24. Assumptions Upon Which Financial Projections are BasedBy Roger Bryan
The projections in your business plan form the core part of the business strategy in your business plan. Most investors go right down to the business projections even before they look into other aspects of the business plan. Inaccurate financial projections of the business plan can blow the lid of any future project.
How to go about the assumptions for the business plan? First, make sure that the assumptions are consistent and not poorly reasoned. Do not project unrealistic projections as these can damage the reputation of your plan. Well reasoned and a well researched assumptions of the business plan go a long way in bagging the confidence of investors.
If possible, one should try to base the assumptions on actual financial results of a similar company in the same niche. Normally, it is a common practice amongst companies to reason the assumptions based on facts and figures of the prevalent companies of the same niche. Hence, it makes all the more sense to do the same based on the same line of thought. If there are reasons for which you expect to grow faster than your competition, then it is very important that you include such reasons in your business plan and back your reasons with sound logic.