In previous Deal Notes®, we’ve covered the importance of defendable projections that have great substantiation and evidence so that you can be successful in buyer due diligence. As projections of your business are an important part of the sale process, our clients often want to know how they can best forecast revenue (if they don’t already have data-backed 3-5 year projections in place). In this Deal Note®, we will cover projecting your revenue, and we will cover other components of your projections in the future.
Your projections should be based on data so they can be defended during buyer due diligence. We’ve seen companies in the middle market of A&D have a wide range of data available to them for their internal tracking or projection purposes. Therefore, the first thing to understand before starting to build projections is: what information is readily available that you/management can accurately produce.
Secondly, the most common misconception about projections is that there’s one perfect way to build them. Over the past 25 years, each company we worked with was different and had a unique revenue mix. This means every company should be projected specifically to it and the information it tracks (or could track). A sample of successful ways we’ve seen our clients project revenue has been by: Customer, Program, Platform, Product, Service, Sales channel, Aircraft type, Contract, Geography, etc.
You should build your projections whichever way is best for your business, specifically given your revenue mix and information available.
Have a great day everyone,
Ryan Kirby
Partner
