Seeing Your Future Pays Off for another Entrepreneur

Feb 19, 2024 by Roger Scherping





Let me tell you about someone I met more than four years ago when I spoke at a SCORE finance seminar. At the time she was a new entrepreneur with an unusually strong interest in understanding the numbers of her business. When I told the class about this thing called projections, I had her full attention. She already understood the importance of understanding where her business had been, so the idea of also understanding where her business was going made perfect sense to her.

She contacted me after the session, and I helped get her QuickBooks set up in the best possible way for her to really understand what her income statement was telling her, mostly in how gross margin was calculated. Then she began doing financial projections, and today I don’t think there’s an entrepreneur anywhere who is a better advocate for looking forward with your business every single month.


Years of Projections

First, a little backstory. She purchased her franchise and later purchased the right to add two more locations. After she opened her first location, she immediately began using QuickBooks to understand exactly what was going on with her business. She considered it critical that she understand what her numbers were telling her. As I said earlier, this is unusual in an entrepreneur. Entrepreneurs usually don’t take the time to understand their numbers. It’s not a criticism; it’s just the way that most entrepreneurs are wired. They prefer to focus on sales, customers, and product development, not income statements, cash flow, and operating ratios.

But she’s done more than study her income statement carefully. Over the last few years, I’ve watched our user logs at ProjectionSmart, and I can see that every month, on usually the first or second day of every month, she logs in and updates her projection. No other ProjectionSmart user is as consistent as her at updating their projection. When I commented to her once how she stands out from our other users, she told me she can’t live without the peace of mind that her monthly projection gives her. She said she simply needs to know where her business is going.


A New Opportunity

I’m certain that the confidence she has gained over the years by understanding her numbers – both past and future – led her to recently open her second location. That location has been open for five months now, and recently, when she was ready to open her third location, she reconnected with me and asked to get together.

When we met, she first brought me up to date on her plans. She had two locations open, and for competitive (defensive) reasons, she felt she had to open the third location now. She seemed slightly anxious, but then uncertainty will do that to a small business owner!

Like most entrepreneurs, however, she understood her business inside and out. She knew the costs of opening the new location. She knew what she could expect as she ramped up sales. She even had a good idea of how much of the revenue from her existing location would probably transfer to the new location, so that revenue wouldn’t really be new revenue at all.

She just didn’t know how to put all this together in a way that reassured her that it would all work out. She asked me to help her model her ideas for her new business with three locations. She wanted to see her future. She wanted the same peace of mind in this new/ exciting/ anxiety-producing time that she has always had thanks to her QuickBooks financial statements and her ProjectionSmart monthly projection.


Where to Begin

We started by focusing on her planned budget for the next 12 months, starting with projected revenue. She knew what her revenue was per month for location 1, so we used that as a starting point. To that we added projected revenue for location 2, which was still ramping up. Then we added projected revenue for location 3, but we also had to go back to location 1 and deduct the portion of revenue for location 1 that would transfer to location 3 once it opened.

This is where understanding your business is critical! Imagine how surprising and shocking it would have been if she hadn’t considered this transfer of revenue from location 1 to 3 in doing her projection! Her total sales would have been significantly below expectations, and her plans and perhaps the future of location 1 might have been in jeopardy!

Next we estimated her gross margin, which is typically very consistent month-over-month. Finally, we laid out her overhead expenses by location and added them together to get her total monthly overhead.

We put all of the projected sales and expenses into ProjectionSmart, and then together we answered ProjectionSmart’s 9 Questions. This is where she entered her future plans for her business, including expected capital expenditures, loan payments, and tax payments by month for the coming 12 months.


The Answer is …

We hit “Next,” and she was presented with seven graphs that rolled it all up for her. ProjectionSmart showed her very clearly her projected cash flow and budgeted sales and net income for her new business with three locations.

I could see a sense of relief come over her. The uncertainty and its accompanying anxiety were gone. She could now see what the data said about where her new three-location business would be in the next 12 months. She could once again see her future.

She closed her laptop and left much more confident than when she arrived. She now had visibility into the future, and her peace of mind was restored.

She had made a very big decision that day, but she had not made it by gut instinct! She could never do that! Instead she let the data lead her to the right decision, and she left with a pretty good idea of what her business would look like with two more locations.


Do a Prediction
                   
I was her trusted financial advisor that day. How do you help your clients see their financial future? I believe there is not a better service a trusted financial advisor can provide to their clients.
                           
If you’ve ever created a spreadsheet financial model to do a prediction, you know what is involved in capturing history, creating a budget, and determining what other plans the company has and then creating a multi-tab spreadsheet that creates an income statement, balance sheet and cash flow statement. You worry about whether there is a formula error somewhere or a bad assumption that drives an erroneous result.
                                                         
The good news is that at ProjectionSmart we’ve eliminated the spreadsheet for you and put it in a quick and simple-to-use online tool! Instead of concentrating on cells and formulas, you just concentrate on your inputs and the results. So ditch your spreadsheet!
                                                           
When you use ProjectionSmart every month with your clients, maybe you are able to bill for an additional hour create their prediction, or maybe you bill them an additional fee for their prediction. It’s up to you.
                                                
With a monthly prediction, your clients will be more successful and more comfortable with their numbers. They will be anticipate and avoid problems, leverage resources more effectively, make more quantitative business decisions, and feel much better about their business’s future – all because of you!
                                                            
On your side, you will increase your monthly revenue, have happier and longer-term clients, help your clients be more successful, and differentiate your practice.
                                         
After all, who doesn’t want happier and more successful clients and more revenue? Let us help.

Here’s a video to show you how easy ProjectionSmart is to use.                                                                               
                                                                                                                       
Try out the new ProjectionSmart here.

 

Return