One of the main functions that I do as a CFO is to create financial projections.  Projecting the performance of a company can be an art and a science.  I take pride in putting together numbers that are realistic and achievable.  Over the years, here are some areas where I have seen people go sideways in the process.

  • Putting out an unrealistic number because they think someone wants to see that number. (“The VC expects us to get to $500M by year 5”)
  • Not having a foundation of financial building blocks to project (if you only have 2 months of customer acquisition costs you do not have a good foundation to create a projection)
  • Assuming that growth metrics will stay consistent (as you grow there are things that get easier or harder, but rarely do things stay the same)
  • Not believing that it is achievable – (If the management team does not believe that a projection can be achieved then it will never happen)

Here is how I approach creating a financial projection.

If you have questions about how to prepare financial projections for your business, please feel free to reach out to me via LinkedIn.