One Thing You Must Do Immediately Before You Start a Project

Starting and managing your own business is a tricky proposition. How do you know how much money will be needed to get started? Or, as you business expands? What will you tell potential investors or lenders about the potential for your business? Or, what will you do if economic times get tough?

Now imagine you had a way to know what the outcome of every decision was. You’d know which project would succeed and which would fail. If you can’t have that, how about if you had a way to know that your business was prepared for the worst case and the best case scenarios? Well, that’s what a good business projection can do for you.

A business projection is part science and part skill. That skill depends on you and your abilities to accurately assess the impact of possible scenarios. The ability to project worst case, most likely, and best case scenarios for projects & businesses is a critical entrepreneurial skill.
With a business, a projection looks at what the business expects to earn. That’s the top-line. It also looks at the take-home profit at the end of the day. That’s the bottom-line.

If you are able, get started with your business projection by first looking at your business past. If your business has been around for a few years, you can compare your income statements on a yearly basis.

If your business is newer, then you can begin fleshing out a basic projection by gathering some of the following information:

• List of known income sources from sales (This is guaranteed income, like a long-term contract, monthly recurring billings, etc.)
• List of anticipated income sources from sales (This is income that you’re hoping to get.)
• List of known income sources from credit (These are sources, such as line of credit, credit card, personal money available to the business, etc.)
• List of anticipated income sources from credit
  (This is additional credit that you’re hoping to get, but it hasn’t been confirmed.)

• List of known expenses (These are your fixed operating costs, like rent, mortgage, heat, light, internet, phone, and so on.)
• List of anticipated expenses (These are costs that vary, like equipment purchases, office supplies, auto expenses, and so on.)

If You Can Survive Your Worst Case, You Can Survive Anything

If you are realistic with a worst case scenario and your business can survive it, you’re already head and shoulders above most business owners who start their business on a hope and a wish, while having no real plan.

Sometimes The Best Case Is The Worst Thing That Could Happen To Your Business. Are You Ready?

On the other end of the projection spectrum is your best case scenario. That usually means you sell more than you really think is possible, and you will need to add more equipment and employees.

In between the worst case and the best case scenarios is the most likely case. This represents the sales and the expenses that you reasonably expect for your business.

In the beginning, your projections might not be that accurate. That’s perfect! It means you’re learning as you go. Soon you’ll have projections that provide concise information for smarter business deductions.

Do you have a smart business or a stupid business? Which one are you building?