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Financial projections are an estimate of your company’s future financial performance through financial forecasting. They are typically used by businesses to secure funding, but can also be useful for internal decision-making and planning purposes.

Pre-Covid, I had always told my clients that projections must be based on reality, not assumption, because no one can predict the future. In the mid-nineties, I recalled one of my consultant buddies saying that she does not write the traditional template business plan. I took that idea and ran with it, so now I write business plans based on facts that are provided by research and current affairs. gross national products, needs assessment, suggestions from entities like the World Bank, The International Monetary Fund (IMF) and Demographics.

A lender's greatest interest is to know that the borrower can pay back the loan through effective business operations. The Investors wants to know that his/her investment will yield high returns within a considerable time frame.

One of the subjects that I no longer include is the Financial Projection and one can understand why. In 2019, I was able to secure funding of over US$1 million for a client who wanted to expand their business. They provided me with their projections based on their target market and the demand for their services. To me, the numbers looked ambitious on paper, so I accepted to include for submission to the investors.

Then Covid 19 showed up its face and the entire scenario changed. Businesses was closed, travel was halted and cash flow was diminished. The dream was no longer based on the projections, because they could not be met. Luckily for the business owner, I had asked the investor to consider a 2-year moratorium as part of the terms of the financing agreement.

Financial projections are just that - forecast. Very unpredictable and sometimes misleading. The wish of the borrower or business owner, the spreadsheet of the accountant, who may not have a clue of how the business would do in the future. The Executive Summary serves as a Introduction to any project, while the Business Plan is basically a Book of Instructions for the Business Owner, which basically tells the Lender / Investor and other relative establishments that the owner(s) and management of the business have a knowhow of the intended or existing business.

With 23 years' experience in preparing Business Plans, the most important components that any investors or lender wants to see are the following (1) Company Background to include the experience of the owner and the management team, (2) Market Opportunity, (3) Competitive Advantages and (4) Financial Highlights which would show the assets, liabilities and profit margins.

Investors want to know that there is a plan to put their money into good use with a reasonable Return on Investment (ROI), while Lenders want to be certain that the Borrower can repay the loan. Simple. Keep it simple. A compelling Executive Summary, a Pitch Presentation (PPT) showing pictures of the existing business assets and location and pictures of the planned project.

Hence, the strategies of how the business will remain vibrant even in difficult times is of major importance in the financing decision process.

Investors identify good investment opportunities based on growth versus value, market capilization, credit rating and when they can expect a return. They are also interested in the Exit Strategy and the Bios of the Management Team.

Thank you

Joseph Doway - Business Development Strategist - Content Writer - Visionary