Market Research: Your Secret Weapon to Financial Modeling for Your Business Plan

Financial Modeling can seem like a mundane task. A dull process in which a spreadsheet is made containing a company's expenses and earnings. However, it is an important practice, especially when creating a business plan. It is used to make plans and decisions in a business and determine its operations. They are used to set the pricing of a product, calculate project costs, anticipate future expenses, and even evaluate the current or future value of a business.

Usually the numbers are gathered from the company's financial records and past performances. But if you are writing your business plan, do not overlook how beneficial Market Research or analysis can be for creating the most accurate financial models.

The customer is always right

Market research is a process of determining the success of a product or service. It is conducted with potential customers through surveys, product testing and focus groups, after which the company has direct feedback from the customers. This type of research is used to see how the potential customers will react to the product. The results of the research can help improve the product, and help the company better position itself in the market, compared to its competitors.

On the other hand, financial models are all about the numbers, mostly from previous sales. They are also about assumptions, predicting future growth or value of shares in the stock market. Of course, that means that having accurate numbers is necessary for better predictions. That is why market research is a valuable source for financial model numbers. and there are a few ways it can aid in making the most accurate financial model for your business plan:

Calculating value, setting the prices

The most common reason market research is used is to determine the price of a product or service. Interviewing potential customers and getting their feedback can help you identify their needs, satisfaction with your product and help you adjust the price accordingly. These numbers are a basic and crucial part of your financial modeling spreadsheet. In depth research will help you calculate the most accurate product value your customers are willing to pay for. This will in return have great significance in constructing your company’s Financial Projections. 

Predicting cash flow, budgeting

After you have determined your business’s prices, you can proceed to use these numbers to predict your business cash flow and revenue. For example, financial modeling spreadsheets are helpful when creating project budgets. Ensuring the most accurate numbers through market analysis, will help create the most realistic budgets and avoid overspending and financial losses. 

Predicting growth, attracting investors

Additionally, this number can be used in financial modeling to calculate and predict your company's profits and performance. This can be incredibly useful when looking to attract investors, since they are often interested in businesses’ potential and growth. Numbers provided by market research can later be used in financial modeling to predict the company's growth and future success. It will show investors exactly what they are looking for in a Business Plan, the most objective (positive) outcomes for a business and a ROI. 

Market research is a lot more than it seems. It is a helpful tool for writing a good Business Plan and it is the one thing that doesn't make Financial Modeling just about crunching numbers. That is exactly what makes it the secret weapon for a “killer” business plan.

Professional Business Plan Writers Say These are the Most Important Sections of the Business Plan

 

When in doubt, turn to the professionals for help. The same goes for writing a business plan. Professional Business Plan Writers have over the years gained a few tips and tricks for composing an outstanding business plan. They know from their own experience that most people do not even read the whole plan. Insead, they focus on the most important sections, and here are some of them to pay the most attention to when formulating your plan:

 

• Executive summary 
• Market research  
• Personnel Plan 
• Financials

Executive summary

An executive summary will be the first thing people read. It is a synopsis of your business, your ideas and goals. So make it a document that really counts. Get to the heart and sole of your business and pour it all out in the executive summary. But be brief, don’t overwhelm your readers with detailed numbers just jet. A tip from professional Business Plan Writers is to make sure the executive summary is something that will immediately grab readers attention, and inspire them to continue reading.

Market Research

An unavoidable part of any business plan, a source for your numbers and business predictions and a reassurance of future success. A well conducted Market Research shows that your business will hold a good position in the market, you fully understand it and all of its changes. A well organized market research instills confidence for potential investments. Therefore, market research provides valuable and in depth information and should not be taken lightly.

Personnel Plan

Another thing professional business plan writers advise you to pay close attention to is the personnel plan. Here is where you introduce your team, their skills and competences. The success of your company depends greatly on the productivity of your personnel. A well structured plan on hiring practices is important here. For instance, people will want to know:

 

• a brief overview/introduction of your team, 
• how and when you are going to fill positions, 
• how many job positions are needed for a timely completion of a project,  
• and how much of the budget is set aside for salaries.

Personnel plans are especially important for a visa or immigration Business Plan as immigration officers are interested to see who you will be hiring and if your business will create new job opportunities.

Financials

And last but not least, it all comes down to the finances. According to professional business plan writers, what most people are looking for in a business plan are the prospects of success. This you need to back up with numbers, creating the most accurate financial models and projections.

No matter who is reading your plan, everybody wants to see if your company will be successful and produce a high revenue. Regardless of the type of plan, it is important to prove to the best of your ability that you will have enough money to return the loan/investment.

Professional Business Plan Writers know what is best for making the most convincing and attention grabbing business plan. Their advice is to pay closer attention to the parts that your readers are the most interested in. Because, in the end, while the whole document is extremely important, some sections are just more important than others.

 

4 Ways a Bank Business Plan Differs from Other Types of Business Plans

If your business is in need of finances and you have already made a decision to apply for a bank loan, there are a few things to keep in mind when writing your Bank Business Plan. Getting a bank's approval for a loan is a different process than getting funding from investors. Each business plan can vary, depending on its purpose, and its contents should be written accordingly. 

Prepare for your audience

First thing's first, know your audience. This is the most basic difference between many types of business plans, whether they are a bank business plan, investor or immigration. Depending on who will be reading it changes how it will be formulated.

• Banks want to see if your debt will be repaid, they are only interested in your numbers, facts and hard data, no matter the business type.

• But when pitching to investors, try to show your company's potential. You also might want to check the investor's background first. They may only invest in certain types of business.

• Immigration plans are intended for immigration officers who check if the business meets the visa application standards. They are looking to see if your business will have taxable profit and possible job creations. 
  

Cash flow - stability vs growth

 

Financial projections are an integral part of any business plan, but pay close attention to how you’re presenting your numbers. While investors are interested in a return on their investment (ROI) and company's potential and predictions for future growth, banks want to see if you are operating a steady business. You need to prove you can maintain a high enough revenue to be able to repay your debt.

That is why a Bank Business Plan requires your company's financial statements, further back and in greater detail than in other types of business plans. Therefore, you can have more modest numbers when applying for a bank loan compared to looking for fundings from investors. For this reason, it is difficult for early-stage startups to get bank loans. 

Exit plan vs. Collateral

No matter the type of Business Plan, no one wants to take on unnecessary risk. That is why they need to include a guaranteed ROI or loan, just in case things go south. Investors are looking for exit strategy, oftentimes in a form of liquidation or sales of their share in the company.

On the other hand, if the borrower is not able to repay their debt, the bank will proceed to take collateral, usually an asset like real estate, vehicles, equipment, etc. Including this in your bank business plan proves you are a low risk applicant for a loan. 

Ownership and freedom

The upside of bank loans, compared to fundings from investors, is that they do not require equity. Upon acquiring the loan you are able to continue doing business as you please. The bank has no saying in choices made in your company.

However, investors are funding business in exchange for equity, or shares in a company. This way you will lose partial ownership, and may have somewhat limited decision making. All of this has to be well formulated in an investor business plan, unlike in a bank business plan.

Experts Can Help

If you’re unsure how to write a business plan in general, let alone how to write it for the correct audience, consider hiring a professional. Professional Business Plan Writers tackle these challenges every day and can create a plan for you that will help you reach your goals, whether that’s acquiring a bank loan, investor funding, or being approved for a business visa for immigration purposes.

Best Practices for Financial Projections in a Business Plan or Information Memorandum

On the surface, a business plan and an Information Memorandum (CIM) may seem the same. They both describe a business and outline its goals and objectives. But a key difference between the two is in their use:

1. Business plans are made in order to plan a company’s path to success, to keep track of it, or to serve as a pitch to investors.

2. Information memorandums, or offering memorandums, are often written with a specific intent or event in mind, namely for the purpose of a merger or a business sale.

Regarding their structure, both of them share the same elements, and one of these is a financial projection or forecast. It is an important document that includes predictions for future revenue and expenses. There are a few crucial practices to keep in mind when writing Financial Projections Business Plan or information memorandum.

They should be realistic

Any good financial forecast should be honest and accurate. They predict potential success, but also your company’s shortcomings and problems. This should most definitely be included in the financial projection in your business plan, or Information Memorandum. So, do not understate, nor overstate your numbers. Many make a mistake of viewing CIMs as a marketing document, but that could lead to a disappointed investor and potential lawsuit or a fine.

Conduct current market research (again)

Solid market research is a good basis for financial forecasts. And even if you are in the industry for a while, it is always advised to check your numbers before making new projections. It is a well known fact that the market is fast changing, and if you want to be on top of the game you should stay alert and adjust your financial projections for your business plan according to the new data found in your market analysis. Speaking of which…

Make changes, reevaluate regularly

Financial forecasts can be short term (1 year) or long term (3-5 years). Usually startups have monthly or quarterly projections. But even if you have long term projections, reevaluate on a regular basis to make sure your company is on the right track.

These documents are all about planning, predicting problems and keeping your company's financial goals in mind. But plans can sometimes change due to an unforeseen event. Changing and evolving with the market is necessary to stay afloat. Financial projections for your business plan or information memorandum should reflect that.

Support your numbers

This may be stating the obvious, but make sure your numbers match your claims, and your data supports your numbers. Part of Financial Projections Business Plan or information memorandum is making assumptions. Therefore, for a compelling projection it is important to show where the numbers came from. So gather your numbers before making assumptions, whether they came from previous sales, market analysis, client data, bank statements and others.

Like mentioned before, do not treat your projections and CIMs as a marketing document. Be realistic and do not embellish, even when the numbers do not work in your favour. It may seem counter intuitive, but show your business's weakness too. This way your projections will seem credible and well planned.

3 Tips From Professional Business Plan Writers for an Attention-Grabbing Pitch Deck

This must sound familiar to you. You have an amazing idea, your business plan is all sorted out, you're on your way to success, but there is a new hurdle on the way. Securing funds. If you already managed to land a meeting with a potential investor, you may now be worrying about how to write a killer Pitch Deck. Something so convincing and memorable that will give venture capitalists confidence to invest in your business. Luckily, there are ways to write a compelling pitch deck, and Professional Business Plan Writers know all about that.

Among many other documents they write, they also provide pitch deck writing services, and here is what professional business plan writers have to say from their experience.

Keep it short, to the point and informative

While you may feel compelled to tell every little detail there is about your business, keep in mind that your potential investors will lose interest if your presentation is too long. Professional Business Plan Writers advise against incorporating too many slides in your pitch deck. This will leave your audience overwhelmed with too much information.

Many agree that the golden rule is about 15 to 20 slides, but according to Guy Kawasaki, 10 slides is the optimal number. Either way, the fewer the better. But keep in mind that there still has to be enough slides to get the message across! You still want to impress investors with good numbers and the right information like your market size, business model, competitive landscape and others. Get to the point and heart of your business.

Set the stage, tell a story

Professional Business Plan Writers know that to write a memorable pitch deck you need to present it as a well composed story. And like any good story, it should have:

1. an introduction,

2. a problem or “conflict”

3. and the solution/“resolution”.

Introduction is going to be the first thing that grabs their attention, so make it a good one. You should set the scene by introducing your company, your product/service and your team. Remember to keep it short and simple.

Continue with presenting the problem. Without the problem there is no product to sell or service to give. Explain the problem your target audience is facing that the market is currently not resolving. Give data and statistics to support your claims.

And lastly present your “resolution”. Here is where you shine. Use the numbers to your advantage, and present how your product solves the problem. This is how you will convince your audience to invest in your business. Your potential investors want to see solid research, your determination and capability.

Show your passion

People these days sound like a broken record when you hear them say “follow your passion”. But that is exactly what you will hear from professional business plan writers, and they are right too.

Your passion and confidence has to resonate in your Pitch Deck. It is a crucial element to your presentation. If you are not passionate about your business why would anyone else be? Showing your passion for your business is what will greatly help your presentation.  

An enthusiastic presentation is guaranteed to grab anyone’s attention, it is a way to make a connection with the audience and leave a lasting impression on your potential investors. If you’re not sure how to do that yourself, make sure to reach out to a professional to guide you or write it for you!

 

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.

How Professional Business Plan Writers Perfect Financial Projections in the Business Plan

Professional Business Plan Writers spend their careers understanding and researching businesses. They know what makes them tick and what the audiences that will read about them want to see. That is why they have best practices that apply to every part, and that includes the financial projections of the business plan. 

They Approach Them Logically

The first thing a professional business plan writer will consider when sitting down to write a business plan is the audience. Every type of audience will have their own unique perspective and interest in the Financial Projections Business Plan.

A bank loan officer is going to be mostly focused on seeing positive cash flow to ensure you can make a monthly loan payment. In another example, investors would be mostly interested in big growth to gauge their potential ROI. If your business plan instead is for immigration it’s going to focus on generating enough money to support job creation.

If professional Business Plan Writers were theoretically writing the same business plan for all of these audiences, the basis of the financial projections would be the same. However, how they are presented and the narrative around them may vary widely.

They Ensure They Are Supported

Regardless of who your audience is, the financials projections in your business plan will be questioned. In order to proactively squash questions and to be prepared to answer any that do arise, professional business writers will make sure everything is supported.

In most cases, this level of detail will not appear in the main Financial Projections Business Plan. Rather, it will appear within the fine details as an appendix. This means showing research that supports expected expenses, as well as the basis for your projected revenue.

On the revenue side, that is going to be based off of the price you have decided to set and how much volume you think you’ll sell. While expenses can be more concrete based on the current price for things, revenue can be tricky. It will require sufficient market research to be supported adequately.

They Make Them Tell a Story

The financial projections are not about the numbers themselves but, the story you can paint around them. Professional Business Plan Writers know this and they have perfected the fine art of telling the story of the numbers. When we say “story” here, we don’t mean a work of fiction. Rather, we’re talking about the context that is structured around them.

In Conclusion

This insight above can be applied in one of two ways. The first, is to be used to approach your own Financials Projections and business plan the same way. The second, is to recognize the expertise that professional business plan writers bring to the table. Not only are the best to write the words of your plan, and lay out the numbers but they are also among the individuals best to conduct your market research. At many top-rated firms, such as Joorney Business Plans, they will even include basic market research to ensure your business plan has all the elements above.