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Home > Blogs > How to come up with solid financial projections?

How to come up with solid financial projections?
Created On: 9/4/2009  - in Financial Plan Writer  - Comments (15)

Whether you are expanding your business or starting a new business, writing a business plan is very important. Business plan contains all the relevant information about your business venture, in which financial projection is one of the most important sections.

Financial projection includes financial statements such as income statements, balance sheets, and cash flow statements and it is necessary that financial statements must follow Generally Accepted Accounting Standards (GAAP). By the business plan reader, financial projection section will be greatly analyzed.
Here are some tips for crafting solid financial projections:

Get easy with worksheets: For all financial projections, worksheet software is the starting point. There are number of special software packages available that help you with financial projection in which Microsoft Excel is the most common. These worksheets or spreadsheets offer elasticity and allow you to adjust assumptions as per your desire. These spreadsheets software are helpful in many ways but on the other hand, they do not write the description part of the plan for you, so you will not get satisfactory result by using computer program in developing your business plan.

Careful Assumptions: Financial projection is one of the crucial sections of any business plan, which will help you to generate funds. Financial projections are based on assumptions and it is necessary that these assumptions must be understandable. If you are looking for capital and you are assuming that your investor or lender will easily understand any kind of business plan assumptions, then you are wrong. You can be familiar with your financial projection assumptions but not your readers. It is necessary to make it easy and logical; explain in detail and round the figures. Many financial projections will lead business to failure because of fake assumptions.

Do not include every possible business plan financial projection picture in your business plan: You and your investors want to know, in what direction your business plan financial projections are going, how they are affecting your business, how they are helping you to gain funds and what aspects of it are most uncertain.

Avoid including every possible business plan financial projection scenario in your business plan, it shows that you’re not sure about financial projections. You cannot take important decisions and communicate with potential investors this way. Spot out the risky areas of your financial projections; tell investors what measure you will take to meet your bottom line. This will help you to focus more on risky areas of your business plan financial projections. The aim of the financial projection is to show potential investors that you are worried about their investment and you are capable enough to protect it.


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How to come up with solid financial projections?

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financial plan   financial projections   business plan tips   writing a financial plan  
 
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