Posts Tagged ‘Lenders’
What Are Budgets and Forecasts?
They are predictions of future income and expenses and cash flow. They also predict future performance with financial forecasts and projections and with financial models.
Why Budget and Forecast?
Budgets and forecasts provide a feasibility analysis. They can help develop a business model, review your key assumptions, and identify resource and capital needs. Budgets and forecasts can be used to find funding. They demonstrate the potential of your business to investors and lenders. Budgets and forecasts can also be used as a management tool. They can help you establish milestones and require accountability for accomplishing the milestones. They can help identify risks and show benchmarks. This will help the small business owner make the necessary adjustments to avoid the risks, to reach the milestones, and to measure up to benchmarks.
Why Are Forecast Important?
A forecast can establish measurements to guide management, to facilitate planning, and to facilitate goal-setting.
What Areas Do You Need to Forecast?
It is critical that you forecast your start-up costs so that you know how much it will cost to open your doors. You need to prepare estimated start-up financial statements and estimated short and long-term revenue forecasts. As part of your forecasts, you will review key concepts and issues that will make a difference in your company’s survival. You also need to forecast the resources you will need and set up a schedule for using and replenishing your resources.
Do Investors Want to See Forecasts?
Yes, your forecasts will show investors that you know your business, that you are likely to succeed, and that you will make wise use of their money. You must have at least a five-year forecast that shows significant profit by year five, significant net income by year two, and that investors will earn approximately 10% return on their investment.
Do Lenders Want to See Forecasts?
Yes, your forecasts will show lenders that you know your business and the you will be able to repay the loan. Be sure you forecast for the entire period of the loan and use conservative financial ratios, because the lenders will. Also, you will need to collateralize and personally guarantee the loan.
The investors and lenders will want to see forecasts of your profit and loss and revenue. They will also want to see what drives income in your industry; for example, sales, distribution, advertising, internet search engines, referrals, location, price, or coupons or other discounts. You also must forecast the revenue cycle for your target customer. How much time will you need to start production, and how quickly will your product or service be accepted in the market?
What Other Forecasts Are Needed?
Another important forecast is the total personnel required to support your desired revenue. If your revenues result from sales, you should start with the desired revenue in year 5. From year 5 subtract 40% from each prior year. On the basis of your research, estimate the number of sales each sales person will make each year. From that you can calculate number of salespeople required.
After you make your forecasts, you should complete a sensitivity analysis by adjusting each major item estimated by 10% plus or minus. Examine the impact on revenues, profit, and cash needs. Remember that most operating expenses are roughly proportional to personnel headcount. These are your variable expenses such as salaries, benefits, employment taxes, furniture, computers, rent, supplies, utilities, training, travel, meals, training, and dues. Other non-variable expenses may or may not be proportional such as professional services, subcontractors, advertising, and trade shows.
Use your forecasts to compare yourself to others in your industry by such things as revenue per employee, revenue per salesperson, gross margin, expense categories as a percentage of revenues, financial ratios, and inventory control. It is critical that you know your industry’s benchmarks and metrics and that your business forecasts are within these benchmarks and metrics. You can find this information by researching your industry.
Should You Hire a Business Consultant to Prepare Your Forecasts and Research Your Industry?
Yes! Unless you have a very strong finance and accounting background, you cannot create financials that will be acceptable to investors and lenders. You cannot do an acceptable business plan with a spreadsheet, and it will be difficult for your to be objective in developing your business model. Also, you are the entrepreneur and your efforts are better spent building and developing your business which is what you do best.
Jo Ann Joy, CEO, Indigo Business Solutions
JoAnnJoy@IndigoBusinessSolutions.net, Phone: (602) 663-7007
The future of your business starts here.
For more information about these and other important topics and for legal consultation, please visit our website at http://IndigoBusinessSolutions.net Copyright 2006. Indigo Business Solutions is a registered trade name.
If you are suffering from liabilities then make it your first priority to eliminate them because it is a kind of slavery which will destroy your whole life. Right now there are a lot of people who are stuck in this kind of slavery and the main reason behind this problem is rise in the unemployment rate. After economic recession many companies shut down because they were unable to earn profit others have reduced their staffs because they simply cannot afford to pay to their every employee. Nonetheless there are proper solutions available, for this problem which are simple and easy to understand.
If would be totally non-beneficial to talk to your lenders about how to get rid of your arrears. Obviously they will tell you ways which will be beneficial for them but very difficult for you. Moreover, they will threaten you and make your life more miserable that you pay their amount by any means or else they are going to sue you.
If you search solutions for this problem over the internet, you will find millions of financial advices which can prove to be very beneficial for you. Furthermore, there are so many experts of debt management present on the web who give free financial advices to help consumers like you to get instant relief from debts and make country’s financial condition better.
Mostly arrears are created due to the extra expenditures. If you want to get rid of them, then you have to set up your mind to make some serious sacrifices. You have to give up your over-spending lifestyle and habits. Like spending money on drinks, eating out, clothes etc. If you made this your goal then you will be able to save a lot of money which will be helpful in resolving your liabilities. This does not mean that you would have deprived yourself from everything forever, this would be just temporarily and then afterwards you can return to a normal lifestyle.
Besides that you can also go to credit counselors which will analyze your problem completely and then will tell you professional advices. But be very careful in choosing a credit counselor, there are many scams present in the market right now which are ready to rip you off any second. Sometimes, borrowers in haste choose the wrong credit counselors who are con-artists in real. Mostly these kinds of people tell consumers unbelievable offers which sound very attractive but are just some false accusations to engulf you money. After getting you money, they run away leaving you in more trouble.
Choose a credit counselor whom you came to know about from a reliable source. Legitimate ones do not charge any fees for providing advice however if you want their service then you will have to pay their charges after they have helped you solve your liabilities.