Building a Financial Plan for Future Growth

by Thom Tracy

2 min read

Creating a coherent, detailed business plan is the first step for successful startups. It is essential in attracting investment, and it serves as a significant resource in keeping your business on track as it grows.

Competitor Profiling

Before entering or expanding within an industry, smart business owners take care to analyze their competitors extensively. If you feel that your business has no competitors, ask yourself: “How is your intended target market presently solving the problem you seek to address?” That is your competition. However, beyond this elementary knowledge, you need to comprehend the solutions your competitors are providing, in addition to the opportunities and market segments they are seizing.

You can profile your competitors for free. The best place to start your competitor analysis is on Google. Begin by searching for your firm’s location and industry. Record the businesses with the top rankings from your search results, as they are likely your largest competitors. Investigate their customer reviews and websites. Set up a Google alert to stay informed about new developments regarding your competitors.

Financial Projections

Financial forecasts are vital for any startup. If you’re looking for financing, cash-flow predictions can help convince potential investors and lenders that your startup can offer them a good return on investment. Aside for attracting investors, financial projections are vital tools for any business owner. They help you budget and plan for your business, and they serve as a yardstick for your company’s future performance. By comparing your startup’s actual financial statements to your projections, you gain further insight to how well your company is performing.

Scenario Analysis

Through scenario analysis, you and your investors can gain much clearer expectations for your company’s performance. Financial projections calculate a single outcome for a variety of assumptions and inputs. With scenario analysis, every input change is made simultaneously with the goal of measuring the effect on financial projections of a thorough change of circumstances. There are usually three outcomes calculated: the base-case, best-case and worst-case scenarios.

The base-case scenario represents the outcome most expected to happen. This is what you think the outcome of your startup’s operations is most likely to be. The best-case scenario is what you reasonably imagine will occur if positive expectations are met and you seize every opportunity available to your firm. Make sure to make the best-case scenario reasonable. For example, if in the base-case scenario your revenue grows 7% a year, then in the best-case scenario. it will likely not grow reasonably more than 15% a year. For the worst-case scenario, you should predict what will happen to your future cash flow if all the anticipated problems do occur.

Outlining Your Firm’s Goals

Setting up realistic goals and a timeline for those objectives should be the last part of your business plan. Defining sensible goals is most easily done through the SMART method. Your goals should be specific, measurable, attainable, realistic, and timely. A Gannt chart can help you manage your goals and specific projects in an orderly and efficient manner.

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