You've done your research, you've put together a great pitch, and you're ready to face the investors. But wait - there's one more thing you need to have in order: a strong financial model.
Your financial model is one of the most important aspects of your pitch, because it shows investors how your business will make money. Get it right, and you'll have a much better chance of impressing potential backers and getting the funding you need. Get it wrong, and you could find yourself out of the running before you even start.
1. Keep it Simple - The first rule of thumb when it comes to financial models is to keep them as simple as possible. This might seem counterintuitive - after all, aren't investors looking for businesses that are complex and have a lot of moving parts?
The answer is no. In reality, investors want to see that you have a clear understanding of your business and its finances. They're not interested in being wowed by an intricate spreadsheet with lots of bells and whistles; they just want to see that you know what you're doing and that you understand the main mechanics.
So ditch the complicated formulas and focus on presenting your financials in a clear, straightforward way. Your investors will thank you for it.
2. Know Your Assumptions - A good financial model is built on a solid foundation of assumptions. These could be assumptions about your target market, your competition, your pricing strategy, or anything else that's relevant to your business.
Before you start putting together your model, take some time to think about the key assumptions that will underpin it. What do you think is realistic? Are there any risks or uncertainties that could affect those assumptions? And how confident are you in each one?
Answering these questions will help you to create assumptions that are both realistic and defensible - which is exactly what investors are looking for.
3. Plan For the Future - Your financial model should be based on where you want your business to be in the future, not where it is right now. This means thinking about things like growth rates, market share, margins, and other factors that will have an impact on your bottom line further down the line.
Investors are always looking for businesses with high growth potential, so it's important to show them that you're thinking long-term. Build realistic projections into your model and back them up with data and rationale wherever possible. If you can convince investors that your business has what it takes to scale quickly, they'll be much more likely to give you the funding you need.
Creating a strong financial model is essential if you want to impress investors and secure funding for your business. The good news is that it's not as difficult as it might seem - as long as you follow some basic rules. Keep your model simple, understand the key assumptions that underpin it, and plan for the future by building in realistic growth projections. Do all of this, and you'll be giving yourself the best possible chance of success when pitching to investors.
If you need to build a financial model for your startup but don't know where to start, Sturppy is the perfect platform for you. We make it easy for founders to build investor-ready models, wothout all the hassle. Plus, we're fast - so you can get back to running your business.
Desire: You'll be able to impress potential investors with a well-crafted financial model that's accurate and easy to understand. They'll see that you're serious about your business and that you've put in the time and effort to make sure everything is taken care of.
Check out our friendly founder pricing today and see how easy it is to use Sturppy.
KPIs & Metrics
What actually is ARR? Annual Recurring Revenue, right? In this post we'll explain why it's important to track, how to calculate it, and more
Founders...are you trying to decide on how to monetize your startup or small business? Here's 7 revenue streams and strategies to consider.