While a Budget is essentially a financial blueprint for your business’s Goals for the next year, a pro forma projects things a bit further into the future. Think 3, or even 5 years into the future. Why would we want to do this?
First and foremost, it can help us guide long term strategic planning that extends beyond the next year. Do we expand? Partner? Merge/acquire?
Pro formas help take the guesswork out of these strategic, longer-range discussions.
Secondly, our investors (and banks) will want to see this. A pro forma demonstrates our business’s potential for growth and profitability. It shows that we have a plan for the future, not just for the next few months.
Pro Tip: When building a pro forma, keep it simple. There are plenty of fancy tools and spreadsheets loaded with macros, but in our experience, a clean, organized spreadsheet works just as well. Keep all your assumptions in one place and reference them with formulas.
Need help? Reach out to us–we’re here for you.
Photo by Kyler Boone on Unsplash
