One of the secrets to creating credibility and trust with everyone who is financially invested in the success of your company is providing them financial projections.
Both the projections themselves (and a unique format for the projections) shows the financial community you have a deep understanding of the financial side of your business.
- It shows them how your business strategy maps back to your key drivers of profitability and cash flow.
- It helps them get a clear view into where the business is headed financially.
- It shows them what the balance sheet should look like based on your strategic direction for the business.
And that is something they don't see often. It puts you a notch above the competition (they can only lend or invest in so many companies - you really are competing for capital and the attention of lenders).
One of the most important objectives I have for this blog is to convince you (in a mono-maniacal fashion, as Peter Drucker would say) that providing a view into where your company is headed financially will pay dividends for you that are almost unbelievable.
I've seen it countless times.
Financial statement projections, down to the cash flow level, are magical in the way they focus you and your management team. And they create tons of credibility with your investors and lenders.
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