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 publicly-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 firm or other firms. As the example above indicates, it is fairly easy to look at a public 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 company 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.
In Business Planning, Competition is Good
When developing the competition section of your business plan, companies must define competition correctly, select the appropriate competitors to analyze, and explain its competitive advantages.
Exploring Arthritis Pain Management Strategies
Arthritis pain is a significant concern among the elderly population in America, as revealed by a recent study conducted by Stanford University Medical Center. The study found that 32% of seniors identified arthritis as the primary source of their discomfort.
An Introduction to Incorporating in Florida
The state of Florida is ripe with business opportunity. The Governor of Florida, Jeb Bush, recently proclaimed that Florida "is a story of a robust economy, of technology innovation, of entrepreneurship, of international commerce, and of a great quality of life." These are all excellent reasons to incorporate in Florida.
