A company is able to forecast its future success and perspectives for development and growth through its business plan, the most important element of which is the financial projections. The financial projection statements of Tessilo Ltd. indicate a five-year financial plan for the company with the indication of expenses and revenues. The analysis of the presented numbers and the quality and quantity of the information included in the financial sheets serve as a basis for assuming that the company will be successful. There are several recommendations that might improve the financial forecasting and contribute to the company’s envisioning of its business goals for better performance alignment.
A general overview of the document allows for noticing that all of the primary data are included in the statement of the financial projections. It ensures that the company has conducted a multifaceted analysis of the market and predicted all economic issues that predetermine the functioning of the enterprise. In terms of market analysis, the industry in which Tessilo Ltd. operates is not marked by a high level of competition with the potential for expanding in the future. The tendency for market size growth, which is depicted in the increase from £1 600 000 to £360 000 000 in year 5, is used by the company as a basis for continuous growth and demand for the company’s performance. The changes in the implied market share that are projected to decrease by the fifth year indicate that the company incorporates the market forces in its financial forecasts.
Therefore, it is necessary to emphasize that the projections are realistic. Another validation of the projections’ realistic nature is the fact that the company does not plan to make a profit in the first two years. As the projection sheets demonstrate, no sales are planned within the first ten months of the first year, and only research and development expenses are projected for the starting period. Another strong side of the analyzed projection statement that indicates that the company will be successful is the forecasting that illustrates goals for continuous improvement and growth. Indeed, the data on the Profit and Loss sheet demonstrates the company’s viability and perspectives for gradual growth. With the starting point of net income in the first year being estimated at – £2 676 000, the company forecasts its net income after taxes to reach £53 913 600. Since the financial statements properly address income taxes, the calculations are realistic and include the basic expenses that the company will be accountable for in the future. Within the same framework, the range of expenses is accurately divided into the categories reflecting the business processes.
However, there are several issues that need addressing to improve the financial projections. Firstly, to ensure that they vividly demonstrate the financial side of the business plan, it might be relevant to include the information indicating costs as a percentage of revenues. That way, it will be possible to easier estimate the level of gains and losses. Secondly, no business-specific financial goals are clearly stated, although they are implied in the Top-Down Market Projections sheet. It would allow for more structure and path guidance for the company if clear financial goals were explicitly articulated in the financial projections. Thirdly, the document does not address investment planning and business insurance expenses and forecasts, which should be presented as proof of the company’s viability and resilience. Thus, with a more structured presentation of goals, improved percentage description of costs and revenues, and enhanced risk management forecasts, the company will perform to its ambitions.