Getting startup funding for a new business has almost everything to do with the
financial projects outlined in the business plan.
Herein lies the challenge. An entrepreneur needs to develop a business plan, which
when backed by marked research shows good return on the investment. However, while
the numbers for the new business need to look good they can't look so good that
it is seems almost unrealistic.
An entrepreneur developing a financial forecast for the new business should first
estimate whether the expectations are reasonable. While developing the forecast,
an entrepreneur needs to ask himself or herself the following questions: Is the
sales forecast plausible? Are the projected margins achievable? Are the working-capital
needs being taken into account? How much is the capital expenditures?
In developing the business plan for the new business, an entrepreneur needs to ensure
that the financial projects are realistic. The forecasting revenue for the new business
should show more than just the projected revenue for a business year. It should
also indicate the desired level of sale of the new business product and projections
of market penetration.
Every business investor is looking
not only to fund a unique business plan but a profitable business. So, an entrepreneur
needs to pretty careful when developing the financial forecast of the new business.
The financial forecast is only one part of the business plan that an entrepreneur
will need to present to an Angel Investor or a Venture Capitalist. The business
owner should be rehearsed and prepared so that the business owner will be able to
address all concerns or questions that a potential business investor may have.
In developing a financial forecast, the entrepreneur needs to keep in mind that
business investors know as much or more about the market then do most entrepreneurs.
Thus trying to embellish the figures with poorly conducted market research is not
going to win over the investors.
A positive financial forecast is also essential for winning over lending agencies
such as banks or when requesting micro loans from Small Business Administration.