3 Tips for the Financial Projections in your Business Plan or Information Memorandum

 

Whether you are creating Financial Projections for your business plan, an information memorandum, a pitch deck, or any other business document these helpful tips will still apply:

1. Substantiate Your Assumptions

When creating the financial projections for your business plan or information memorandum, you will use a set of assumptions. The projections are all about predicting the future, so they are going to be a guess but, they must be an educated guess.

You should make it known throughout the Information Memorandum or business plan where your assumptions came from. In part, this will be explained in writing in other sections of the respective document, and the financial section. 

An example of what this may read something like this, “We are projecting 10% growth based on future product release and historical year on year growth”. Don’t just guess. Put the effort into your financial projections and make it evident how you arrived at them. 

2. Present for Your Audience

The financial projections must be accurate and realistic to be believable. Great financial projections will also be created with their audience in mind. Certain types of audiences will be more interested in some components of your projections than others and you need to be able to identify this or trust professionals that are skilled at this.

In either case, ensuring the financial projections are prepared and presented with your audience in mind will be very beneficial. It reduces the number of questions that are asked, possibly speeding up the review process. It will also ensure that your audience remains interested, as they are looking at financial information that is relevant to them and will help them quickly make the decision they seek to make. 

3. Follow Standard Formats – 

While you need to present the financial projections with your audience and mind you also shouldn’t reinvent the wheel. All three core financial statements (income statement, cash flow statement, and balance sheet), as well as other types of analysis (example: break even analysis) follow a similar format. You need to present this information in a predictable layout to avoid confusion.

If you decide to deviate from this, you risk confusion. Chances are, busy business brokers, investors, loan officers and other common audiences, are not going to take the time to figure out overly complicated financial projections. Not only do they not have time but, it will make you look unprofessional.

At the end of the day, financial projections in the business, information memorandum and other documents are the same. They are all about using the best information at your disposal to realistically predict the future. The more believable these predictions, the more professional they will appear.

Although your financial projections should be realistic and follow a standard order and format, you can still customize the presentation for the audience. Make sure you are highlighting the information that matters the most to your audience and you will be well on your way to achieving your goals, whatever they may be.

Don’t be afraid to hire a professional to prepare your Financial Projections, your business plan, or your information memorandum. It can give extra validity to your business and your numbers.