Displaying items by tag: realistic
Displaying items by tag: realistic
It is important for any investor to see realistic suggestions and assumptions in the financial plan. Plans showing the degree of their implementation, the operating income, earnings per worker and other figures that are not well substantiated, contradictory or in fact simply unrealistic, may undermine the credibility of the business plan as a whole. On the contrary, sober, well-reasoned financial assumptions and forecasts demonstrate the maturity and credibility of both the plan and its authors.

For example, if a company plans to work with infrastructure projects, then it makes investors suspicious planning an 80% operating income as investors can easily check the operating income of network infrastructure public companies and find out that none of them has a high level of operating income margins. That is they will understand that you have provided them with unrealistic data from the start.

Financial calculations should be based on actual performance indicators of your own firm or of other firms. As the example above shows, it's easy to check an operating profit of a joint-stock company and use them to forecast your own performance indicators. Similarly, a business plan should be based on earnings growth forecast corresponding to other companies in this industry. Many firms consider it simply impossible, claiming that they have a unique breakthrough idea and can't be compared to other companies. In this case use data of companies from other industries that have had breakthrough products. If you expect to grow even faster than they did (possibly due to new technologies that those firms could not have used), you can include more aggressive assumptions in your business plan as long as you can give detailed and plausible reasons for this growth in your business plan.

It is also important to make your forecasts realistic to attract funding and to keep temporary reserves to find alternative ways of developing your project. More realistic financing plans can help you to create the most accurate key points of project development.
Published in Research