When you talk to many investors about how they review a business plan, most will admit to skipping straight to the financial section of the business plan. What they see in this section may determine if they even bother to look at the remainder of the plan at all. It is absolutely critical that they assumptions and projections used in the financial section be realistic and attainable. Plans that over-reach and show unrealistic growth will damage your credibility immediately with the investor. By using a well-reasoned approach to the financial projections will communication an operational maturity and demonstrate a level of credibility to the investor.

It is critical to look at the performance of similar businesses to get a realistic view of potential margins and growth. A savvy investor will have access to public information on similar companies and will definitely do their research before they invest in your company. If your business plan projects an 80% operating margin and the industry is performing at 40%, it will raise an immediate red flag with the investor.

As much as possible, the financial assumptions need to be based on your historical results or similar company's results. It is fairly easy to find information on the performance of publically held companies and there are numerous online tools to assist in the process. Likewise, the revenue growth needs to be based on the experience of similar firms. You may believe that your company cannot be compared to the performance of another company, but I can guarantee you that a seasoned investor will compare the two. If you expect to grow differently than those companies, you can definitely include more aggressive assumptions in your business plan but make sure you back up your assumptions in the next of the financial plan.

Always keep in mind that the financial can either enhance or harm your business plan's changes of helping you raise capital. By doing your homework and backing up your assumptions, you will greatly add to the credibility of your plan. Remember that you will be judged against the numbers you present in your plan so they need to be realistic and attainable. A solid financial plan will bolster your chances of winning investors and becoming a proven success.

Article written by Terri Sullivan owner of TLS Business Consulting.
http://www.tlsbusinessconsulting.com
Article not to be used without the authors permission