November 28, 2017
Business Plan Financial Projections – Common Mistakes Explained
Every business plan has a financial projections section. The business plan financial projections generate most interest because they show where your business is now and where you think your business will be from a financial perspective.
All other sections in your business plan flow into the assumptions that support your financial projections. For this reason financiers are very interested in this section and as a result it tends to strike fear into most business owners.
How to do Business Plan Financial Projections
Business plan financial projections should outline the historical performance (if any) and outline the assumptions that you have used to forecast business earnings in the future. The key financial statements required to present the business plan financial projections are:
- Income Statement (Profit & Loss)
- Balance Sheet (What the business owns and owes)
- Cash Flow Statement (Cash flow in the business and how it is used)
When considering your business plan financial projections you should focus on these three documents when forecasting, especially if you are trying to attract funding. This is because each financial document in the business plan financial projections tells the investor something about your business.
These documents naturally impact each other so it is essential that your projections do not solely focus on sales and costs. You must also show the capital structure of your business as it grows (balance sheet) and also the cash flow in your business (cash flow statement). This is accomplished by producing forecasts using an integrated financial model. If the forecasts don’t talk to each other they are useless to an investor. My advice, to hire a professional essay writer australia for this target.
The Importance Of Reasonable Financial Assumptions
Sound financial assumptions are pivotal to business plan financial projections. Here is a list of the top 3 mistakes made by entrepreneurs in the business plan financial projections section. See our next post to find out about the mistakes.