Using a 3 Year Financial Projection Template

Creating a business plan is, for all cases, a very important factor for attaining financial success. Though it doesn’t completely guarantee that thought, it at least, paves the path for your business to go to. Of course, your business plan will only have meaning if it is backed up by a solid financial plan. The financial plan will need to realize factors such as:

•    Where you will generate revenues / income
•    Which costs you expect to spend
•    Why and how much profit the business should generate
•    Where the funding comes from
•    Where to take the funds from
•    How to allocate the funds to maximize profitability
•    And many more factors in regards to the management of funds

Usually, a detailed financial model expresses the assumptions in the projected income statement, balance sheet, and cash flow statement, over a minimum number of forecasting period which is usually around 3 years for a financial plan. These components are useful references as to make sense of what’s stated in the business plan. The report will also further solidify the credibility of the business plan and ensure that the model is not completely made-up and reliable. That’s why a financial plan should clearly explain the expected financial projections of a business going forward.

Business plans can go up to 5 years, but to build a sound financial plan, a 3 year financial projection is enough as a minimum. This is due to the fact that normally after 3 years, it can be very difficult to justify what will happen to the business. Meaning, longer projections are very difficult to come up because the range of scenario outcomes will increase after three to five years. As a result, the best-educated guess normally will focus on a normalized profit the business can generate and is bound to manipulation at a certain point.

To help you with building a financial model which is good for 3 years, you can use a 3 Year Cash Flow Projection Template provided at eFinancialModels which is a platform that offers industry-specific financial model templates. A 3 year financial projection template can be especially useful when considering the theoretical “what-if” scenarios to simulate any change in assumptions on the forecasted cash flow over time. You can also use other financial model templates for building a financial plan designed for specific industries so you’re free to choose which one fits your business model. No more building a financial model from scratch. All you have to do is apply the figures as to customize the model to fit the financial standing of your business.

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