The Financial Compass: Planning with Forecasts & Projections

 Learn how to use financial forecasting and projections to plan for the future of your business. Discover the key components of a financial forecast, common mistakes to avoid, and best practices for presenting financial forecasts to stakeholders.

Do you know the difference between financial forecasts and financial projections? If not, don't worry. This guide will answer all your questions. There are many reasons why a company should use forecasting to plan for the future. Forecasting is simply predicting what will happen in the future based on past data. A company can forecast its sales, profitability, cash flow, and many other aspects of its business. Forecasts help businesses make decisions that might not be intuitive or easy to make.

What are Financial Forecasts and Projections?

Financial forecasting, also known as financial projection, is the process of predicting a company's financial position or a country's GDP in the future. The difference between forecasting and projecting is that forecasting deals with the past and present, while projection deals with the future. Forecasting can be used to predict market demand for certain products on a quarterly basis. For example, projecting can be used to predict a country's GDP for the next year based on current economic policies and other factors that may affect economic growth. Financial forecasts and projections are useful tools for capital suppliers and managers, who rely on firms' financial projections to set their own expectations of future cash flows for investing purposes.

There are two types of forecasts:

Qualitative forecasts are based on the opinion of the analyst.

Quantitative forecasts use statistical data and math.

Quantitative forecasts can be useful for decision-making, especially when used in conjunction with fundraising advisory services. These projections can help businesses understand the potential impact of their decisions on their financial future and make informed choices.

Why Use Financial Forecasting and Projection in Business?

Financial forecasting is an essential tool for businesses to plan ahead and avoid potential problems. Poor cash flow accounts for about 82% of small business failures, and forecasting can help identify and address these issues. It involves analyzing data and making informed estimates about future cash flows and revenues. In contrast, financial projections analyze past data to see if it matches expectations. Forecasting is forward-looking, while projection is backward-looking.

Forecasting is crucial for businesses because it allows them to stay on top of their finances and prepare for potential outcomes. By considering past trends and future possibilities, businesses can formulate action plans for different scenarios. While projections provide detailed information on past or future performance, forecasting gives an overview of the company's financial state.

Businesses with multiple lines of business or volatile cash flow streams that cannot be predicted accurately with financial projections alone should consider financial forecasting as a valuable tool in managing their finances.

How are Financial Forecasts Done?

The forecasting process can be a complicated task, especially when forecasting for a growing company. There are many aspects to take into account, and it may seem daunting. The forecast process starts with identifying the different scenarios that can happen within the company's industry and estimating their impact on the company's operations. Factors such as demand, prices, competitors, and new products should be considered when making forecasts. This section will explore two key aspects of forecasting that every company should consider when completing their forecast process.

What is Your Forecasting Horizon?

Before beginning the forecasting process, you must determine the length of time you plan to forecast. This is known as the forecasting horizon, or how far into the future you want to predict your expenses and revenues from contracts or other sources. There are generally three types of forecasting horizons:

‍Short Term: This forecasting horizon is less than three months. It is used for job schedules, work tasks, client commitments, workforce and product levels in planning and purchasing.

‍Medium Term: This forecast covers 3 months to a year, but can be up to 3 years. Management predicts aspects such as sales, production planning, and cash budgeting.

‍Long term: This forecasting horizon is for more than three years. Management creates a long-term plan that may include installing new plants, factories, or outlets, and considers capital expenditures, factory locations, and other sectors.

Forecasting horizons are an integral part of planning and decision-making in any organization. This is why financial managers need to clearly define the horizon of their forecasts. From a financial perspective, horizon analysis examines the expected discounted returns of a security or investment portfolio's total returns over multiple periods.

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Elevate Your Pitch: What is a Pitch Deck and Why It Matters

 Learn how to create a winning pitch deck for investors, customers, and partners. Discover the key elements and common mistakes to avoid in a concise and engaging guide.

A pitch deck is a concise presentation that outlines the problem, the solution, and the company's path to success. This presentation can serve different purposes, and in this article, we will provide an overview of all of them.

To create an effective pitch deck, it is important to include key elements such as a brief introduction, a problem statement, a solution statement, a market analysis, a business model, a marketing plan, and financial projections. Each of these elements should be presented clearly and concisely, using persuasive language and compelling visuals to convey the company's unique value proposition.

By understanding what a pitch deck is and what it includes, entrepreneurs can create a pitch deck that captures the attention of relevant stakeholders and provides them with important information about the company's goals and potential for success.

The Importance of a Pitch Deck for Your Startup

Pitch decks are an essential tool for entrepreneurs looking to raise capital, attract partnerships, or communicate their business idea or plan to potential investors or customers. Simply put, a pitch deck is a visual presentation that summarizes the key aspects of a business idea or plan. But what is a pitch deck and why is it so important?

A pitch deck is a document that provides a clear and concise overview of a business idea or plan. It typically includes slides that cover key topics such as the problem/opportunity, solution, market, business model, team, and financial projections. The purpose of a pitch deck is to provide potential investors or partners with a quick and engaging way to understand a business and its potential.

But a pitch deck is more than just a summary of a business plan. It's an opportunity for entrepreneurs to tell a compelling story about their business and differentiate themselves from competitors. A well-crafted pitch deck can help entrepreneurs stand out in a crowded market, attract investment or partnerships, and refine their strategy and communication skills.

So why is a pitch deck important? Firstly, a pitch deck helps entrepreneurs communicate their business idea or plan quickly and effectively. In today's fast-paced business environment, it's important to be able to communicate your vision and value proposition in a clear and concise way. A pitch deck provides a structured and engaging way to do this.

Secondly, a pitch deck can help entrepreneurs attract investment or partnerships. Pitch decks are often used by entrepreneurs to pitch their business to potential investors or partners, with the aim of securing funding or forming strategic alliances. A well-crafted pitch deck can help entrepreneurs make a strong case for their business and build credibility with potential investors or partners.

Finally, a pitch deck can help entrepreneurs refine their business model and strategy. Creating a pitch deck requires entrepreneurs to focus on the most important aspects of their business and articulate them in a clear and concise way. This can help entrepreneurs identify gaps or weaknesses in their business, refine their strategy, and develop a compelling story that resonates with their audience.

In summary, a pitch deck is a visual presentation that summarizes the key aspects of a business idea or plan. It's an essential tool for entrepreneurs looking to communicate their vision, attract investment or partnerships, refine their strategy and communication skills, and seek guidance from business consultants.

Purpose of a Pitch Deck

A pitch deck is an essential tool for startups. Its purpose is to present the company's strengths and goals in a concise and easy-to-understand manner. A pitch deck can serve several purposes:

Raise Capital

A pitch deck is primarily used to persuade investors to invest in a startup's product or service. It presents the company's strengths, goals, business model, and value proposition in a concise and easy-to-understand manner. The deck should be visually appealing and compelling while highlighting the potential of the startup and how it can benefit from the investment. If you’d like to learn more about how to get your pitch deck in the hands of investors, take a look at How to send Pitch Decks to investors?

Attract New Customers, Partners, or Employees

A well-crafted pitch deck can also help a startup attract new customers, partners, or employees. By presenting the company's unique value proposition, it can gain the attention of potential customers or partners who may be interested in working with the startup. Additionally, the pitch deck can highlight the company's growth potential, which can attract talented employees who see the potential for career growth within the company.

Gain Media Attention

A pitch deck can be used to gain media attention and increase the startup's visibility. By presenting a comprehensive and well-crafted pitch deck, the startup can demonstrate its potential to the media, which can lead to press coverage, interviews, and other media opportunities. This can help the startup reach a wider audience and attract potential investors.

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The Entrepreneur's Haven: 16 Engaging Startup Communities

 Join a startup community to scale up your business through networking. Discover the best communities for expert guidance, mentorship, and resources to thrive in your field.

Startup teams do not rely solely on traditional means of marketing and scaling up. Instead, they focus on finding and engaging with communities to scale up through networking. These communities are specialized groups that help businesses grow, network, seek new opportunities, and find mentors who positively contribute to their ideas.

Are you a startup looking to join a community that provides expert guidance and resources to thrive in your field?

Things to Know Before Joining a Startup Community

You can join a startup community at any stage of your business. These communities are full of established and experienced professionals who are willing to help your business grow, regardless of its stage. Some communities charge for membership, while others are free.

Once you find the most suitable community, your business will thrive in the environment and you may even find resources and guidance for business plan writing.

16 of the Best Startup Communities to Join

Having a healthy start-up community is like having a healthy heart in the start-up world. It ensures the health and longevity of a start-up. To help you scale your venture to a whole new level, we've compiled a list of the 16 best startup communities to join.

Growth Mentor

Growth Mentor is best suited for start-ups seeking a one-on-one experience with seasoned professionals. It's a popular choice among individuals seeking personal advice from experienced entrepreneurs. The professionals on this platform are well-versed in the culture and requirements of start-ups, making it easy to connect. If you're looking for personalized advice, Growth Mentor is the best startup community choice.

Startup Grind

Startup Grind is a veteran community in the start-up world spanning 125 countries. It is a popular choice among startups seeking to learn from, get help from, and connect with founders and owners with similar experiences. Start-up Grind is the largest and one of the best startup communities where a diverse blend of experienced individuals come together to share advice and expand their network.

No Code Founders

If seek a community for your non-technical start-up, No Code Founders is the best fit for you. No Code Founders was started in 2019 as a community for start-ups that were not using coding for their business. Communities like these help non-technical businesses in the start-up world where coding is a common attribute.

No Code Founders provide non-technical start-ups an opportunity to build their own community. This community is a great resource not just for its uniqueness and cost but also for providing guidance on startup financial modelling.

Indie Hackers

If you are looking for an online platform to grow your start-up and improve your business, Indie Hackers is your best bet. Professionals on this platform share their experiences and give advice to start-ups seeking assistance. It is an online platform free of cost; however, in order to acquire unique benefits, a fee is to be paid.

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Business Startup Checklist to Becoming An Entrepreneur

 Starting a business? Here's a complete guide to help you navigate the process, from obtaining necessary approvals to building a strong team and measuring success.

Are you planning to launch a startup in the near future? As a founder, there are a few things you should pay attention to before, during, and after formally starting your business. Even the best startup ideas won't work if you don't consider these aspects. By doing so, you'll be able to take off with a well-considered business idea and start operating smoothly.

Starting a business doesn't have to be difficult if you follow the business startup checklist. Here are a few business startup tips that you can use as a source of inspiration. Let's begin the 'starting a business checklist.'

Business Startup Checklist Begins with a Business Plan

Creating a business plan is the first step on our business startup checklist. Starting a business is no small feat, whether it's a small or large one. The foundation of a quality business venture with a good chance of success is a suitable business idea. By "suitable," we mean that the business idea should be validated and meet current customer demand, as well as be able to meet ever-growing market demands. Ultimately, it's the customers who respond to an offer and determine the competitiveness of any company.

Before you plunge into a new challenge as a founder, it's important to write a business plan. The greatest advantage of a business plan is that it allows you to determine existing market needs and gaps right at the beginning of the venture, and serves as a guide for all business activities. A good business plan includes goals and strategies, market and cost analysis, and other important details. Additionally, it may be worth considering seeking professional fundraising services to secure the necessary capital for your startup.

Company Name, Domain, and Brand

The next item on the business startup checklist is choosing a company name. The name must be legally correct and accurately reflect the company's activities. It should also be appealing and easy to remember for potential customers. Additionally, the company name must include the appropriate legal form suffix (e.g. GmbH).

After deciding on the company name, the next step is selecting a suitable domain that aligns with the brand image and positively influences search engine optimization (SEO). It's important to devote significant time and attention to this step as the company name and domain contribute to a coherent brand that resonates with customers. CheckDomain is a great and easy way to check the availability of a domain.

Choosing the Appropriate Legal Form

Are you planning to start a business? If so, you must make an important decision about its legal form, which will have a significant impact. The first question to consider is whether you want to start the business alone or with partners. If you opt for a joint venture, you must decide on liability and the distribution of authority at the management level. The legal form you choose will depend on the country in which you reside. In Germany, for example, the following legal forms are available: sole proprietorship, stock corporation (AG), limited liability company (GmbH), civil law partnership (GbR), limited partnership (KG), general partnership (OHG), or entrepreneurial company (UG). Each legal form requires different minimum contributions, liability limitations, and formation formalities.

Financing Options

Financing is a critical component of setting up a company. We recommend consulting a Financial Modeling Consultant to assess your financial situation. Without sufficient start-up capital, it is difficult to bring a new business idea to life. If you are considering launching a startup, it's important to understand various forms of financing. There is no "right" answer, as it depends on individual circumstances. Worth considering are internal and external financing, as well as equity and debt financing. With internal financing, the capital comes from the company's own entrepreneurial activities. With external financing, on the other hand, capital is brought in from outside. Self-financing is based on equity capital permanently available to the company. In contrast, external financing is only temporarily available. In every case, we recommend creating a Pitch Deck. The purpose of a pitch deck is to keep track of the startup's strategy and goals. You can also show it to new employees, customers, or investors.

Obtain Necessary Approvals for Your Business Startup Checklist

Starting a business is an ambitious goal that requires job-specific expertise as well as the free will to self-determine. To ensure the maximum quality of products and services and the necessary safety of your personnel and customers, as a founder, you must obtain and present certain licenses and qualifications.

Examples of important permits that must be on your startup checklist include obtaining a master craftsman's certificate, ensuring that freelancers have necessary qualifications from the chamber of commerce, and getting a permit for certain activities in accordance with trade regulations. Additionally, you must obtain other permits, such as those from the building and health authorities, to avoid sanctions from trade supervisory authorities. It may also be worth considering including obtaining necessary permits in your investor outreach plan to showcase that you have taken all necessary steps to ensure compliance and mitigate risk.

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