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The Entrepreneur’s Cure For Financephobia

Sales Expenses

What Are Financial Projections?

Many entrepreneurs don’t understand what financial projections truly are. They don’t see the connection between the financial projections and their business idea. They believe that there is a disconnect between their actual business and the financial projections. This is totally wrong.

Your Vision/Idea Expressed as $$$

You see, financial projections are your idea expressed as money! It’s a common language that allows comparison of different business plans. In many ways, money is the source code of business.

Lightbulb Picture: http://www.flickr.com/photos/caveman_92223/3346906435/

Your Vision

Financial PlanningProcess Your Financial

Projections

The financial planning process translates your vision into a set of financial projections.Don’t be scared, it’s easier than you think. You already know most of what’s needed.

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Focus

In order to do this, it’s extremely important for you to have a clear vision. So, focus focus focus.

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AddSubtractMultiplyDivide

You already know all you need to construct your financial projections. It’s simple, all you need to know is how to add, subtract, multiply and divide. As a result, it’s illogical and borderline insane to believe that you cannot do the financial projections yourself.

Do your research

Do your research. Don’t take your assumptions from thin air. Read annual reports of similar public/listed companies (download them from their website). Check out the Key Financial Indicators for your industry sector. Read news articles on your sector and try to find typical industry conversion rates. Become obsessed.

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Your Sales Assumptions

Traffic Estimator

Unique Visitors

Mailing List Subscribers

Sales

Example: Website Sales

Conversion rate of 15%

Conversion rate of 6%

Your assumptions are the key. The most difficult part to project, are your sales figures. However, if you break these down into the various parts of the sales funnel you can produce reasonable reliable sales projections. Break them down into the first point of contact such as website visitors, enquiries, number of people who enter your shop etc. How many people are your marketing activities going to attract into the top of the sales funnel? Try to find a typical conversion rate for each part of the sales funnel.

Pick up the phone

Your Expense Assumptions

Go online

Get quotes

“...”

There are a number of methods that you can use to put together your expense assumptions. The single best method to use is to get actual quotes for each expense. Pick up the phone and get quotes for rent. Check out website prices for computers and software etc. This way, you can get your expenses almost 100% accurate.

Phone: http://www.flickr.com/photos/8628950@N06/2770856499/ Internet: http://www.flickr.com/photos/dannysullivan/273838692/

Use a Spreadsheet

(It’s free)

(It’s free)

Microsoft Excel

Use a spreadsheet. It’s not hard. There are thousand of tutorials on the Internet that will help you. Just type “spreadsheet tutorial” into YouTube. You only need to know how to add, subtract, multiply and divide using one. It will take you less than 10 minutes to figure this out.

Sample Financial Projections and “How to Guide”

Download Sample Financial Projections and “How To Guide”

You can download a free template and “how to guide” from this link:http://www.lostjobstartbusiness.com/samplefinpro.html

Your Sales and Expenses for a

Year

Cash In Versus Cash Out For Each Month of

a Year

Everything You Own and

Everything You Owe at a

Point in Time

Income Cash Flow Balance Sheet

Your projections will consist of three main sections. 1) Your Income/Profit & Loss Projections 2) Your Cash Flow Projections and 3) Your Balance Sheet.

Stress Test Your Financial Projections

Put on your investor hat and question all your assumptions

?You must be aware that it’s extremely difficult to justify your projections and business model to investors without real world results. However, when you do achieve these, your projections will be much easier to defend. As a result, you should focus on building your business as fast a possible. Get traction and make early stage sales. Remember, your financial projections are just a tool to help you develop your business.