Financial statements · Fundraising

Financial projections.

Anonymous

February 17th, 2014

Hi all.

My company is currently trying to raise some seed/angel funding. I've been fortunate to get meetings with investor friends of mine and other investors through intros made by friends and acquaintances. We already have the interest of a couple angels and are in talks with some VCs. We've created a nice pitch deck, which we're using, but it's lacking one very important thing, which is financial projections. We already have our business/revenue model figured out. We're currently trying to come up with some good estimates of what our revenue and profits will potentially look like, but it's kind of difficult given we don't really know yet how our launch will work out and how effective our user acquisition strategy will be. I'm wondering what methods you guys are using to come up with some solid numbers.

Thanks.

- Jonathan
As a founder, you’re always in fundraising mode (whether active or passive). In this course, we’ll teach you how to successfully raise follow-on capital, establish a valuation for your company, build an investor pipeline for your next round, and more...

Anonymous

February 17th, 2014

If you need a good template the attached is a start. As for estimating sales? Try and find a proxy in the market, such as adoption rates for a similar product. Best of Luck!

Helen Adeosun

February 17th, 2014

Doing this right now for two pitch competitions we should talk! Helen A Sent from my HTC One please excuse any typos.

Frederic Moreau Agile Business Transformer

February 17th, 2014

When you say that you already have a business/revenue model figured out, do you mean that you already have a few clients and you have an idea what's the cost to acquire a new client is?
If not, you should focus on business angels, have a solid idea that can be demonstrated through existing market data (Google search traffic, competitors' revenues, etc.), the rest is "powerpoint dreams" and it will worth nothing in front of a VC. It is better not to build financial projections in some cases, pitch your idea to an angel and see how you could figure out what the next step could be together.

Sean Hurley Strategic Marketing Leader with strong financial results for growing organizations

February 17th, 2014

Hi--

When you have a moment, let me know when you can talk.  You need to have solid assumptions in place. How comprehensive is your business model?

Sean

Rob G

February 17th, 2014

Johnathan, are you selling to businesses or consumers? How will you generate revenue? (advertising, subscriptions?, selling a widget ???).  what do you think is your typical revenue for a typical sale?  These questions get at your options for customer acquisition - if you are selling to enterprise customers and your average sale is $10k+ that provides different options for customer acquisition than selling B2C for a $5/month subscription which is different that monetizing eyeballs (where you need to build some mass before you can monetize). I prefer a "bottom up" financial model as noted by Mark. put together a detailed spreadsheet with which you can do some 'what if' modeling.  As Archer notes, projecting your costs is easier and more tangible and stay 'lean', but not foolish.  Any additional advice would depend on answers to the above questions. Investors are more interested in how you think and the assumptions you make in your revenue/cost projections and whether or not you in fact did your homework than they are in the numbers themselves. Always helps to know your numbers and the assumptions that underline them cold before you pitch to investors. 

Vijay MD Founder Chefalytics, Co-owner Bite Catering Couture, Independent consultant (ex-McKinsey)

February 17th, 2014

If you're really unsure, scott painter (truecar) highlighted that he used a flash tool with an excel backend. This allowed people to use a slider and set their own assumptions. You could probably hack something like this together today in tableau - lets people buy into their own thought rather than you trying to justify your specific number

Niraj CFA Multi-Asset Discretionary Institutional and Private Client Investment Manager

February 17th, 2014

My best advice would be to ensure conservatism, realism and consistency - under promise and over deliver. Start with first principles and build up your financial projections model from first principles - it will force you to think of each important metric in your business model. Worth looking at competitors in your space or the closest comparable business models - this should give you a very good starting point in terms of developing your own projections. N

helloandyhihi

February 18th, 2014

@Vijay Goel mentioned an online tool to help create financial models. A Quora post suggests several sites, including Projection Hub

Peter Morgan CEO at Zepto Ventures

February 17th, 2014

Hi Jonathan, Projection means just that - projection. Come up with a best case and worst case scenario and then a few cases in between these as well. No one can really predict anything ahead of time in business so you need to realize yourself what it means to give projections. If you have some sales already then this obviously helps guide your forecasts.

Mark Neild Empowering quietly creative people to prosper through innovative yet authentic and engaging business models

February 17th, 2014

Jonathan You have hit on exactly why some say financial projections are not worth anything as they are often founded on guesswork. There are 2 main ways todo it. 1. Top down. Take the size of the market you are initially addressing be it a local area, city, country or whatever. Exclude people who could not buy your product eg kids too young to use it, people too sick etc. or if you need certain technology then this can limit your potential market. next work out what proportion of your market are really likely to want your product. For your product it could be keen amateur photographers and people who like curating collections. Try to find benchmark data to support your estimates. You then just multiply them through Target market = 1M Not buying (25%) =- 250k Potential market. =750k Target cmrs (10%) = 75k This is your addressable market. Next you have to work out your possible share based on other competing products and relative attractiveness to customers and how much of the addressable market you can reach through your sales resources. Lots of guesses here. 2. Bottom up. Who is your ideal (archetypal) customer? Where do they hang out (social media group, read certain magazines, shop at certain stores etc. how many of them are there hanging out in these places and how many of these can you convert into customers. Best way to find out is to try selling to them, tracking your conversion rate and cost to sign them up in a series of mini campaigns. The more you experiment, the better your data on acquisition cost and conversion rate will become and the higher your conversion rate should become too. In simple terms your incremental customer volume = marketing budget/acquisition cost. Obviously revenue = price x incremental customer volume. Good luck with it Mark