4 Ways Market Research Informs Financial Modeling

 

Your business’s financial history is the most obvious source of numbers for Financial Modeling. Looking into previous sales and expenses your company had in the past is a great way for calculating and predicting future revenue. But consider doing Market Research in order to get the most accurate forecasts. It can provide important information and data which can later be used for changing variables in your model, and calculating the most precise financial outcome for your business.

1. Determining market size

Having a good understanding of the market is a good starting point for making your business decisions. Knowing how much interest or need there is for your product can greatly impact your business finances. For example, it can determine production rates and therefore greatly affect revenue. This type of data gathered from market research can be processed through financial modeling to examine how much market size can influence future production and earnings.

2. Setting the price straight

Correctly pricing an item increases the likelihood of it being sold. And this is how market research comes into play. It can give you an idea of how much the customers value your products, or to be more precise, how much they are willing to pay for them. This way you will be able to set an exact price for your products, and calculate your future earnings. The price you decide can be used in Financial Modeling to predict your business’s exact profit margin.

3. Following the trends

Because the market is fast changing, companies that do not stay on top of those changes do not remain relevant. They will slowly fade and disappear. To avoid this, companies do regular market research to be able to follow its trends and demands.

Conducting this systematic research detects markets' imminent shifts and changes. Collected data can be later used to determine what business decisions need to be made in order to be able to beat the competition. Therefore, changes in the market can affect the variables in financial modeling and produce different financial forecasts.

4. Testing new products

If you are in the process of upgrading your products and services to follow market trends, you will certainly want to know if you're going in the right direction. Any changes you make to your merchandise can be either a great success with the customers, or an absolute detriment to your business. That is why Market Research can help analyse the public's opinion of the new and improved product, which can later be used for financial modeling. Different models can be created depending on the product's effectiveness on the market, and consequently drive product’s development.

Market research is a great source of information for your business. The data collected from it can serve many purposes. But the bottom line is that it is an integral part of the decision making process in any business. It provides important information that can change variables in financial modeling and provide many potential outcomes. Therefore, it shows all the possible directions your business can take, and is extremely useful when trying to plan your business’ operations or estimate its Financial Projections.

The Power of Using Financial Modeling to Complement the Business Plan

 

If you’re familiar with business plans and business presentations, you know how much relies on the numbers. Because the numbers are such a focus for nearly any audience, it stands to reason that Financial Modeling has the potential to be tremendously impactful.

Not sure how financial modeling plays into it all and can be used? Read on!

Financial Modeling is Already in the Business Plan

The first thing is to know that financial modeling already played a part in creating the Business Plan. The financial projections themselves are almost certainly the result of financial modeling. Even if you are the one that created them, you may not have realized that is what you were doing at the time. But, if you had an Excel sheet or software where you plugged in different numbers into formulas before you arrived at your final projections, that’s it!

The Power of Additional Financial Modeling in the Business Plan

So, now that we have a better understanding of what financial modeling is, we’ll get back to the main point. When used in conjunction with the business plan, they can be quite impactful. But, how?

Additional Information – There is only basic Financial Modeling that typically goes into the business plan financials. Beyond that, you may choose to have additional information that may or may not go in the plan itself.

One good example would be a valuation of your company when approaching potential buyers or investors. A valuation gives a mathematically value to the likely worth of a business in the future.

There are a few different generally accepted methods for calculating this and which is best will depend on your business and to an extent, personal preference. The important thing here is to realize that financial modeling allows you to provide additional, highly relevant and impactful monetary/mathematical information to your audience beyond what is standard.

Financial Modeling in Action – One of the most impactful ways financial modeling can be used is to present it dynamically. What does this mean exactly? Well, one example would be when you have an investor meeting to review your pitch deck or business plan.

Chances are, they are going to be very interested in their return under different scenarios. If you have a model that is ready to be used with them in real-time, it will likely make a positive impression. It also helps to speed up negotiations by eliminating some of the back and forth that may occur after a meeting otherwise.

Rely on the Best But, Make Sure You Understand

Now that you understand how the use and inclusion of financial modeling in the Business Plan can benefit you, it’s time to discuss your involvement in the model(s). Not everyone is an Excel wizard, and some people downright hate it. Unfortunately, it’s kind of a necessity.

So, the best course of action if it is not your thing, is to hire an expert to do it! Because one of the worst things that can happen to your business plan is for someone to identify your numbers are wrong. Further, professionals may see opportunities to present numbers in a way you don’t.

If you have a Professional Business Plan Writers create your financial models though, you should be certain you understand them. You will need to be able to explain them to someone but also answer questions and maybe even alter them in real-time. So, hire a professional but, make sure they include time to train/explain financial modeling, otherwise they might not be worth it.

Answering the Question: How Important is Financial Modeling in Creating Financial Projections of a Business Plan?

 

People who are unfamiliar with Financial Modeling often consider it as something scary and overwhelming. It seems like a tall task outside of creating the financial projections for the business plan. However, this is not the case. Before we go too far, let’s answer the question above.

So, how important is financial modeling in creating the Financial Projections Business Plan?

The short answer: imperative.

You Can’t Have Financial Projections in a Business Plan Without Financial Modeling

Why is it so imperative? The biggest reason and explanation for this is because you literally cannot have the projections without the modeling. That’s just not how it works.

Think about it, when you sit down to determine the Financial Projections for your business plan, you will usually start by putting down your current financials. Then, you layer on top of that the assumptions about what your business will do in the future. This use of math to arrive at the new number is financial modeling.

Usually, financial modeling is done in a spreadsheet like Microsoft Excel or Google Sheets. But, even if what is discussed above is done on a cocktail napkin, it’s still a form of modeling.

Financial Modeling Isn’t as Scary as People May Think

The example given above is a very simple, basic example of financial modeling but, it’s nonetheless relevant. When people think about it in terms of these complicated equations and big spreadsheets it may seem overwhelming. But, it doesn’t have to be and it is rarely the case.

If you are an entrepreneur and you’ve been running or planning a business, you will already have the key ingredients that should go into your model. You have an idea – more officially called an assumption in modeling – of what your business will do based on various factors.

These factors will typically include things like market research, customer feedback, level of competition and other things that you are probably already thinking about. All Financial Modeling prompts you to do is quantify this knowledge and apply it in a numerical equation to arrive at a certain number.

If You’re Still Unsure or You Really Do Need a Complex Model, Hire a Professional

The part some people struggle with the most isn’t the knowledge about what direction the business will go in but, how to use Excel, other spreadsheet, or modeling software. As a busy entrepreneur if this is not already in your skillset it can be daunting to learn.

In this case, it may be most practical to bring in an advisory professional who can help! You may be able to find people that list themselves as financial modelers but, a better option may be a business plan writer with advisory experience.

Why is this? Because unlike Excel savants, business professionals understand the numbers in context. They will be able to ask the right questions to create the right model. They don’t simply put in the numbers and assumptions you may provide them but, they will also validate and question them as you go.

This process is usually highly beneficial because if you are creating Financial Projections Business Plan it is most likely for an external audience like a bank loan officer or an investor. They will scrutinize your numbers closely so, having the backup of well thought through and supported financial modeling will go a long way.

The Importance of Doing Market Research for Your Business Plan and the Different Types of Research to Take into Consideration

Any successful business starts with a business plan, and a thorough business plan should definitely start with Market Research to provide you with a detailed analysis of your market and to help you identify new opportunities.

Market research is the process of gathering and analysing information about target markets, potential customers, and competitors in order to keep up with the latest trends and provide an insight into customers’ thinking and buying patterns.

Different types of market research:

1. Primary vs. Secondary

There are two main types of market research: primary and secondary.

Primary research is the process of collecting new and raw data directly from the source, while secondary research involves analysis and interpretations of the data already collected through primary research.

Focus groups with specialists, face to face interviews with customers and online surveys are the most used methods in primary research. On the other hand, the necessary data to conduct secondary research can be found on the internet, on the reports of government and non-government agencies or by contacting market research firms.

Since primary research is done from scratch and conducted on the basis of new first-hand data it can be a long, expensive process. Secondary research is often faster because all the relevant data is already available but, often you will need a subscription or to purchase one-time access to see this informaiton. Depending the source, this can be expensive as well.

2. Quantitative vs. Qualitative

Within the primary and secondary research, two types of data collection methodologies can be used: qualitative and quantitative research.

Qualitative research uses unstructured or semi-structured techniques, like focus groups and interviews, to collect non-numerical data such as opinions, motivations, attitudes and behaviors. It is used to initiate market research and aims to develop hypotheses for potential quantitative research.

Quantitative research uses structured data collection methods, like surveys and observations, to generate statistics and numerical data such as spending patterns and market trends. It can be used to test theories and assumptions, draw general conclusions from the research and make future predictions.

For your market research you can choose either type of research or a mixed methods approach depending on, among other things, your budget and the type of data you need to answer your research question.

Why market research is important to the business plan

Accurate market research helps businesses better understand the state of the market, the consumer behavior, and the economic trends. All these are critical information to have when creating a Business Plan. They provide managers with the knowledge to make smarter business decisions because, if done correctly, market research is a powerful tool to help your marketing and financial strategies and minimise the risks involved when making key business decisions.

Market research is also important to the business plan because it helps you assess your business ideas and better understand your customer by answering questions such as who is buying your product, what motivates them, and whether they are loyal to your brand.

Keep in mind that market trends and the customers needs and preferences are constantly changing. Therefore, conducting market research should be considered as an ongoing activity to help you better understand the market dynamics and improve your offering.

How to approach market research

Before you start market research you should, first of all, set out clear goals and objectives and identify your target audience. Then, you have to choose the most suitable market research and data collection methodologies. Once all the necessary data is collected you have to analyse it and draw conclusions that will guide your business decisions.

Although you may be able to conduct your own market research, it may be better to hire a professional Market Research Firm to get the maximum benefits from the whole market research process. They have more expertise in the field and they will guide you through important decisions such as the suitable type of market research to use and the perfect questions to ask in your surveys or interviews. Finally, they will provide refined market analysis and business recommendations to help you make the best decisions for your business.

6 Tips for Preparing Financial Projections for your Business Plan or Pitch Deck

Creating Financial Projections for a business plan or a pitch deck is an incredibly important task. Yet it is often something that founders have the least amount of experience with. Many choose to hire outside professionals – like financial modelers or professional business plan writers – but, if you choose to go it alone, here are some important tips to keep in mind.

1. Start with expenses – Coming up with financial projections for a business plan or subsequent pitch deck can seem like an overwhelming task sometimes, especially if you are not experienced in coming up with sales assumptions. It’s easier to break it down and start with your expenses. These tend to be easier to identify and predict than sales, especially if you’re a new business. Start with expenses and build from there.

2. Layout your history – If you have been in business for a year or more, layout your historical information before predicting your future financial projections for the business plan. You will often be able to identify trends and understand big drivers which will impact your future performance with this information in front of you.

3. Consider multiple scenarios – When creating the financial projections for your business plan or Pitch Deck there is a tendency to want to be optimistic. However, optimism – especially in a business landscape – can be unrealistic, or at least viewed as such. The best way to present realistic financial projections is to consider multiple scenarios and choose a number in the middle. When appropriate, you should even apply various calculation methods. That way when your numbers are questioned, which happens frequently, it’s easier to justify.

4. Hard coding assumptions in your spreadsheet - You are going to have many assumptions that will go into your numbers and as implied above, you are going to have people question them. You need to make sure you can clearly point to them in your models. This means in your spreadsheet they should be in their own cell or section and labeled appropriately. You should not, under any circumstances, incorporate your assumptions into a formula that will not be visible when presenting the document to others.

5. Go beyond the basics – It is a given that you will include the three basic financial statements in your financial projections in your Business Plan. These include the income statement, the balance sheet, and the statement of cash flow. This might be the norm but, consider your audience and what information is going to be most important to them in assessing your business. This is especially true in the pitch deck, which will likely also include investment ROI information.

6. Update when new information is available – You may go months or years between presenting the financial projections in your business plan or pitch deck to someone. You should make sure to keep these projections current. Even if it has only been weeks or months, if information has come to light that will materially change your assumptions, you should reflect that.

Crafting the Financial Projections for your business plan, or selecting the abbreviated version for the pitch deck, should not be taken lightly. They’re also not as complicated as they may initially seem if you have some guidance. Applying the tips above will be a good start and help the process go smoother for you.

How to Decide if You Should Hire Professional Business Plan Writers for Your Bank Business Plan

Creating a bank business plan can be intimidating. That is why many people choose to hire Professional Business Plan Writers. It is not the right decision for everyone though. There are a number of questions you should ask yourself to help determine if hiring a professional writer for you bank business plan is the right decision to you.

Am I familiar with bankers and lenders?

Banks and loan officers have very exacting standards and high requirements. Not just for the information contained within your bank business plan but to how it’s presented. When considering whether or not to hire professional business plan writers the first thing is to ask yourself if you are clear on what bankers – or possibly the SBA depending on the type of bank loan you are applying for – expect. Not just what is required, but how they expect a business plan to look and sound.

If you’ve spent time in the banking industry, or already have an established relationship with the bank and have attended several meetings, the answer to this question might be yes. If this is the case, you may be able to craft a Bank Business Plan that speaks their language. If not, you should consider professional business plan writers.

Are you able to be objective?

Often, when working on building a business, you become emotionally attached to it. Are you the type of person who can look at creating your bank business plan from the perspective of a banker? Not just do you understand how they think but, can you consider what information is most important to them and what details are actually pertinent from their perspective? One thing professional business plan writers are particularly good at is seeing a business plan through the lens of the audience. This is a skill that is imperative and you should make sure you have and, if not, find someone outside.

Have I written a business plan before?

It is possible you’ve been to business school. Or maybe you’ve written a business plan before or at least been part of the process to create one. This experience is highly valuable and may put you in a position to tackle this very important task on your own. If you’re confident in your abilities, have the skills you need, and have familiarity with bankers (as discussed above), then tackling the business plan on your own could be the right choice for you.

Do you have the time?

You cannot sit down and write a formal bank business plan in one sitting. Or, at least, you shouldn’t. It takes time to do Market Research to perfectly support your strongest points. It takes time to format and reformat and likely reformat again until its just right. If you don’t have several days – at a minimum – to devote to the art and practice of putting the bank business plan together it is definitely better to go with professional business plan writers.

What’s my budget?

Most experienced, proven, and professional business plan writers will usually charge around $1,000 or more for a standard bank business plan. That can feel like a big sum, especially if you’re just starting out. However, if your budget is too low, it may be a waste entirely to hire an inexperienced business plan writer. What they may produce may not meet your expectations (or the loan officers) and you will likely scramble to put it together yourself or amend it on your own to make it suitable. If you are able to budget $1,000 or more, professional business plan writers are likely the path for you.

Going through this series of questioning will help you identify your own strengths and weaknesses as it comes to preparing your bank business plan. While it is hard to tell whether or not you may be able to craft a winning plan before it is actually reviewed by bankers, hiring professional Business Plan Writers can allow you to apply with additional confidence.

The Role of Market Research in the Information Memorandum

 

When planning to sell a business you will need to prepare an Information Memorandum. This document is similar to a business plan. It is meant to provide an overview of the business and insight into the company’s value in order to entice prospective buyers. A lot of what buyers are looking for is potential. The section that helps inform a great deal of this potential is the market overview, which should be based on current market research.

Market research is the process of identifying consumer needs and preferences. It also involves identifying the total size of the industry and the customer base. When it comes to your information memorandum, the more thorough the Market Research the more you’ll be able to justify other sections of the plan.

Thorough market research will allow you to:

 

Demonstrate market share

You can’t demonstrate your company’s place in the market without describing the overall market. If you’ve been busy working in your business, things around you may have changed without you realizing it. When you do market research, you get to see the real picture. You will also be able to identify what percent of the total market you are capturing. This is of particular interest to competitors who may buy your business simply to expand their market share.

Justify financial projections

In the financial section of the information memorandum, you will report historic information as well as projections for the future. When creating the projections, this should not only be based on your company’s financial trends but, overall market trends as well. It gives more validity to your numbers.

Show future potential.

As already mentioned, one of the most important parts of the business plan is the market overview. Even if your business is under-performing now, market research shows the future potential, making it far more appealing to buyers. Plenty of companies will purchase failing businesses if they know there is an upside. Market Research is where this can become evident.

Receive top dollar.

Ultimately, the reason it is so important to use market research in the information memorandum is because your goal is most likely to sell the business for as much money as possible. It doesn’t matter if your business is succeeding right now or not, if there is a reasonable potential for it to perform well you can receive top dollar. Business values are subjective and acquisition prices can come down to the highest bidder. The more people you have interested in your business, the higher the final offer.

Since information memorandums are so similar to business plans, business planning professionals can help you. They will be able to complete the information memorandum with buyers in mind. Business plan writers and other similar professionals are accustomed to creating documents that “sell” the business. Ideally, you’ll be using a mergers & acquisitions (M&A) firm to handle your business sale. Even they often outsource the creation of the information memorandum - or at the very least market research - to streamline their businesses. Regardless your situation, hiring professionals can ensure you get the market research and the Information Memorandum that best represents your business.

 

A Brief Overview of 5 Types of Financial Projections in Your Business Plan

 

The Financial Projections Business Plan are arguably one of the most important aspects of the business planning process.  Businesses serve many purposes, but they all run on money.  Assets and expenses are essentially the gears of your business.  As such, it is imperative to understand how they work.  That is what creating financial projections for your business plan allow you to do.

Most of the financial projections, as well as other aspects of the business plan, will be presented with both short- and long-term goals.  Short-term projections account for the next year and will be broken down by month.  Long-term financial projections on the other hand, are typically for three or five years, broken down into year.

Sales Forecast

When coming up with a business idea and creating a business plan, your very first consideration is your product or services.  What is your business going to sell?  This question leads to determining how much you can – and need to - sell.  This becomes your sales forecast which is one of the first financial projections in your business plan.  As your company begins, this will be based off market research and assumptions.  After you have been in business, this will also be based on your actual performance.  It will also be impacted by your expense budget.

Expense Budget

Your expense budget helps in determining your sales forecast by informing you how much you need to sell.  The expense budget will be a detailed breakdown of how much it will cost you to run your business.  Expenses add up quickly and is that is why it is so important to get them down on paper so you can manage them.  It is only once you understand your expense budget and sales forecast that you can dig into the other financials of your business plan.

Income (Profit & Loss) Statement

Businesses like to understand their margins and other key business ratios to make informed decisions.  One of the financial projections the sales forecast and expense budget facilitate is the profit and loss (p&l) statement, also commonly referred to as the income statement.  This is one of the key financial statements of the business and how you will likely synthesize your actual financial performance on a monthly basis.  Creating this projection also creates the benchmarks for how your business should ultimately run.

Statement of Cash Flow

It is just as important to consider when you will generate revenue and incur expenses as it is to know how much you’re going to make or spend.  This allows you to manage your cash appropriately.  The way you will understand this is through creating the statement of cash flow.  Outside of the Business Plan, in day-to-day operations, you may even have a daily cash flow projection.  It is arguably one of the more useful financial projections in the business plan, though they all play their part and provide different insights.

Balance Sheet

Last by not least of the financial projections in your business plan is the balance sheet.  The balance sheet is like the report card for your business.  It allows you to understand where your assets and liabilities are, which gives you all sorts of vital information such as how liquid your business is.  It is a brief overview of your total financial health.

You may find other financial projections in a business plan but, these are the main ones.  They all give a different view and understanding of how your business is performing.  Combined, they give you a complete picture.

 

Alleviating the Confidential Information Memorandum Bottleneck in Your Firm

 

When looking to sell a business, the Confidential Information Memorandum (CIM), also called the information memorandum or sales memorandum, can be one of the most important documents that will help determine if the business sells.

 

 

Read More Alleviating the Confidential Information Memorandum Bottleneck in Your Firm

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5 Considerations for Financial Projections in a Business Plan or Information Memorandum

The financial projections in your business plan or confidential Information Memorandum (CIM) are often one of the most important components of your document. Your entire plan or CIM is important, of course, but when it comes to business it usually all comes down to numbers in the end. There are a number of things you can do to ensure that this vital piece of your document is the best representation of your business as possible.

1. Do Not Overinflate Your Numbers

It is natural to want to paint the best picture of the business possible via the Financial Projections Business Plan or information memorandum. There is a tendency to want to show the highest revenue and the lowest expenses possible. You should resist this urge at all costs. No matter your audience or the purpose of your plan or CIM you should include reasonable numbers. External professionals will know when you are trying to oversell.

2. Include Background and Backup

The financial projections in your Business Plan or information memorandum will likely raise more questions than any other component of the document. You should stive to answer as many questions as possible – before they are even asked – by including backup for your financials in the appendices. This will include details on the assumptions included and any financial models you may have used.

3. Anticipate Obvious Questions

Beyond just including backup, try to put yourself in the shoes of your audience and anticipate what information they need so the financial projections in the business plan or information memorandum are easy to understand. Do all aspects of any charts and graphs have labels? Are your financial statements in a format that is easy to read within the context of your document? These are all the types of questions you should consider before sharing your business plan or information memorandum with outside parties.

4. Footnotes are Your Friend

One way to proactively answer questions without your audience needing to look at the detailed backup in an appendix is to include some detail in footnotes. Just be careful not to use too many as they can become a distraction if they take up too much of the page.

5. Include Visual Elements

There will be specific points of the Financial Projections in your business plan or information memorandum that you are going to want your audience to pay special attention to. Sometimes the best way to highlight certain things is in a chart or a graph. You may also be able to effectively do this through the use of formatting and headers. Including visual elements not only can make your projections easier to understand but, it gives you some control over what information stands out.

Crafting the financial projections for a business plan or information memorandum can be overwhelming, especially if you do not have experience with such things. Don’t be afraid to reach out to professionals for help if you are able. Even if you choose to write your business plan or CIM on your own, often times business plan writers will do specific aspects like the Market Research or financial projections. Given how important the financial projections are, it is worth considering this if financials are not your forte.

Financial Modeling: An Important Key to Business Plan Success

A strong argument could be made that the financials are the most important part of a Business Plan. The only way to develop these financials in a sound fashion is through the process of financial modeling. Financial Modeling is one of the most important tools you have in creating a successful business plan.

How Financial Modeling Works

Financial modeling is a way of creating an “abstract representation of real-world financial situations”, particularly as they apply to business. They are working representations, usually created in a program like Excel, that allow you to input various scenarios to see their potential financial outcomes. This representation helps guide businesses to making informed, well-considered decisions even in complex situations.

Financial Modeling in the Business Plan’s Financial Projections

Financial modeling is used in a business plan to create Financial Projections. Unlike financial modeling, which is meant to be a “living” document that will have multiple outputs based on different variables, financial projections are static figures that do not change. These financial projections are in essence the goals of the business. Existing, future projections may be overwritten by new projections later but, the original projections themselves will not change, rather will be replaced by more recent, and often more informed, projections.

Break-Even Analysis: Financial Modeling Example

When it comes to creating your business plan, financial modeling will play a role in all of your financial projections in one way or another. Let’s take the break-even analysis as an example. A break-even analysis shows when a business will become profitable. It is based on how much you will charge for your products or services, your sales volumes, and the expenses you expect to incur.

You may have an idea of your sales volumes and revenue or the expenses you will incur, but it’s only when you begin to put it on paper, via financial modeling, that you can start making real decisions about your business. It will help you decide what expenses to take on and where you may need to cut. It will also help you set your sales goals. Financial Modeling allows you to start putting in your planned expenses as you do research. It lets you adjust all the numbers as you go, do research, and make decisions.

As an example, after research and listing your expenses, your total expenses for three years come to $100,000. However, your sales expectations are only $80,000, which would lead to a $20,000 deficit. If you want to break even in the first three years, you have a couple options for the business plan at this point:

1. Reasonably increase sales expectations, either in volume or revenue

2. Find ways to decrease some of the expenses

3. Completely cut some of the expenses

Financial modeling in the business plan financials allow you to see an issue in abstract, on paper, well before it occurs. It allows you to better plan and support your financials to get a clear picture. Your financial projections will rarely fall together without research and evaluating various scenarios. It will almost always require financial modeling to make important decisions about the business to set realistic, reasonable financial projections from the beginning, so you have the most sound, stable, and realistic Business Plan possible.

How Market Research Informs Financial Projections in a Business Plan

 

Market research is a cornerstone of the entire business plan. It informs many of the decisions you will make about your business. It is also what will help support many areas of the Business Plan. This is perhaps most evident in the financials. Financial Projections Business Plan are heavily based on Market Research and they have a very close connection.

Understanding Market Research

In order to understand the impact of market research you must first understand what market research entails. In the simplest sense, it is an organized way to gain information about customers. Not only does this include things like looking at consumer data or conducting qualitative analysis, it will also deal with doing research on the overall industry/market, specific locations (if applicable), and competitors.

Understanding Financial Projections in the Business Plan

The financial projections in the Business Plan are the forecast of future positions usually expressed in the format of the three main financial statements. These statements are the income statement, balance sheets, and statement of cash flow. They are presented this way so that they can be used as goalposts, which will be compared to actual results – in this format – later on. This comparison, also called a variance analysis, allows you to carefully compare your expectations to reality and understand why they differ. You can then adjust your expectations for the future and get better at projections and forecasts.

The Connection

If your business already exists and has history, the future Financial Projections for your business plan will still be based on market research. Though, it may be to a lesser degree than when your business is brand new. However, the market, competitors, and consumer preferences are always changing so it will still inform a great deal about your business, even if you have a well-established history.

Competitor analysis will help you determine your own pricing strategy. Pricing is part of the equation to figuring out one of the most basic financial projections, the revenue forecast. The revenue number drives a great deal of the financial projections in the business plan. This includes the break-even analysis, profit & loss statement and the statement of cash flow. It will also be required to project the balance sheet but, not as directly.

The overall size of the market determined in Market Research will inform your maximum potential. If, in a perfect world, there was not competition. That’s why it is so important to understand the competition and how much of the market competitors are reasonably capturing. Many businesses use a small percent of market share as their goal. This, again, is where we can see how market research feeds into financial projections in the business plan.

Conclusion

Although it may be tempting to view market research as independent from Financial Projections Business Plan, that is just not the case. As with many other aspects of the business plan, they are intimately connected. The above only scratches the surface on how one informs the other. The truth is, the entire business plan is one cohesive document. It doesn’t matter how it is split up or what headers are used, all the pieces fit together and have an impact on the other, especially the financial sections.

 

7 Things A Business Plan Writer Does to Create a Bulletproof SBA Business Plan

When writing a business plan, it’s always best to learn from the experts.  There are some commonalities between the best advice for all types of business plans.  Yet, each individual type of business plan will be slightly different.  Here are seven things a Business Plan Writer would make sure to include or emphasize in an SBA business plan.

1. Emphasize Personal Finances & Credit History – An SBA Business Plan must do more than just sell the business concept.   It must also sell the business owner(s).  In most cases, they will be personally liable for the business debts, so the SBA and lender need to know that the individual(s) responsible for the loans are likely to be able to pay them back regardless the fate of the business.

2. Provide Well-Supported Market Research – It’s not enough to say the market for your product exists. You have to prove it.   A business plan writer knows how to present Market Research in a compelling way that makes it evident the business concept has a strong likelihood of success and there is a market expressing genuine interest in the product or service.

3. Incorporate Owner’s/Partner’s Experience Throughout – Especially if the business venture has yet to be opened or is still new, the expertise of the owners, partners, or managers needs to be exemplified.  If the business owner does not have the required relatable experience on paper, they should bring on partners or managers that fill those gaps.   The important thing in an SBA business plan is proving how all the main skillsets required to run a business are evident in the combination of owners, partners, and managers.

4. Highlights Past Successes – If the business does have history, being able to show how previous goals or objectives were met successfully is paramount.   You will also rely more heavily on past financials to build the basis of your financial models.  If your sales aren’t aligned with future projections, you will need to be able to adequately explain that gap in your SBA business plan.

5. Tie Financials into Entire Plan - The financial projections may be the last section of the business plan but, a Business Plan Writer understand that your entire plan is laying the foundation for them.  Further, your ultimate goal is to secure bank funding and lenders are notoriously known for being numbers people.  Relating everything back to financials is a way to speak their language while proving that the plan is based on facts and figures, not merely opinion and optimism.

6. Write the Executive Summary Last - Despite being the first part of a business plan, this should be the last thing that is written.  A business plan writer understands the weight of this section.  It sets the tone for the entire SBA business plan.  It is an opportunity to present a summary of the entire plan and highlight the most impressive components.   There are times when this will be the only section that is thoroughly reviewed so, you must make it count!

7. Present a Visually Appealing Business Plan – An SBA Business Plan can be dry.   You need to present an entire business concept with a great deal of supporting information in a limited number of pages.   SBA representatives and lenders are very familiar with business plans, so a little visual appeal can go a long way.  Including appropriately placed stock photography or relevant charts and graphs when discussing numbers may just give your plan the edge it needs to stand out.