Accurate revenue projections play a vital role in securing manageable insurance premiums that align with your business’s financial reality. During the quoting process, one common challenge is insureds providing ambitious revenue goals instead of realistic figures. While aiming high is a positive mindset for growth, it’s essential to understand how inflated projections can lead to complications, including unexpected premium increases that strain your budget.

For example, some insureds have declared goals of $1.5 million in revenue for the coming year despite generating $300,000 in revenue during the current year. While it’s exciting to anticipate significant growth, projections that are overly optimistic can create sticker shock when you receive your insurance quote. To avoid these challenges, here are some practical recommendations for setting realistic revenue projections:

Keep Projections Realistic

Rather than overestimating future revenue, consider basing your projections on your current revenue, with a margin of approximately 10% over or under last year’s actuals. This approach provides a more accurate representation of your exposure and helps maintain premiums that are both affordable and practical.

Build Trust with Carriers

Insurance carriers highly value consistency and transparency in the figures you report. Significant discrepancies or dramatic changes in revenue projections can raise concerns and potentially harm the trust between you and your carrier. By providing realistic projections, you demonstrate reliability, which can lead to a stronger and more favorable relationship with your insurer.

Avoid Sticker Shock

Setting realistic revenue projections minimizes the risk of unexpectedly high premiums. Accurate figures help you plan your budget effectively, reducing the likelihood of financial strain or unpleasant surprises during the quoting process.

Update Mid-Year if Goals Are Achieved

If your business surpasses your revenue projections mid-year, it’s important to proactively update your exposures with your carrier. This ensures that your coverage remains aligned with your actual operations and helps mitigate any surprises during the year-end audit. Updating mid-year also reinforces trust with your carrier by demonstrating a commitment to transparency.

The Bottom Line

Setting accurate and realistic revenue projections benefits both your business and your relationship with your insurance carrier. It helps maintain manageable premiums, avoids unnecessary complications, and strengthens your credibility as an insured. If your business is experiencing substantial growth, taking proactive steps to adjust your exposure ensures your insurance coverage evolves alongside your success.

For businesses navigating the complexities of insurance, having a knowledgeable partner to guide you through these decisions can make all the difference. Reach out to your insurance consultant at Rikor to discuss your projections and find a solution tailored to your needs.