Newspaper article THE JOURNAL RECORD

A Solid Foundation

Newspaper article THE JOURNAL RECORD

A Solid Foundation

Article excerpt

If you have presented your business plan to potential investors and bankers who seem to lack confidence in your projections, you won't see a dime of their money.

To overcome this weakness, you need to build a credible financial foundation. If you do, financiers will believe you. If you don't, they won't.

As part of your planning process, you should develop a marketing plan before you develop a business plan. An effective marketing plan describes your company's market and how you will sell to this market; your plan should articulate specifically who the company is selling to and why they will buy from you. It sizes the total market as well as your share, and it quantifies your specific sales projections for the next three to five years. Your marketing plan should provide you with realistic defendable sales projections. These sales projections help you arrive at the manning required, and manning will help you develop a specific operating budget for each year. Combine these sales and budgets, and you will have pro-forma income statements and balance sheets. These documents will then lead you to your cash flow forecast. This is how the process should unfold: SALES PROJECTIONS (how much the company will sell over the next five years) determine... STAFFING PROJECTIONS (how many people the company needs over the next five years) determine... BUDGET PROJECTIONS (expenditures over the next five years) determine... PRO-FORMAS (income statements and balance sheets over the next five years) determine... CASH FLOW (how much cash the company needs over the next five years). Unfortunately, aspiring entrepreneurs typically begin with sales projections based not on a sound marketing plan but on an entirely different erroneous process: Entrepreneurs from the ranks of manufacturing or engineering tend to use maximum production as their cornerstone. …

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