Often when you decide to start a business project, many entrepreneurs make a very common mistake, that of always thinking first of the product itself rather than the company as a whole. What is meant? Starting a company means creating an organization that generates value through the sale of products or services that customers buy on the market, preferring them to others offered by the competition. And in this the company, or rather the entrepreneur, has two main objectives: the first is to ensure the product sold is appreciated by the market while the second is to understand how to grow the company (to anyone likes to stay flat).
As regards the first of the two objectives, we can certainly say that a good methodology to apply is that of lean management, which we will not explain in detail in this article but which we recommend to deepen, while on the second point we put the greatest focus.
How to understand how to grow the company? First of all, it is necessary to verify if the business project is sustainable, therefore if the company at full capacity can generate incoming cash flows greater than those outgoing and allow the entrepreneur to make profits that can be reinvested in the growth of the business, thus fueling a virtuous circle. It is therefore necessary to predict the possible entry of the company with the exits in a time horizon of at least three years, to be updated from time to time based on the progress of the project. Predicting the income statement, however, is not enough, it is also necessary to predict the company’s equity trend by projecting the possible expenses that will be made in corporate capex (or assets): for example, if I start producing a digital platform that I intend to resell to other companies, I will not it is enough to know how much I plan to sell and pay to generate those sales, but I must also understand how much capital I have to invest in assets such as in this case licenses, certifications, patents and in the case of companies manufacturing tangible goods such as machinery.
So, if you are about to start a business project, the wisest strategy is to build a financial plan that includes the income statement and balance sheet and its trend over the years.