In the first of our Angel insights content series – Dave Allison from Angel HQ shares his knowledge gained from reviewing 100’s of deals on how to write good financial forecast for Angel investment
Financial forecasts are a crucial part of the business plan and can help to attract investment to your startup or product launch, however the balance between reality and ambition is a challenge when building these documents.
Bare in mind that no two angels are alike and what may seem an important point to one may be meaningless to another. Some angels want you to get them excited and others will ask you to tone things down. The best way to present your financial projections to investors is to walk them through different scenarios in order to show potential. But consider pitching what you are most comfortable with.
For every forecast, a list of all your key assumptions is absolutely a requirement as well as the ability to support them with accurate quality information and to explain how they were measured.
Key assumptions are critical to all aspects of the financial forecast and professional support to develop a model can be useful but two words of warning:
- Experience is more important than the big name. Ask your expert what they have modelled and who they have done it for.
- You can’t hand off responsibility for the forecast – you have to own it and own all the assumptions
Tracking and testing these assumptions on an ongoing basis is the best way to react to them quickly if they don’t show a real chance of success.
It is important to have an intimate knowledge of how your forecast works and what the key levers are. This is a model of your business so what happens if sales or prices slide by a few months (or a few million dollars) is not just important – you HAVE to know.
Your investors will want to know who your customers will be and at what price they will be eager to buy your product.
Bill Payne – The Definitive Guide to Raising Money from Angels
Every angel expects and accepts that the numbers are not correct but you will lose credibility if your assumptions are not defensible. Look for comparisons to other companies. Build your evidence and know your stance. Feel free to highlight the biggest, riskiest assumption but back yourself with what you are doing to manage that risk.
Don’t put all the detail in your pitch. Too many columns just invite people to do maths instead of listening to you. Pull out key figures, key events and timescales to show the impact it will have on your business with reasonable explanations. Have the detail of your model for follow up – PowerPoint and Excel are separate programs for a reason!
To meet international angels, leaders in New Zealand’s angel investment community and make your New Zealand connection secure your seat at one the southern hemisphere’s largest international exclusive investor events Asian Business Angels Forum, being held in Queenstown, New Zealand, October 14-15 2015.
Register now. Limited places available.