A five-year financial projection can make almost any business look attractive if the assumptions going into it are optimistic enough.
That is why, when we prepare a Direct EB-5 business plan, getting the spreadsheet to balance isn’t the end of the work.
We want to know whether the numbers make sense and, just as importantly, what we can use to support them.
Imagine an investor planning to open a bakery and café. The projections show $1.5 million in revenue by Year 3, a growing team and a profitable operation.
At first glance, everything works.
Then we start breaking down that $1.5 million.
How many customers would the bakery need each day? How much would the average customer need to spend? How many days a year will the business operate? Is the location capable of handling that volume? And does the staffing plan make sense for a bakery serving that many customers?
Now we’re no longer looking at a number in a spreadsheet. We’re looking at what would actually need to happen inside that bakery for the projection to become reality.
For a Direct EB-5 investor, that analysis has another important dimension. The investment must create at least 10 qualifying full-time jobs. Buying an existing business that already employs 10 people does not, by itself, satisfy that requirement. A different rule can apply to a qualifying troubled business, where preserving existing jobs may count toward the requirement.
So when we develop the projections, we aren’t simply trying to show a profitable business. We also need to understand how the business is expected to grow in a way that supports the creation of the required jobs.
Credibility often comes down to what is behind the assumptions.
At Visa Business Plans, we don’t base those assumptions only on what the investor hopes the business will accomplish. We combine what we learn from the investor with real industry and market data.
Depending on the business, we may research industry revenue trends, typical margins, salaries, operating costs, pricing, competitors and other benchmarks that can help us evaluate whether the projections are reasonable.
Let’s go back to the bakery.
Suppose the investor believes the business can reach $1.5 million in revenue by Year 3. We can work through that figure by looking at expected customers and average spending, but we can also compare those assumptions with relevant industry and local market information.
If the projected margins are significantly different from what we typically see in the industry data, we want to understand why.
Perhaps this bakery has a product mix that supports stronger margins. Maybe the business model includes wholesale accounts in addition to retail customers, or there is another source of revenue that changes the economics of the operation.
There may be a perfectly reasonable explanation. We just want the plan to explain it.
That research becomes particularly valuable if an assumption is later questioned by immigration authorities.
If someone challenges a revenue figure, salary, margin or another important assumption, we don’t want the explanation to simply be that this is what the investor believes will happen. We want to be able to explain how we arrived at the number and, whenever possible, point to objective information that supports it.
This approach is consistent with the level of detail USCIS expects from a comprehensive EB-5 business plan. When projected job creation is being established through the plan, USCIS looks for a credible and comprehensive business plan showing that the nature and projected size of the enterprise are expected to create the required positions.
The analysis also has to go beyond revenue.
Suppose the bakery expects sales to increase substantially in Year 2. We would want to understand what’s expected to produce that growth. Perhaps the company will increase its marketing, add wholesale accounts, introduce another product line or expand its capacity.
From there, we can look at what else would need to change.
If the bakery expects to serve significantly more customers, can the existing location handle the volume? Will it need additional equipment? At what point will more employees become necessary? And do the additional expenses associated with that growth still make sense when we put everything together?
Sometimes we find that the investor’s original projections need to be adjusted. In other cases, looking more closely at the business and the available industry data may give us good reasons to support ambitious growth.
The purpose of going through this exercise isn’t necessarily to bring the projections down. Sometimes, after looking more closely at the business, we may find good reasons to support significant growth. What matters is understanding where the projections came from and having a reasonable basis for the assumptions behind them.
That’s also why we don’t develop the financial projections in isolation.
If we’re projecting significant revenue growth, we need to consider whether the business will need more employees to support it and what those employees will cost. We may also need to look at whether the location has enough capacity, whether additional equipment will be necessary and whether the investment provides the business with the resources contemplated in the plan.
As we work through those questions, one adjustment can naturally lead to another. That’s how we end up with projections that reflect the business we’re actually describing rather than a spreadsheet that happens to produce the numbers we want.
For Direct EB-5, getting this right is especially important. USCIS ultimately looks for the required job creation resulting from the investment, and at the removal-of-conditions stage reviews whether the investor created, or can be expected to create within a reasonable period, at least 10 qualifying full-time jobs.
At Visa Business Plans, financial projections are therefore part of the analysis, not simply a spreadsheet added after the business plan has been written.
We want to understand the numbers, question the assumptions and use real data to support them.
That way, if someone eventually asks, “Where did this number come from?” there is a real answer behind it.
Contact us today to get startedThe information provided in this blog is intended solely for informational purposes. While we strive to offer accurate and up-to-date content, it should not be considered legal advice. Immigration laws and regulations are subject to change, and individual circumstances can vary widely. For personalized guidance and legal advice regarding your specific immigration situation, we strongly recommend consulting with a qualified immigration attorney who can provide you with tailored assistance and ensure compliance with current laws and regulations.
Visa Business Plans is led by Marco Scanu, a certified coach from the University of Miami with a globally-based practice coaching Fortune 1000 company executives, entrepreneurs, as well as professionals in four different continents. Mr. Scanu advises clients on turnaround strategies and crisis management.
Mr. Scanu received a bachelor’s degree in Business Administration (Cum Laude) from the University of Florida and an MBA in Management from Bocconi University in Milan, Italy. Mr. Scanu was also a Visiting Scholar at Michigan State University under the prestigious H. Humphrey Fellowship (Fulbright program) with a focus on Entrepreneurship, Venture Capital, and high-growth enterprises.
At present, Mr. Scanu is the managing partner and CEO at Visa Business Plans, a Miami-based boutique consulting firm providing attorneys and investors with business planning services in the areas of U.S. and Canadian immigration, SBA loans, and others.
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