No Bottom Up Assumptions: You need to understand that the company’s revenues and growth rate from the bottom up.
The cost of the item, the margin per unit, and the number of units sold should all match up to a revenue amount. Don’t say that you will have a great service, or that your coffee is better.
They usually think ideas in their own favors, meaning they set profits too high or make a profit too early.
In the actual world, startups decide growth or profits, not both. And therefore, the shareholders win on growth, not profitability.
Bankers and potential investors will look at this and immediately know that you don’t understand the industry of your business. In order to generate a $500,000 profit next year, how many ice-cream will you need to sell? Your assumptions need to be based on data, when possible.
For example, “there are 200,000 people in my city, 28% of people buy ice-cream from an ice-cream shop, I will need to capture 40% of the market in my city in order to generate a 0,000 profit next year.” Now you can outline a plan to demonstrate exactly how you intend to capture that 40% market share.
So keep tracking things are a good habit to overcome unwanted risks.
Financial projections and financial forecasts are the weapons to keep track of your financial situations.
Investors ask you for: Creditors won’t just request data in your previous performances, also called historical data, in the financial section of your business plan they may also request for 5 year financial projection or 3 year financial projection for startups.
No Assumptions Listed: Startup financial projections include assumptions — assumptions around growth rates, pricing, expenses, and several different things affecting the condition of the company.