One of the most important aspects to keep in mind when writing the business plan is the analysis of the budget forecast . In fact, as we have written in many quarters, the business plan is composed of two main parts: the first one is descriptive, is one in which “tell” the data for the business you want to do, when it comes to the potential customers, potential competitors, strategies you want to use to penetrate and serve the segment chosen, the production cycle.

The second part, technique is one in which you summarize the data collected in the descriptive part and transform in numbers. In this second part, the predictions are synthesized within a budget in order to evaluate in advance the economic and financial feasibility of the idea. In fact, it is said that an idea is also economically viable financially feasible . This depends on a number of variables that come out just doing the analysis of the budget of which is embodied the technical part of the business plan.What does it mean to analyze the budget? Means going to see if some data “standing” and can guarantee the sustainability of the medium to long term.

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The analysis of the budget that is in the business plan (and it is a prospective analysis) is virtually identical to the analysis that is done on a budget past data from Lipizzaner and evaluate are the same, the information that you may have are the same, the feedback on the financial structure of the company are the same, and assessments of an economic nature are the same.

The only difference is the fact that an analysis refers to what happened in the recent past, and the other refers to what might happen in the near future if all the conditions hypothesized occur. This is why we insist in not always “give the numbers” when making forecasts in the business plan : the numbers shot through the roof must be analyzed and if a forecast is based on an excessive optimism, their analysis suffers significantly. This is because the data to be analyzed are those contained in the budget.

The Business Plan and budget analysis: let the numbers!

In the past we have seen a “phenomenon” quite interesting: in some business plan have been moved reliefs for ” excessive profitability “of the idea. What does “excessive profitability?”. It means that those who have studied the feasibility of the proposed business at the appraisal for approval or for the granting of loans, they came across some data a bit “strange” ROI of 60% or ROE of 50% plus other indicators budget a bit exaggerated compared to some media!. Now: it is said that these values ​​are absolute impossible, in fact.

But we must prove not only with a series of fine words, but with a few facts. In Italy there is a publication that lists the data of average total budget of the first Italian companies in 1500, divided by sector. These are general data, taking into account various aspects of the various businesses: property aspects, economic and financial, and another set of data, that is, those that come out from the analysis of the budget .

If the data of mid say that in the “X” the average return in ROI is 9.1% and the ROE is 10.7%, it is hard to believe that I come and say: “Dear Sirs, up now you have not understood anything and you did hurt your analysis! I invented the most innovative and most economic rates of return to get much, much higher. “Time: it may be that in the field there are actually taken into account rates of return are higher than average (just because it is an average that considers high values ​​and low values), but to say that I have invented a system that improves the 500 % an average, it is not credible. And then the Business Plan is evaluated not credible.