Before it starts the definition of the term financial projection, it is important that we proceed to know the etymological origin of the two words that shape it.
The notion of projection is used in different ways. In this case, we are intent in its meaning as that planning or forecast that is carried out in certain contexts. Financial, on the other hand, is what is linked to business, banks, and the stock market.
These definitions allow us to understand the notion of financial projection. The analysis that is developed to anticipate what the eventual gains or losses of a commercial project will be from a financial projection, an entrepreneur or an entrepreneur has valuable information to make decisions about their business.
In addition to all that, experts in these matters advise those who are going to make a financial projection to launch an initiative that asks potential investors for 25% of what are the expected expenses, to face any unforeseen, and always keep your feet on the ground.
The financial projection will allow determining the level of expenses that the business can support, what amount it is convenient to invest for its development and when the business in question would be profitable if sales expectations are met, for example. The results of the projection could even indicate that it is not convenient to carry out the business.
Typically, financial projections are made based on different scenarios. In this way, the entrepreneur will be able to define strategies for one or another context.
Financial projections are very important when requesting financing for a project. Suppose that an entrepreneur meets with potential investors to request funds. This entrepreneur makes a financial projection to show that, if he receives the money necessary to start up his project, he will obtain profits that will allow investors to recover their money in a few months and even obtain profits in less than a year.