A full set of financial projections includes the sections below but is always backed by the research you did in the feasibility study. We strongly suggest not putting the core data on 10 different tabs and rolling it all up to a master (in Excel or whatever spreadsheet software you use).
Do as much as possible on one tab so you can see it all by scrolling down. It is much easier to work with and investors can easily see how the assumptions affect the numbers. For example, start with a product or service count at the top of you master and let that drive your revenue.
Financial Projections include:
- Monthly Profit and Loss projections – These should continue until cash flow breakeven. The monthly P&L should have cash flow calculations at the bottom so you know when cash flow breakeven is. The P&L should include these major categories:
- Income
- COGS
- Marketing expense
- Operations expense
- Staffing expense
- EBITDA
- Cash flow including Invested funds, loan principle, etc.
- Annual Profit and Loss projections for 10 years – Your monthly can roll up to the first few years meaning month 1–12 can be totaled to fill in Year 1, month 13 – 24 can be totaled to fill in year 2, etc. Keep the cash flow on the annual so you can input investment funds and it’s easier to see it all.
- Balance sheet – If done right the balance sheet can just change automatically with any changes to the P&L.
- Valuation calculations – This can look different depending on what your trying to value but for the most part it includes:
- Your net income
- A multiple you justify with PE ratios or acquisition amounts you found in your feasibility research
- Pre-money valuation (net income x multiple)
- Your requested investment amount (the total shortfall in your P&L)
- Post-money valuation (Pre + investment)
- Equity your offering (investment/post money valuation)
- Use of funds – Sometimes it’s helpful to use spreadsheets to figure automatically. For instance if you want to show payroll for web development and marketing separately, you can create a formula to put the right salaries in the right place AND calculate their share of benefits/payroll tax.