Developing Realistic Financial Assumptions in Your Business Plan

Many investors skip straight to the financial section of the business plan. It is critical that the assumptions and projections in this section be realistic. Plans that show penetration, operating margin and revenues per employee figures that are poorly reasoned, internally inconsistent or simply unrealistic greatly damage the credibility of the entire business plan. In contrast, sober, well-reasoned financial assumptions and projections communicate operational maturity and credibility. For instance, if the company is categorized as a networking infrastructure firm, and the business plan projects 80% operating margins, investors will raise a red flag. This is because investors can readily access the operating margins of pub-2403258503801684licly-traded networking infrastructure firms and find that none have operating margins this high. As much as possible, the financial assumptions should be based on actual results from your or other firms. As the example above indicates, it is fairly easy to look at a pub-2403258503801684lic company�s operating margins and use these margins to approximate your own. Likewise, the business plan should base revenue growth on other firms. Many firms find this impossible, since they believe they have a break-through product in their market, and no other company compares. In such a case, base revenue growth on companies in other industries that have had break-through products. If you expect to grow even faster than they did (maybe because of new technologies that those firms weren�t able to employ), you can include more aggressive assumptions in your business plan as long as you explain them in the text. The financials can either enhance or significantly harm your business plan�s chances of assisting you in the capital-raising process. By doing the research to develop realistic assumptions, based on actual results of your or other companies, the financials can bolster your firm�s chances of winning investors. As importantly, the more realistic financials will also provide a better roadmap for your company�s success.

3 Essential Tools for Starting and Maintaining a Small Business

We believe that there are 3 factors that drive the success of small businesses. 1) Acquiring start-up capital 2) Finding customers 3) Accounting for, budgeting and controlling sales and expenses The following resources will help your small business achieve these success factors. Acquiring Start-Up Capital An adequate supply of capital is essential as many profitable businesses fail because they don�t have enough cash to pay their employees and suppliers. But what is an adequate supply of capital? The only way to tell is by doing a significant amount of research on your potential market and formally documenting this in a business plan. I�m sure you know that a business plan is a very important document that is crucial to convincing your banker to lend you money. There are two ways to obtain a business plan. 1) Do it yourself by amending a business plan template, or 2) Hire a professional to do it for you. Obviously obtain 1) will be a great deal cheaper. Our research led to a website that has over 60 high quality and free business plan templates. We also found a directory that you can use to easily find a business plan writer in your city � where ever you live in the world. Finding Customers Finding customers is a difficult and expensive task for service business owners such as accountants, lawyers and plumbers. We believe that a cost effective marketing strategy for service business owners is to simply give all their personal contacts a few business cards. Our research led to a few websites that have pre-designed business card templates. We felt that the diversity and quality of these designs was outstanding. In addition, we found that you can obtain a significant saving by finding a printing service on the Internet. We found that you could get 2,000 full color business cards for as little as US $150. Accounting For, Budgeting and Controlling Revenue and Expenses Accurate accounting is very important for small business owners. It�s essential that you have timely access to information that could make or break your business. If stocks are running low � you need to know about it. If a large proportion of your debtors haven�t paid � you need to know about it. If you do not react to these situations quickly you may have a situation where you don�t have enough money to pay your employees � or worse still someone is stealing cash out the till. Our research led to a website that compares and reviews top accounting software for small businesses. The cheapest software cost US $89.99 and the most expensive software cost US $1,499. It was interesting to note that the top 3 ranked websites were not the most expensive and cost between US $250 - US $300. Hopefully you now have an idea of some of the tools that you can use to grow and maintain your small business. If you would like to benefit from our research please visit our website. We do not charge for this research and offer the content freely on our website.