Business Plan Financial Projections: Stop Worrying About Being Right…

Business plan financial projections seem daunting because
they are so uncertain. This very uncertainty, however, is
what makes preparing them easy because you can’t possibly be
right. You can’t predict the future. None of us can. All you
can be is competent in the way you prepare your business plan

Before you finalize your business plan this year, consider
these six caveats to preparing your business plan financial

1. Don’t offer pull-out-of-the-air, “conservative”
guesstimates about getting some percentage of the overall
market demand or year-over-year growth.

It is a mistake to assume that business investors will
appreciate your being conservative with your business plan
financial projections in the early years of your business.
Don’t think for a Wall Street minute that presenting
“conservative” business plan financial projections indicates
“realism” to prospective business investors. Business investors
invest for one reason: to earn a return on their money. How
long the money is invested influences the amount of the return
earned. Let’s say a business investor wants to triple an
investment. Well, if that investment triples in 3 years, the
return is 44%. If it triples in five years, the return is
25%. Adding just two years to the investment period nearly
halves the return! Now do you see why time is so important
to a business investor? Here are a few other examples: let’s
say a business investor wants to:

Make 5 times an investment in 3 years = 71% return

Make 5 times an investment in 5 years = 38% return

Make 7 times an investment in 3 years = 91% return

Make 7 times an investment in 5 years = 48% return

Make 10 times an investment in 3 years = 115% return

Make 10 times an investment in 5 years = 59% return

So, while you may find it attractive to figure out how to
make “just a living” until the business venture proves
itself, you now understand why business investors want sales
and earnings to grow absolutely as fast as possible, without
being deceived, in your business plan financial projections.
On the whole, business investors are risk averse only to the
extent that they don’t want to lose their money or tie it up
in a low return investment. Typically when you make the claim
that your business plan financial projections are “conservative”,
it usually just means that you have no idea how and why you’ll
achieve a certain level of sales within a certain time frame.
Interesting, these kinds of estimates, provided that you’ve
done some good thinking about market segments and overall
demand, often turn out to be too low. Remember, it’s just as
bad to underestimate your sales, as it is to overestimate

2. Avoid calculating costs as a straight percentage of

Sure it’s easier to do things this way, especially with
Excel and other business plan financial projection software.
Costs are real, however. You need to know what they are very
specifically. If you’ve done your homework in developing
your business plan, then you should already have this information,
or at least the basis of it. Just estimate and calculate your
costs on a product-by-product basis.

With these warnings in mind, use the following steps to
develop your business plan financial projections:

Think about what percentage of the overall market share your
competitors already own. Assume that they will continue
their present trends in growth. (Note: some competitors may
already be trending down and losing market share.) Temper
your market share estimates with some discussion of how your
entry into the market will affect these trends. Then,
estimate the percent of total, potential demand that remains
available to you.

Now, based on the limitations of your operations plans,
calculate how much of this remaining available demand you
can achieve. This is a very simple calculation. Start with
your overall productive unit capacity and factor it by the
expected yield of sellable product, then multiply these unit
sales by their respective selling prices and voila, you have
the revenue numbers for your business plan financial projections.

Let’s take an example.

Your research indicates that 2 out of every 10 females age
23 to 55 will under go some type of non-invasive cosmetic
treatment in your area. Your research also shows that this
number is expected to grow 20% each year over the next 5
years. There are 40,000 females in your target market. You
identified four competitors in your target market. These
four competitors currently handle on average 6 procedures a
day. You plan to start a non-invasive cosmetic treatment
center that uses the most advanced technology and is thus
capable of performing an average of 7 procedures a day.
Using this data you calculate the following statistics
about your market and market potential:

Total market 40,000 females x 20% = 8,000 procedures per

4 competitors x 6 procedures x 250 days = 6,000 procedures
per year

Available procedures: 8,000 less 6,000 = 2,000 per year

Your productive capacity: 7 procedures a day x 250 days =
1,750 or 21.875% of the total market. The average selling
price for a procedure is $400. Thus, the revenue for the first
year in your business plan financial projection would be 1,750
procedures times $400 or $700,000.

Now, let’s say you’re were projecting 2,200 procedures per
year. This would mean that you would have to alter your
operating plan to be able to perform 2,200 procedures. You
would also have to demonstrate how you would capture an
additional 200 procedures from your competitors.
Granted this is an over simplified example, but it should
give you a feel for how this process works.

Regarding price, in most cases you should have a clear idea
of how to price your product or service. There are usually
other, similar products or services out on the market.
Unless your competitive advantage is a cost reduction and/or
unless price is a critical basis of competition, just
estimate the value of your improvement and add it on to the
average price currently offered in the marketplace. In order
to make this estimate, you’ll have to be talking to
potential users. Find out what they pay now. Find out how
they feel about the current price. Ask them if they’d be
willing to pay more and how much more. If you ask enough
people, you’ll get a general idea.

3. Never determine price on the basis of a margin you think
is attractive.

The market will pay you only for the value you deliver,
which is determined by the consumer paying the final price.
It’s easy to make the mistake of thinking that a 20%, 40% or
even a 60% margin is great. Never considering that if the
product or service you’re offering provides a real
advantage. If you do this, you may be grossly
underestimating the price you can get in the marketplace and
underestimating your business plan financial projections.
Consumers don’t think in terms of margins. They could care
less about what you ought, “reasonably”, to get for your
product. That’s why you must find out the most that they’ll
pay. This is the value of your product or service. Come up
with some reasonable basis for determining this real value.
Keep in mind the obvious: If the consumer’s value on the
final product or service is less than your cost plus a
reasonable profit to keep your business growing, you’re in
trouble. Your business model will not be sustainable and your
business plan financial projections useless.

Now calculate the costs of manufacturing and distributing
your product. These costs flow directly from your revenues
estimates and operations plan. How much will it cost to
purchase what equipment and materials, hire what personnel,
engage in what selling efforts, pay what accountants and
lawyers, rent what kind of space and so forth, to achieve
the revenues you’re showing in your business plan financial
projections. You must be very specific. Project your costs
over time. Keep them tied to the units you need to sell to
achieve the revenues in your business plan financial

Obviously, costs and revenues work hand in hand.

4. Keep your fixed cost low.

Keep in mind that none of these revenues and the cost
estimates are going to be perfectly accurate, which means
the amount of profit or cash available to pay “fixed” cost
isn’t going to be accurate either. As a result, you can lose
your shirt trying to pay for equipment, a receptionist, or
other activities that don’t contribute to the sole objective
of making sales. Wherever possible, rent space, rent time on
equipment, answer your own phones, etc. To the extent that
you keep costs variable in your business plan financial
projections, you can cut back when sales are slower than
expected. It’s the worst situation to have a big,
well-furnished office with an expensive secretary who
needs the job, when the money isn’t coming in. High fixed
costs in your business plan financial projections also send
the wrong message to investors that you know more about the
“form” of doing business than about actually making money.

Now pull all your numbers together to prepare the financial
statements that summarize your business plan financial
projections. You need three basic statements: cash flow
analysis, income statements, and balance sheets. All of
these come directly from the above calculations. Your cash
flow analysis indicates when and what amounts of capital
infusion you’ll need to start and sustain your business plan.
Make your income and balance sheet projections on the
assumption that you’ll get the capital. For the first year
or two of your business plan financial projections, present
each of these statements on at least a quarterly basis.
Monthly is best. I suggest doing a 24- or 36-month projection
depending on your growth plans and changes in the industry that
you foresee. Follow these monthly or quarterly projections with
annual projections till you cover a span of 5 years.

Finally, run through some “what-if” scenarios or sensitivity
analysis. Though you business plan financial projections should
be based on your best, and best-supported estimates of costs
and revenues, you know you can’t be 100% right. That’s why it’s
important to identify those elements or assumptions of your
business plan financial projections that you feel are most
uncertain. Write out the nature of the uncertainty and the range
you think the estimates will fluctuate up or down. Then change
the estimates accordingly and re-run all your statements.
Pay close attention to how your business plan financial
projections, especially cash flows, change when you change
each assumption. This will help you determine how much
“cushion” you have available and, if business isn’t going
according to plan, at what point cash will become an issue.

5. Do not simply assume that costs and revenues may be
“off”, up or down, by some percentage.

Again, I know that Excel makes it easy to do this. For all
the same reasoning as above, stay focused on the assumptions
and details that make up your business plan financial projections.
It’s the details you need to examine for their sensitivity and
their impact on the bottom line. You only need to alter those
specific items that you’re most uncertain about. If it’s revenues
that you’re worried about, is it the price, the volume, or
both that concerns you most? How big a swing in the estimate
are you worried about, in what direction and why? If it’s
your cost projections that are keeping you awake at night,
which cost elements and why? Things like rents and labor
costs can be determined fairly accurately. But maybe you’re
unsure about materials or labor availability or how
efficiently you can produce your products or provide your
services. Maybe you’ll have to pay extra to ensure their
availability. This kind of thinking forms the basis for running
“what-if” or sensitivity analysis on your business plan financial

6.Do not include every possible business
plan financial projection scenario in your business plan.

Both you and your investors need to know what aspects of the
business plan financial projections are most uncertain,
represent the most risk, in what direction, why, and how
they affect the bottom line. Having hundreds of alternative
scenarios to sort through is like a man with two watches
showing two different times… he never knows what time it is.
Lots of alternative business plan financial projections also
indicate that you’re not too sure about anything. This is an
impossible way to communicate with business investors, manage
your business, or make important decisions. It’s much more
effective to identify the risky areas of your plan, tell why
and how they impact the bottom line and what actions you
plan to take if they occur. This helps you and your business
investors stay focused on the high impact areas and to think
clearly about whether other factors should be considered as
well. It also lends more credibility to your talents and
increases the likelihood of your plan’s success.

Finish this discussion with a summary of the critical
aspects of your plan and related contingency plans. If
you’ve followed all these steps, then you can figure out
what you’ll do if your actual performance turns out to be
different than your business plan financial projections.
Remember, you’re purpose is to demonstrate to business investors
that you’re competent; worrying about protecting their investment
and running a business, not just flying by the seat of your pants.

The Keys to the Queendom: How Financial Advisors Attract Wealthy Female Clientele

As the female financial advisors walked into the workshop, they stopped short, looked around, smiled and expressed pleasure. When the male advisors walked into the room, they paused and wondered, “What have I gotten myself into?”

They all had come with hopes of learning how to connect with and attract female clientele, but they certainly weren’t expecting this.

The conference room had been transformed, with every detail tailored to appeal to the feminine. Tables were covered with crisp white tablecloths, and carefully set with pink linen napkins and delicate china teacups. A large bouquet of flowers graced the front podium, and each table had a small vase of pink tulips. Soft music played as participants found their seats, but we could still hear their quiet expressions of surprise when they found our final touch: a pink journal for each participant.

In this gentle, feminine environment, the women came to life. The men were a bit more sullen at first, as this all felt a bit foreign to them. But, by the end of the workshop, even the men were nodding in agreement: women really respond well when we tailor the environment to suit them.

A female-friendly financial advisory practice isn’t created by writing a cutesy script or softening your tone of voice; it starts with tailoring your approach to suit the ladies.

The financial industry at large has failed to notice that it is very strongly skewed toward men. For the most part, financial services were developed by men, for men, based on what appeals to men. While this system worked well in a male-dominated culture, the balance of financial power is shifting quickly.

Women have never had more financial power than they do now. BCG Estimates that by 2014 women will control close to $29 trillion. These projections are based on women’s growing presence in the workforce, greater involvement in family finances and the greater incidence of inherited wealth owing to women’s longevity.

Today, women are earning and controlling more wealth, becoming more involved in business, and engaging in marriage as equals. BCG estimates that by 2014, women will control close to $29 trillion, based on their growing presence in the workforce, greater involvement in family finances, and greater inherited wealth.

These women expect the industry to recognize what they need and want… and it’s NOT a cutesy script.

Women want more. From the office environment to the way information is presented, the female client will no longer tolerate “manhandling.” The time has come to learn how to appeal to the feminine forces of finance… or, prepare to face massive attrition.

Did you know that when a woman loses her man to death or divorce, 70 percent change advisors within one to three years (according to a study by Boston Financial Services)? What is the driving force behind this trend? It’s simple: most financial advisors direct their energy, attention and information to the husband. Sure, they may treat the wife with cordialness, maybe even warmth, but they tend to leave her on the periphery instead of really engaging her in the process.

Since 90 percent of all women will experience the loss of a spouse at least once, sometimes twice in her life, many traditional advisors are in for some serious attrition.

Avoiding attrition is just one reason to create a female-friendly practice; there are so many other benefits:

  • Because women tend to be strongly relationship oriented, they are also very loyal. Once you establish a good relationship with your female client, it will take a lot for another advisor to woo her away.
  • Women are motivated by a strong sense of purpose, and they relate to their money through that purpose. When they know their money is in position to support their purpose, they relax, and usually see portfolio performance and related fees as an important, yet secondary concern.
  • As we all know, women love to talk, and because of this tendency, female clients provide three times more referrals than male clients. They are deeply community oriented, frequently trading information and knowledge to enhance their own life and the lives of those around them. Whether their sense of community extends to family, the neighborhood, colleagues, or a much larger circle of influence, when a woman becomes your “raving fan,” people are going to hear about you!

In order to create the kind of practice that attracts and wows women, it is critical to understand the strengths and natural abilities that women bring to the world. These are the same strengths that have helped women effectively manage their homes, families, crises and careers – and these are essential points in building rapport.

  1. Women are driven by a purpose. As natural nurturers, women want to make the world right. While men prefer to focus on goals and objectives, women focus on their purpose in life, and how money can help them fulfill this purpose.
  2. When selecting a financial advisor, women require three things (according to Hannah Shaw and Vanguard):
  3. Good interpersonal skills and the ability to create a personal connection with the woman;
  4. Good communication skills: the ability to ask great questions, and communicate concepts and information in a manner that is easy to understand, using terms and concepts that apply to women;
  5. Expertise, which includes both knowledge and experience. Most financial advisors overemphasize this component and underperform in the first two areas.
  6. Women are relationship driven. A good relationship should be reciprocal and escalating. As you learn about your female client, she may want to learn about you as a person. Sharing who you are and why you care about working with her is essential in building her trust and loyalty.
  7. Women work well in communities. Create opportunities for women to learn and share knowledge with each other. In their eyes, this adds to your value, and when women see that other women are comfortable with you, this dramatically enhances trust.

One of the smartest things you can do as an advisor is to learn how to create a professional environment that really engages your female clients.

By speaking to their innate strengths and abilities, and encouraging them to become more interested in their financial affairs, you can effectively differentiate yourself as a professional – and when you do, it will open the floodgates to a sea of female contacts, all looking for a financial advisor who knows how to work with women.

How Can Gender Traits Affect a Logo Design Project?

Although this may sound to be a stereotypical topic, but there is a certain element of truth in it as well. Being in the logo design business for the past 8 years, I have gathered a sizable amount of experience and observation on this perspective. Also a part of the logo design community, I have been around many friends and colleagues, both male and female.

In a majority of cases, male and female characteristics are similar to each other. But on the other hand, there are certain traits peculiar to a certain gender. These characteristics differentiated the way designers handle a design project. Following are a few traits that show how gender affects a design project:


The first gender difference that is visible in a logo design project is the timeliness and punctuality of the designer. Although not true for 100% of cases, but majority of times it is the girl designers who are more punctual and prompt with their deadlines and project submissions. On the other hand, male are known to procrastinate more than women, so in the process they tend to delay matters in most cases.

Panic Factor:

The next trait that you will find in designers is the panic factors. Women are generally known to be less composed and tend to get irritated more easily. Since they are emotionally sensitive, they take to heart all criticism from clients. While on the other hand, male are generally more composed and follow the “whatever” attitude. They are not really bothered or pushed by client criticism as much as female designers are. So the male designers tend to panic less in the wake of a problem in the project.

Bargaining Element:

Every client wants to get logos for as less as possible. But it isn’t always possible to get bargaining deals with logo designers since they mostly work on an hourly basis. If you try to bargain with female designers, chances are that they will get sensitive to clients problems and slash their compensation for them. On the other hand, men are not that much emotional bound and don’t care about the personal issues of the client. Hence they seldom compromise on their logo design fee.

Rational vs Emotional Minded:

The most common element that distinguishes a male and female designer is the thinking approach. Female are known to be more emotional minded and think from the heart. Their decisions on logo design include things that their heart tells them is right. On the contrary, male designers are more rational and include logic and reason in their decisions. Everything they do will be backed by a certain amount of facts and figures.