“Have you made a forecast?” How many entrepreneurs frequently hear this phrase when they are at the fundraising and go see their banker to get a loan! The financial forecast will effectively allow him to detect the potential of your “ killer app “And to justify to his hierarchy, supported by figures, that you are the next nugget of the web in which it is absolutely necessary to invest …
As a result, many people think that the forecast is an “accounting” document which is only used by the banker to justify the line of credit he will grant you (let’s be optimistic!) after studying your file. However, the estimated is a strategic document which answers several questions and can be produced for various reasons, each more essential than the other!
1. A sketch of your project
Perhaps this is the first time that you have plunged into the deep business creation ? Before launching into the unknown, financial forecasting is a tool that can help you visualize your project and in particular its potential in terms of investments, financial needs, profitability. Although it is a forecast, a sketch, this document is based on actual figures from your sector of activity and therefore constitutes a coherent financial projection.
2. An investor pass
We have seen, whether it is your banker, the accountant, a Business angel or a venture capital company, the forecast is an essential document. Even if it does not guarantee the granting of funding, it is a guarantee of professionalism and seriousness of your project.
In any case, carrying out a financial simulation (which fits into your business plan) is a condition sine qua non to obtain an honorary loan, a bank loan or to raise funds from a “venture capitalist”.
3. A good reason to start accounting
You don’t like numbers? Now may be the time to get started! This can only do you good for several reasons:
- You will need to master some accounting concepts to run your business (threshold, profitability, breakeven, budget forecast, discount, VAT payable, etc.)
- For explain your project to investors, you have to know what we’re talking about. This therefore necessarily involves understanding the various figures that make up your initial financing plan or your forecast income statement.
4. An excellent balancing act
Do you like juggling? Why not do it with numbers? Realizing a forecast is indeed a “iterative” work all the time. A grant of 10 000 euros which is refused to you? You will have to go back to your simulation to take it into account and “balance” the model again.
5. A tool to save money
Finally, an important argument, the financial forecast may save you money. Indeed, by building it, you will realize the financial viability of your business. Perhaps you have not appreciated the importance of the capital required. Your business model is not thought out well enough to generate regular income or the profitability you hoped for will only come in N + 5!
So much information that will enlighten you on the opportunity to get started. this will will save many disappointments and will save you time. You can then either redirect the project, or postpone it, while waiting for a better fortune!