Financial Projections

When you wrote your feasibility analysis, you hadn’t done the research and planning that you now have. At that point, I suggested that you only project financials for the first 6 months of operations. Now it’s time to expand your scope.

You may look back on your pro forma financials for the first six months and say, “Man, I was dead on in that projection. I don’t want to change a thing.” Lucky you! You now just need to multiply out those numbers for the first 3 to five years of operations.

More likely, however, you’ll look back and realize that you were off base on some number. Maybe your costs were too low. Maybe you were a little too ambitious about your prospective growth. Now is the time to make those adjustments, and then expand the numbers to include your first three to five months of operations.

Now, what numbers and spreadsheets should you include in your final plan for investors? I’d highlight the key numbers within the text of your plan and include the major financial spreadsheets that you would put in a 10-K or Annual Report: the balance sheet, income statement, and statement of cash flows. I know, this leaves out the statement of shareholder’s equity. Equity will likely be divvied out when you negotiate with your investor; so including this sheet now would be a waste of time.

You may be saying, Em, I’ve never written one of these statements in my entire life. I have no idea where to begin. Again, resources abound. You can search online, try out this e-book published by Your Business Pal, or take a look in The Portable MBA in Entrepreneurship (I know I’ve mentioned this book before. I think it is a holy grail resource.) If you have any questions, I’m happy to attempt to answer them as well.

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