The title addresses a critical question: are you presenting to buyers the fact sets that support your financial forecast, or are your providing projections based on assumptions that don’t have concrete support? As discussed in Deal Note® 100, published in January of this year, financial projections are the most important single item that you will provide to buyers during the sale process. Today’s Deal Note® addresses how to optimally develop your projections.
Over 23 years, we have seen a multitude of approaches that clients have used to develop their projections. One approach is above all others, for its proven success. That approach is to development of projections based on detailed fact sets with documentary evidence. Nothing else leads to a higher price and nothing else results in a higher likelihood of closing. Conversely, over the past 23 years we have seen time and again that projections based on unsubstantiated assumptions will fail in buyer due diligence and lead to either a failed sale or a sale at a depressed price.
Most buyers do not care about the form of supporting evidence used to develop projections. However, all buyers care deeply about the quality of the supporting evidence. Whether you are a manufacturer and you ship components to your customers based on contractual build rates, or you’re a service provider with a portfolio of long-term customers who purchase your goods or services year after year, every middle-market aerospace and defense company is capable of providing high-quality supporting evidence for their projections.
When it’s time for you to construct projections for a sale process, the proven best practice is to ensure they are based on high-quality fact sets and documentary evidence.
Have a great day everyone,
Bill Alderman
Founding Partner
