Sum Up Your USDA SBIR Commercialization Plan with a Financial Projections Table

The USDA has a deadline coming up in October for submission of Phase I SBIR proposals.  Even though the next deadline for Phase II proposals isn’t until February of 2021, I’m going to use this thematic moment to talk about a common shortcoming of commercialization plans for Phase II proposals – financial projections.   

USDA rules state that all proposed Phase II projects should have a commercial outcome and therefore the application requires an extensive commercialization plan.  

Well, that seems pretty clear.  More specifically, what are they looking for? 

In various commercialization plan subsections – Company Information, Market, Revenue Model, Financing – they ask for things like your vision for the future and how you will grow a sustainable business entity, your projected needs to get you from Phase II to commercialization, and your proposed profitable revenue model.   

Although they don’t specifically ask for a table showing financial projections, this is a great way to consolidate your thoughts about all the above points. Equally important, it’s a great way to make your thoughts clear to the people who review your proposal.   

For these purposes – a pre-revenue company seeking SBIR funding – I’m partial to a pro forma income statement-ish.  I say “ish” because it can be relatively barebones. You can tell enough about your story to the USDA with a table that includes five basic elements: revenue, cost of goods, gross margin, operating expenses and operating income. Of these, revenue is the cornerstone, and your projections should be in alignment with the rationale you laid out in the Revenue Model section of your proposal.   

Thinking about the proforma as a timeline, it can also be helpful to connect it to the narrative of your commercialization plan in other ways.  For example, in your projections, consider calling out where you anticipate boosts from investment capital or strategic partnerships or inflection points caused by achievement of key milestones.  

How far out should your projections go?  Five years is typical. The first two years should include your SBIR funded project, then add three more years. And don’t fret if your projected operating income is a negative number in early years. Experienced reviewers will be expecting it.  

A pro forma income statement is worth a thousand words? That might be a stretch. But a tidy financial projections table can help summarize your commercialization plan at a glance.  

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