Do Business Well

• Explain your assumptions.At some point in the financial section of your business plan you need to explain the assumptions that underlie your projections. That is, how did you arrive at your estimate of general and administrative expenses? Have you worked out a commission structure with your sales reps or are you just estimating the sales costs? And how much of your sales increases come from expanding volume and how much from price increases?

Consider several scenarios. One way to ease the concerns of outsiders worried about your projections being overly optimistic is to provide several potential outcomes. The first would be your expected projections_; the second, a “worst-case” scenario—if there’s an industry recession, here’s how your financial situation would be affected. Third, you may want to include a “best-case” scenario—how things would work if everything went your way. The best-case numbers may look impressive, but they won’t carry much weight with experienced investors. Continue Reading »

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Financial Issues tend to be unpopular among entrepreneurs. Some find the subject tedious. Others find it intimidating. The result is that many entrepreneurs do nothing. Financed in many businesses become the state of the checkbook each morning. If there’s cash, the business is still around and if there’s no cash, the businesses become the state of the checkbook each morning. If there is cash, the business is still around and if there is no cash, the business has major problems.

One of the major benefits of creating a business plan is that it forces entrepreneurs to confront their company’s finances squarely. That’s because a business plan isn’t complete until entrepreneurs can demonstrate that all the wonderful plans concerning strategy, markets, products, and sales will actually come together to create a business that will be self-sustaining over the short term and profitable over the long term. Continue Reading »

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