3 Differences Between Financial Projections in the Business Plan and Information Memorandum

Most business documents have a lot in common. One of those commonalities is that they will all include some form of Financial Projections. However, the financials presented will not always be the same. As an example, the financial projections in the business plan differ from those in the information memorandum. Understanding the difference can shed some light on the versatility of financial projections in general.

Business Plan and Information Memorandum Defined

In order to appreciate the difference between the financial projections in a business plan and Information Memorandum, you must first understand these two documents.

If you’re unfamiliar with a business plan, it is the most common business planning documents. It is as straightforward as the name implies. It is the plan for your business. It will include key elements of the business such as an overview of the products or services you will offer, an overview of the industry and market, the basics of your marketing plan, the team/personnel plan, and overall operational structure, among other things.

The information memorandum has most of the same key sections of a business plan. The big difference is that it is used by professionals – usually business brokers or mergers & acquisitions (M&A) firms - to market a business that is for sale.

Understanding the Differences

1. They’re Not that Different – The first thing to realize and acknowledge is fundamentally, financial projections in a business plan and information memorandum aren’t really that different. They should be based on the same core concepts and information. They will also be determined and produced via financial models.

2. Your Audience – In every business document you must speak to the correct audience. The big difference is that a business plan is usually written for an immigration officer, bank loan officer, or potential investor. Information memorandums on the other hand are usually meant for potential business acquirers.

3. The Emphasis – The reason differentiating between the audience is important is because what you emphasize from the financial projections for the business or information memorandum will vary based on it. You must always approach each document with the mindset of what will matter most to the intended audience and present the aspects that are most important to them.

Wrapping it Up

Even when you’re looking for differences in financial projections between the Business Plan and other types of business documents like the information memorandum, you’ll often find similarities. They are, after all, built on the same premise. They are all about predicting the future based on past trends (if applicable) and assumptions about the future that can be substantiated.

What will often differ is how they are presented, what is presented, and what the emphasis is placed on. This will typically be determined based on the type of document and the audience.

The Role of Professionals

Creating financial projections for a business plan, information memorandum, or any other type of business document can be a nuisance. When it comes to the business plan, you may not be comfortable using Excel or other type of spreadsheet software, or may not have a financial background. In terms of the information memorandum, you’re likely a broker or M&A firm that simply does not have the time.

Whatever the case, don’t underestimate the value that professionals can bring to your Financial Projections. If you choose to hire professionals for the financials projections, or any part of your business document, make sure to look for ones with the right expertise. This is often ones with experience or a specific background in your industry.