A strong tendency on the part of many business owners and managers is to paint an unrealistic picture of how the business will perform over the foreseeable future.
Human nature is such that delivering bad news is difficult.
When preparing financial projections and forecasts, our rule of thumb is to be conservative with sales and revenue projections and liberal with expense projections. We believe that is is always better to outperform projections than to come up short in meeting expectations of ownership, bankers or investors. Remember that the projections you prepare will establish expectations of you by these people. This should not imply that your projections should be unusually conservative. It is important to be as realistic as possible in preparing projections and forecasts.