Business Planning Considerations: Timing Your Expenses and Income
Part of a great business plan is properly timed expenses and income. How you expect to make money is one part of your business model, but when you expect the money to roll in is also an important part of the plan. Some companies run up costs and spend cash months (even years) before a revenue stream begins to flow. For that reason, your business model must include a timeline that takes the following into account:
The upfront costs you expect to incur when setting up your business
The source of funds to pay for your upfront costs
A schedule showing when you expect revenues to pour in
The question of timing isn’t only for big companies with factories to build and products to design. Timing can impact businesses of any size.
Take the example of a bed and breakfast (B&B) on Cape Cod, where the tourist season begins on June 1 and ends with the big Labor Day weekend in September. Except for a few other holiday periods, the B&B brings in all its revenue during those three summer months. The owners need a business model that ensures that summer revenues are enough to cover fixed costs — mortgage, utilities, taxes, salaries, and upkeep — all year round.
Timing issues apply to many retailers, too, who often make the majority of annual sales during the year-end holiday or some other prime selling season.