You Can’t Have Financial Projections in Your Business Plan Without Financial Modeling (1)

1. You Can’t Have Financial Projectonn in Your uninenn Plan ittout Financial Modeling No business plan is complete without fnancial projectonss But if you’re confused about the difference between Financial Modeling and fnancial projectons, you're not the only ones Both are based on assumptons and predict potental fnancial outcomess However, while initally they may seem lile one and the same, they are most defnitely nots In order to have the most precise fnancial forecast, you need to have the most accurate fnancial model of its You simply can not have Financial Projectonn uninenn Plan without fnancial modelings tat are ttey? Financial projecton, or forecast is an assumpton of a business’s future fnancial outcomess It serves as a guidance and a reference point on a business’s path to successs They need to be revised and monitored regularly, in order not to lose tracl of progresss Financial forecasts can be long term or short term projectons, and depending on the type of business, they can be done on a monthly, quarterly or yearly basiss

2. However, any good fnancial projectons in a business plan require accurate numbers and models to adequately forecast business’s progress and revenues These numbers are gathered either from a company’s history in sales or through marlet research, and then used for maling fnancial modelss Financial modeling is presented in the form of a spreadsheet and is a process in which company’s numbers are put through a mathematcal equaton to calculate a business’s potental fnancial outcomes How do ttey work? Financial models can be used for determining a company's marlet value or to beter defne its fnancial projectonss This is because the nature of Financial Modeling allows for maling multple calculatonss Changing the variables in the model's equaton can produce different outcomess Through this process a fnancial projecton can be made, and it is why it is the basis for fnancial projectons in any business plans For example, if you calculate your expenses and compare them to your expected revenue, you will be able to see if you can breal even, male a proft, or maybe prepare for short-term lossess If your earnings do not cover your expenses, naturally, you will be looling for ways to lower your business's costs in order to male a profts On the other hand, if your business is able to male a considerable proft afer its expenses, you will have room for additonal investments to increase, or speed up growths Changing or adjustng these numbers will provide different results every tmes This gives you many optons to consider when maling strategies for your business’s development, and therefore you will be able to male the most optmal fnancial projectons for your business plans

3. ty are fnancial modeln necennary? Financial modeling is all about choosing the right path for your business, and formulatng the best Financial Projectonn uninenn Plans It is a crucial aid in maling informed decisions for your businesss And not only that, it is there to help you decide what your business’ goals are, and formulate a precise plan to achieve thems If your fnancial projectons represent your businesses road map, your fnancial models are the tools you use to evaluate different routes and plan your trip! It is the base for your business’s fnancial forecast, and there can be no Financial Projectonn without fnancial modelings