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Making financial projections based on solid assumptions is wonderful.But you must explain the derivation and calculations to give business plan readers confidence in your data. Many spend hours pouring over data and create reasonable financial projections.
While both lenders and investors want your small business to generate solid net income and have a strong balance sheet, cash flow is more important.
It is from cash flow that you can repay loans or distribute cash to investors from profits.
Perform your industry and competition research diligently and with a total focus on becoming an expert.
You must then make financial assumptions based on this expertise – and communicate this clearly in your business plan. Have knowledgeable answers ready for these challenges.
You can then switch to quarterly projections for years three through five. Base your income and expense assumptions on factual, verifiable information.
For example, if your product competitively sells for to , refrain from using a selling price to craft your sales projections.
Three universal financial presentations are expected in all business plans.
You must include a projected income statement, balance sheet and cash flow statement for the coming three to five years.
Business plans are required for all small businesses seeking loans or investors.
Financial assumptions and projections are critical components of all business plans.