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Calculate Financial Projections for
Investment Presentations
Riley Rodgers
Principal- Valia
Investments
Jim Antes
Partner- Venture Advisors

Today’s presentation will focus on the how and why of
building and pitching financial projections
●How: Creating financial projections using a spreadsheet
and some common accounting knowledge shows you
where to focus your resources
●Why: Creating financial projections demonstrates to
investors that you have thoroughly considered every
aspect of your business model.
Financial Projections: WIFM?

1. Force discipline and objectivity through creating a
methodical approach
1. Demonstrate thorough understanding of your
company’s business model
1. Provide answers to “what if?”
Financial Projections: 3 Objectives

• I’ve heard that I don’t really have to build a business plan with
financial projections because no one actually reads it…
• Business plans with financial projections are necessary…
FOR YOU
- Bottoms-up vs. Top-down
- HINT: You're trying to talk yourself out of this!
• Financial projections are a key portion of the due diligence
most investors perform
Investors are more interested in the assumptions made when
building financial projections, not the exact bottom line
Building Projections: Yeah, but…

Projections are just imaginary anyway, so what does it matter what I put
in?
• A common mistake is to have illogical numbers in the projections
– All numbers should be tied to your growth assumptions
• Ex 1: If sales cycle is 6 weeks, should there be sales in month 1?
• Ex 2: If business is seasonal, should growth be smooth in every
month?
– All numbers should tie with a rough cash flow statement
• Either a separate tab or at the bottom of the P&L
Projections that have not been planned properly make investors
question your understanding of your business model
Building Projections: Pulp Fiction?

Building Projections: What if…
Scenario planning is just worst-case (out of business), expected (what I
really think will happen), and best-case (Google buys us for a bazillion
dollars), right?
• Focus on YOUR key success metrics to drive scenario planning
– Sales traction
– Gross margins
– Incremental headcount
Fundraise amount range should encompass most likely
scenarios to avoid expensive “Bridge” or “A-1” rounds

Worst-case scenarios should answer “What happens if there is no
outside capital?”
– if the answer isn't 'grow slower', is this a pipe dream?
Best-case scenarios should answer “What does this business look like if
everything goes right?”
– if the answer isn’t a huge financial win for your investor, is this a pipe
dream?
Most-likely scenarios should answer “What does this business look like
following comparable companies’ growth paths?”
– if the answer isn’t able to be funded with the current “ask”, is this a
pipe dream?
Goldilocks got it right: examine all options!
More on Scenario Planning…

Common Terms
• Revenue/Sales
• COGS
• Gross Profit/Margin
• Operating expenses
• EBITDA
• Cash flow breakeven
• Working capital
• Burn rate
Important KPI’s
• Total cost of acquisition
• MRR/TCV
• Churn
• Month over month
increase in
revenue/expenses and
other key metrics (%)
Building Projections: Common Terms

Building Projections: How it works
• Fundamental components of model:
• Profit & Loss
• Balance Sheet
• Cash Flow
• These three schedules flow together and are essential to
understanding your business
• Above schedules should be presented by month
• Have an assumptions page: this allows flexibility – change
assumptions for different growth scenarios
• Assumptions are the backbone of your projections, so you should
know them COLD
Excel is your friend, but be careful with cell references – it’s easy
to make a mistake!

Projections: Getting started…
What is your business model like?
• Look at other
businesses/competitors/comparables
• Link for SEC website
• Analyst reports
• Market surveys
• Don’t recreate the wheel

Projections: Getting started…
Start with Revenue
• Ex: We have tracked X unique visitors to our website and with an
industry averages 2% conversion rate, sales will be Y.
• Ex: Survey revealed customers are willing to pay $X for a product with Y
features.
• Ex: Q4 sales were $X. With a customer acquisition cost of $Y, we expect
a 20% growth rate as a result of marketing efforts
• All revenue projections must be backed up with a sales plan
Econ 101: revenue = price * volume. Knowing which element is
driving your company’s revenue is a key metric.

Projections: Expenses
Group expenses according to function:
▪ COGS/COS
▪ Selling
▪ Marketing
▪ Engineering & Development
▪ General & Administrative
Determine headcount first then build expenses around
that
▪ Who are your key hires?
▪ What function and timing and cost?

Projections: Expenses
● Payroll expenses
– Salaries and payroll taxes
– Other compensation (bonuses, commission)
– Fringe benefits (medical/dental insurance, etc)
– Founders can work for free – but no one else!
• Rent
• Legal and Accounting
• Insurance
• Variable expenses (T&E’s)

Projections: Final Checks
● Take a step back and determine if your
assumptions are reasonable and realistic
● Check financial integrity of your model
● Consider timing of major financial milestones: cash
flow breakeven, profitability, etc.

Pitching projections: What’s the “ask”?
● Put yourself in the investor’s seat – what are they
getting for their money?
● Does your ask for cash get you to a value creation
point?
● Cash gives you options
● Plan on 12-18 months of cash burn
● The secret to life is “t”
- “t” is the variable for “time” in mathematical
equations… and time in projections is everything

Pitching projections: Rookie Moves
– CTRL+C+P entire excel model into a slide
– Using anything less than 18-point font
– Littering clipart from 1995… or 2013
– Stating projections to the $.01
– Failing to summarize projections
– Using ANY of the following phrases:
• “conservatively estimated…”
• “at only X% of the market…”
• “with no competition…”
– Forgetting to explain what the amount you raise achieves
– Relying on a short-term exit at a high multiple

Bad Example
Revenue
Custom runners $ 480,000 624,000 811,200 1,054,560 1,370,928
Standard runners 60,000 78,000 101,400 131,820 171,366
Total Revenue $ 540,000 $ 702,000 $ 912,600 $ 1,186,380 $ 1,542,294
COGS
Custom runners $ 120,000 $ 156,000 $ 202,800 $ 263,640 $ 342,732
Standard runners 39,000 50,700 65,910 85,683 111,388
Total COGS $ 159,000 $ 206,700 $ 268,710 $ 349,323 $ 454,120
GROSS PROFIT $ 381,000 $ 495,300 $ 643,890 $ 837,057 $ 1,088,174
Expenses
Selling Expenses
Commission $ 36,000 $ 46,800 $ 60,840 $ 79,092 $ 102,820
Marketing/Advertising 50,000 50,000 100,000 150,000 200,000
Research and Development 40,000 50,000 62,500 78,125 97,656
General and Administrative Expenses
Office Rent 30,000 30,000 30,000 30,000 30,000
Insurance 9,600 9,600 9,600 9,600 9,600
Office Utilities 4,800 4,800 4,800 4,800 4,800
Supplies 18,000 18,000 18,000 18,000 18,000
Salaries 120,000 120,000 120,000 120,000 120,000
Benefits 30,000 30,000 30,000 30,000 30,000
Miscellaneous 21,600 21,600 21,600 21,600 21,600
Total Expenses $ 360,000 $ 380,800 $ 457,340 $ 541,217 $ 634,476
EBITDA $ 21,000 $ 114,500 $ 186,550 $ 295,840 $ 453,698

Good Example- For Presentation Purposes

Good Example - Graphs