3. Explain How You Made Your Forecasts
Present a prediction of where the company will be over the next three years. Never present aggressive forecasts that defy belief. If no company has achieved the type of results before that are being presented, it is unlikely that bankers will be convinced that your small business will be the first to do it.
Build this forecast from the bottom up, not the top down, through simple multiplication. For example, know the time and cost of driving customer purchases and the gross profit on each sale. Understand the lifetime value (LTV) of a customer. Show where the leverage for increasing profit is and how the company will make money as the business grows in size.
Make sure that the forecasts are conservative by increasing expected expenses by 25% and reducing forecasted revenue growth by 50%. Under this scenario, can the company still make money and repay the bank? Don’t present anything that can’t be confidentially delivered based on the current facts that are known.
