When a growing business needs financing, lenders often require financial projections outlining expected revenue for the coming year. Your accounting professional can prepare these projections, explain the figures and provide the documentation your lender needs.
But there is an important question every business owner should ask: Do you actually understand what those numbers mean for your business?
We recently worked with a client who needed revenue projections for their lender. Their accounting professionals had prepared the documents and explained the numbers. The client knew the projected revenue target, but couldn’t explain how they were going to achieve it.
That’s where we stepped in.
First, we helped the client get a clear picture of their current profit margins. Then, we broke down their previous year’s sales, looking at how many products and services they had sold. From there, we determined how much more they needed to sell to reach their revenue target.
Most importantly, we made those numbers practical.
Rather than looking at one large annual revenue goal, we broke it down into monthly, weekly and even daily targets. Suddenly, the numbers became something the business owner could understand, measure and work toward.
We also established a plan to review the results each month, monitor progress and make adjustments when necessary.
Without that direction, the client would have been flying blind, hoping to reach a number without having a clear plan to get there.
Here’s the lesson: Your accounting professional may understand every number in the financial projections submitted to your lender, but that doesn’t necessarily mean those projections provide the practical guidance you need to run and grow your business.
Financial projections should be more than paperwork for the bank. They should be a roadmap for your business.
Don’t be afraid to ask questions, request clarification and seek the information you need to make informed decisions. If your accounting professional isn’t able to translate those numbers into an actionable business plan, that’s where The Business Therapist can help.
Knowing your revenue target is one thing. Knowing how to achieve it is what makes the difference.
