Part 2 of a 5-Part Series: Testing the Credibility of a Business Plan

When it comes to investment-based immigration, building a credible business plan should be the foremost priority. Of course, each immigration program has its own requirements, and those requirements need to be met, however, we commonly see prospective immigrants presenting business concepts that meet program requirements without much thought as to whether or not they are doing so in a way that is logical and believable. When adjudicators review business plans, they look at everything in context to make sure that all the pieces fit together in a manner that makes business sense.

This series presents some of the most common errors we see and how to avoid them.

Part 2: Financial Projections

Whether applying for immigration or for financing or looking for investors, there is a common misconception among small business operators that the only way they will succeed in their goal is to impress with big numbers and grandiose projections.

The reality, however, is that everyone from immigration adjudicators to venture capitalists to bankers are automatically suspicious of the so-called “hockey stick” growth curve, which shows a business growing from almost nothing to millions of dollars in sales, without much justification. In our experience people do not want to be sold a bill of goods, they want to see realistic and justifiable projections. Furthermore, from an immigration perspective, adjudicators typically want to see that there is sufficient justification for the applicant to invest the money they say they will be investing, which means they want to see the ability to generate sufficient income for the applicant and a reasonable return on the applicant’s investment.

Depending on the circumstance, it can be okay to show a cash flow loss for the first 12 to 18 months of business activity, as long as there is a reasonable trajectory to turning cash flow positive and that the growth from that point generates a sufficient profit in the following years.

The more a business projects in sales the more it should be able to justify how it will generate those sales. Factors to consider can include the following:

• the applicant’s experience in the business or in the market in which they are opening their business
• the team the applicant will be hiring and how they can contribute
• whether or not the business has established connections in the marketplace
• whether or not the business is able to demonstrate that it has ready customers
• if the business can demonstrate how it will uniquely satisfy a demand in the marketplace that is currently not being fully met by competitors
• partnerships that will position the business to have a dedicated sales or promotional channel

Other factors to consider in financial projections include: having expenses that are somewhat relatable to industry standards relative to revenues, how competitive the marketplace is, how fragmented the marketplace is, and what stage of maturity the industry is in.

Clients should be advised to avoid putting together financial projections that are rough guesses, based on what they think will look good. Instead, they should build their financial projections in a logical manner, so that they will be able to explain and justify them if questioned.