6) Refine & Reforecast
After completing your forecast, take time to review and refine it. Use Profitual’s tools to step back from the details and assess the bigger picture. Does it align with your business? Is it realistic? Does it support your business plan’s narrative? Refining and reforecasting is an ongoing process, ensuring your financial forecast remains one of your most valuable decision-making tools.
Profitual Platform Guide:
Refine & Reforecast Guide
Refine & Reforecasting Steps:
Step 1: Refine What You Have Built
Now that you have completed your first draft of your financial forecast, let's see how it compares to industry standards. Profitual offers a number of key benchmarks to allow you to assess how your financial plan aligns with the market, and varies from those averages.
The goal is not to hit the middle of every industry average, the goal is to understand why you may, or may not, be different than the averages. Are you spending more on R&D than the typical company? If yes, that is perfectly fine, but it is important that you know and understand why this is the case.
These deviations from the norm help to identify potential investor questions if you are in the due diligence process.
See Benchmarking in the Profitual Platform Guide above.
Step 2: Scenario Planning
After further refining your forecast, consider preparing for alternative Scenarios. What if you miss your revenue targets? What expenses can you control/delay to manage your cash levels? What if you exceed revenue targets? How will you allocate the additional resources to optimize your business and scale even faster?
Consider a $500K vs. $750K fundraise. What would each mean for your runway, how would you spend the additional funds if you were to receive them? How much quicker could you hit key financial and other milestones with the additional resources? Having these answers prepares you for investor questions on why they should cut you a larger cheque now, and helps you gain an understanding of how much capital you truly need to so you can avoid unnecessary dilution.
Step 3: Review & Reforecast
Profitual offers multiple tools to help you review your actual results compared to forecast. This tells the story of, here is what I thought would happen, here is what actually happened, do I understand the differences? Am I spending more than anticipated on software, and need to reduce that spend? Did I make an unexpected investment in my team that I should adjust my forecast for and review my runway? Was there a new customer sale that we missed in our accounting software and we need to add so our financial results are telling the full story?