Financial projections are probably the single most intimidating and difficult portion of a business plan competition. The judges will completely tear your projections apart if you make just a few mistakes. There are 3 important things to keep in mind when you are creating projections for a business plan competition.
1. It’s All About Your Assumptions – Most judges won’t be too concerned about your specific numbers, but they will inspect your assumptions very carefully. Your financial projection assumptions should be data driven, not guestimate driven. So often entrepreneurs say, “Our product is so great that I would imagine customers would pay us twice as much as they would for our competitors product.” If you build your entire business model on the hope that customers will pay you twice as much as they would your competitors, you must have data to prove it. Have you already sold units at that price level? Have you surveyed a significant number of potential customers to prove that assumption? If you don’t have hard data, you will fail in any legitimate business plan competition.
2. Don’t Forget to Include Expenses – Another common, but devastating mistake is simply forgetting to include major expenses. A few of the most common expenses to forget are:
- Taxes – Will you have to pay sales tax? If you have employees you will need to pay a number of employee related taxes, and you may need to pay federal income taxes as well.
- Depreciation – It is very common to forget to include depreciation because it is a non-cash expense, but still very important for you to understand and include in your projections.
- Loan Payments – Often times entrepreneurs assume they will finance the business with a loan, and then they forget to include the loan payments in their projections.
3. No One Expects You to Be Right – If it was possible to perfectly project your future financials, there would be many less failed businesses. No one expects you to be right. So you should not come across too confident about your projections. Your job in a business plan competition is simply to make the judges believe you have a good chance at huge success. Demonstrate a large market potential and then use logical, data driven assumptions to develop your projections. That is all anyone can ask.
If you keep these 3 things in mind as you create your financials, you will put yourself far ahead of the competition.
Contributed by: Adam Hoeksema
About the Author: Adam Hoeksema is the Founder of ExecutivePlan. ExecutivePlan helps entrepreneurs write business plan executive summaries in order to raise capital. For more business plan competition tips read Adam’s blog post “How to Win a Business Plan Competition.”This entry was posted in Featured Posts and tagged Business plan, business plan competition, business plan competitions, entrepreneur, featured, how to win a business plan competition. Bookmark the permalink.