Financial projections are often treated as a formality, a spreadsheet built to satisfy a lender and then filed away. Their real value has less to do with predicting what will happen and more to do with preparing for what might.
Hakim Kassam, Director of SBA Lending at Midwest BankCentre, explains why detailed projections are worth the effort long after the loan application is behind you.
Planning for the Downside
A detailed projection lets you map out your downside risk scenarios before you are living in one. The questions it forces you to answer are the ones that are hardest to think clearly about in the moment:
- What happens if you lose a customer? Particularly one that represents a meaningful share of revenue
- What is plan B? The response you turn to when the primary assumption does not hold
- What is plan C? Because the backup plan sometimes needs a backup
- How do you pivot? To the next product or service the business is positioned to offer
None of these are comfortable questions. Working through them while the business is stable is considerably easier than working through them after something has already gone wrong.
Beyond the Next Ninety Days
The horizon matters as much as the detail. A plan that covers thirty or ninety days is really just cash flow management. A plan that extends out one year, three years, and five years is something different, because it accounts for the decisions that compound over time.
That longer view is what keeps a business viable for the long term, and for many owners the business is what supports the family behind it. Planning at that horizon is not an academic exercise.
Hakim also covers the biggest financing mistake business owners make and what SBA loans can be used for.
For more information about SBA loans, visit us online or stop by one of our local branches. Our team can help you think through the scenarios that matter for your business.