you still need to identify what makes your project or organization unique in the space.
Strategy 2: Describe Your Theory of Change
Describe your approach to solving the problem you just stated. Write a compelling story that highlights the impact of your organization’s work. Describe your service delivery approach – home-based case management, center-based programming, mobile services, etc., and your evidence base. Evidence-based means that you rely on objective data and best practices within your industry to inform your service delivery. Don’t worry, this doesn’t mean that you have to pay for an expensive curriculum (although you can certainly raise funds to do so), there are plenty of free resources available for evidence-based programs. The California Evidence Based Clearinghouse for Child Welfare is an example of a directory of evidence-based programs. You can find yours with a simple Google search: Evidence-based programming for [insert your cause]. Explain how you will incorporate this evidence into your program strategy.
Strategy 3: Use Local Data
Use data and evidence to support your proposal and demonstrate the project’s potential impact. Using local data elevates your proposal by making it relatable to the reviewers (most likely local volunteers). If your program is the first of its kind in your area, use local data that supports the need for your specialized intervention. Data from the problem statement section can be used here as well.
Be clear and concise, use simple language, and avoid jargon. Make sure your proposal is easy to read and understand by a person not intimately familiar with your industry.
Strategy 4: Provide a Clear Budget
Start by creating a comprehensive master budget that is aligned with the priorities of your target population. This master budget should serve as the foundation for your project’s financial planning, ensuring that all expenses are accounted for, and the budget covers multiple years to account for growth. Once the master budget is established, it can be tailored to suit the specific guidelines and priorities of various funders to create individualized funder-aligned budgets for each proposal.
Begin by listing all aspects of your project, from staffing and operational costs to equipment and other essential resources. This will provide a clear and thorough representation of the project’s financial requirements. Incorporate the cost to achieve the goals and objectives of your project. Strive for a balanced budget that reflects the most critical needs and aspirations of the participants, employees, and the organization.
Once you’ve created your master budget, you can customize it to align with the unique guidelines and priorities of each prospective funder. This will demonstrate that your project is not only well-planned and cost-effective but also directly addresses the specific concerns and interests of the funder. Ensure that each funder-aligned budget highlights the relevant aspects of your project, showcases how the funding will be used and adheres to any restrictions or requirements specified by the funder.
Strategy 5: Create your Logic Model
Logic models are my jam! said no one ever! Despite their ability to frustrate the most patient of souls, they are useful (and required) when building your projects. The quick and dirty is that logic models are a snapshot of your participants’ journey represented by specific program elements. The core elements of a logic model are:
· Goals: a broad/general statement about the intended outcome(s) of your project and is based on the results of a client-informed needs assessment. Goals serve as a framework for all other components of the logic model.
· Objectives: The steps we need to take to achieve those goals. Objectives are concrete and precise action statements of intended outcomes that are specific, measurable, attainable, relevant, and time-specific.
· Activities: Activities are the actions you will take to meet your objectives. What will you do with resources to meet the objectives and, ultimately, the goal(s)?
· Input/Resources: What are the resources you need to complete the activities to meet the objectives? Consider staffing needs, facility needs, insurance, licenses and permits, technology, and other equipment. A list of resources can also be used to develop a budget for the initiative.
· Outputs: Outputs are the tangible and direct results of activities. Remember that an output statement doesn’t reveal anything about quality. You will assess the quality of your outputs in your evaluation.
· Outcomes: Outcome statements express the result(s) that our initiative intends to achieve if implemented as planned. Outcomes are specific, attainable, and measurable changes that we hope will take place because of our initiative. It answers the question, “What difference did our initiative make?” We should be able to measure the desired change at an individual, group, or organizational level by measuring changes in knowledge, behavior, and/or condition.
· Indicators/ Milestones: Indicators tell us when/if changes have occurred. When we develop our objectives, we need to ask ourselves the following questions.
How will we know when we have achieved our objectives?
What indicators will we look for to measure the progress and success of our initiative?
Are data to measure our progress and/or success readily available or do we need to develop new measures, e.g., surveys, focus groups, etc….?
Strategy 6: Create a Master Program Guide
The Master Program Guide serves as a detailed roadmap for your organization’s programming. Each section represents a clear and concise picture of how the program operates and where it aligns strategically with the overall mission and vision of the agency. This document helps you identify alignment between the agency’s goals and the funder’s initiatives, ultimately increasing the likelihood of securing essential financial support. Additionally, the master program guide aids in streamlining internal communication within the organization, ensuring that all team members have a consistent understanding of the programs and their respective roles in executing them. Finally, each section of the master program guide corresponds to the information you need to respond to funding announcements, saving you time during the application process.
Grant Writing Tips and Best Practices
To summarize, here are some best practices to consider:
Tip 1: Plan Ahead
Plan ahead and allocate enough time and resources to build a comprehensive and compelling project plan.
Tip 2: Use Data and Evidence
Use data and evidence to support your project and demonstrate the project’s potential impact. Be sure to update your data regularly and use local data to make your project relatable.
Tip 3: Tailor Your Proposal
Tailor your proposal to fit the funder’s priorities and requirements, not your program. This is one strategy for avoiding mission creep. Avoid the temptation of trying to make your program fit a funding opportunity by writing your program overview in advance.
Tip 4: Create an application system.
Applying for grants is a time-consuming process that requires strict attention to detail. It helps to have a system that includes easily accessible, frequently used content, a checklist system for relevant requirements, and a review system to check the overall quality of the application. Creating a compelling proposal is the first step toward building that system.
In the next article, we will talk about how to create a universal checklist and review system that is unique to your organization.
If you want to learn more about the grant writing process and creating a system, schedule a session with me here.
Basic Grant Writing Steps for New Nonprofit Organizations
You’ve started your nonprofit and created your program design and financial plan. You know that funding is critical to achieving your mission and serving your community. Grants are an important part of your financial plan and now it’s time to write your first grant. Grant writing can be a daunting task, but with the right strategies and tips, you can master the art of grant writing. In this article, I will share the essentials of grant writing for nonprofit organizations, including understanding the grant writing process, a step-by-step guide to writing grants, strategies for developing a compelling grant proposal, dos, and don’ts of grant writing, best practices for nonprofit grant writing, and grant writing services for nonprofit organizations.
Understanding the Grant Writing Process
The first step in writing winning proposals is understanding the grant writing process. Grant writing is a competitive process where nonprofit organizations submit proposals to funders seeking financial support for a specific project or program. Funders can be government agencies, foundations, corporations, or individuals.
The grant writing process involves several steps, including creating your grant management plan, researching potential funders, analyzing the grant guidelines and making sure they align with your project or program goals, writing a compelling proposal, and submitting the proposal by the deadline. It’s important to note that the grant writing process can take several months, so it’s essential to plan ahead and allocate enough time and resources to complete the grant.
How to Write Grants – Step-by-Step Guide
Now that you understand the grant writing process let’s dive into how to write grants. Here is a step-by-step guide to help you write a winning grant proposal:
Step 1: Create your Grant Management System
The first step in grant writing is to create a grants management system to help you organize project narratives, supporting documents, and financial documents in a reliably accessible location. Your system should also include a tracking system to keep up with deadlines and capture results. Taking the time to do this first will save some time in a time-consuming process.
You can find plenty of fee-based grant management systems that do all this for you, however, a simple Google Drive folder for document storage and a spreadsheet-type tracking system is fine to get started. Your supporting documentation folder should contain a copy of your IRS designation letter, state certificate, board resolution authorizing you to act on behalf of the organization or letter approving the grant application, key staff bios and resumes, board member list, and project narratives for all of your programs.
Your financial documentation folder should contain a copy of your most recent profit and loss report, balance sheet and board approved budget, and a project budget for each of your programs.
You are already using these documents to run your organization, take the time to set them aside in a reliably accessible location like Google Drive, Microsoft OneDrive, or Dropbox, and remember to update them so you don’t attach outdated information to a project proposal. It will save you LOADS of time!
Step 2: Identify a Funding Opportunity
Now that you’ve set up your system, it’s time to search for a funding opportunity that aligns with your organization’s mission and goals. Start with the advocacy group for your cause, i.e. The American Heart Association if you are a heart health for women nonprofit. Next, go to your local library. Most local libraries have free, limited access to Candid Foundation search. Another good place to search for initial funding is your local service clubs (Rotary, Kiwanis, etc.) and big box department store community donations page.
Yes, I deliberately left out Grants.gov. However, if you insist, here is what you will do:
You’re going to search for the federal department that oversees the programs and services that directly or indirectly align with your projects’ goals and objectives. For example, if your organization provides services to families with medically complex children, you’ll most likely find aligned funding opportunities in the Administration for Children and Families. When you get to their page you’re going to look up the most recent grant recipients in your state or nearest to your state. You’re going to look for an agency near you that is already providing the service and strike up a conversation. Hopefully that conversation leads to a partnership that includes you providing services as a component of their program.
Why would I leave out grants.gov, you ask? Because those grants are massive. They require time, capacity, and funding that most starting nonprofits will not have. Writing one of these grants is the equivalent of jumping into the deep end of the pool when you only learned to backstroke last week. Also, a finely tuned partnership gives you experience with leveraging funding; bonus points in the eyes of most funders, and the opportunity to increase the overall amount of funding in the area for your mutual causes!
If you want this organization to last, you’re going to build smarter, not harder.
Step 3: Analyze Grant Opportunities and Guidelines
Once you’ve identified a funding opportunity, analyze the grant guidelines carefully. Here is where part 2 of your grants management system enters the picture: your grant analysis system. Since we are focusing on smaller grant applications, the system doesn’t have to be any more complex than another spreadsheet. Here is a simple tracker you can use to get started. I modified a version of that spreadsheet to include analysis that measures factors I look for when deciding to apply for a grant. Sign up for our newsletter and I’ll send you a free copy.
Step 4: Write a Compelling Proposal
Write a compelling proposal that clearly aligns with the funder’s priorities and requirements. Clearly define the project’s goals, objectives, outcomes, and metrics and articulate your organization’s mission, the project’s goals, and how it aligns with the funder’s priorities. Use data and evidence to support your proposal and demonstrate the project’s potential impact. This can be the most time-intensive part of the process, however, we’ve alleviated some of this by having our project plan and supporting documents nearby and easily accessible.
Step 5: Submit the Proposal
Once you’ve completed the proposal, review it carefully for accuracy, grammar, and spelling errors. Submit the proposal by the deadline, following the funder’s submission guidelines. Have a trusted person review your application or hire a grant specialist to review it before you submit your application.
In the next article, we’ll discuss strategies for developing a compelling proposal. Hint: it starts with having a compelling project plan.
Remember, you don’t have to do this alone. Contact me if you want to talk more about grant writing strategies.
