In order to be presented with a safe note offering by investors, you need to keep in mind first that financials are one of the most important aspects of a pitch deck when presenting to investors.
They want to know your valuation, potential and how you came to those numbers, costs, and growth projections. Never walk into a room of investors without them, or you might get directed straight out the door. They need to justify their investment, and then have the opportunity to ask questions about your assumptions and numbers.
Do you need to be a financial wizard? Certainly not. But, if you expect an investor to give you hundreds of thousands of dollars, millions or billions, you should know how to develop an excellent pitch deck and know where to put the financials.
So, what are the financials, and how do you develop a winning pitch deck? Let’s learn everything you need to know about the financials and where to include them in your pitch deck.
What are the financials in a pitch deck?
Your pitch deck doesn’t just have to communicate the storytelling and your product idea. Unfortunately, many entrepreneurs often don’t spend enough time on the company’s financial plan. How do your projections look? Do you have multiple, well-processed valuations? When developing your pitch, it is essential to include a summary of accurate financials and metrics so investors can make an informed decision.
So, what gets included in the financials?
The key performance indicators (KPI) are the number of products or subscriptions you plan to sell. This must be customized to fit in with the business model. If there is no revenue and wouldn’t be for some time, it will be a crucial growth metric for showing potential in the market. If you have revenue, you can present the number of sales dollars and active users.
The income statement shows the startups profit and losses and will consist of the following things:
- Cost of goods sold
- Operating expenses
- Gross profit
- Earnings before interest, taxes, depreciation, and amortization (EBITDA)
How many people do you need to hire for a successfully run business? Even if your company is solely online, you still need tech developers, marketing and sales staff, customer service, and more. Therefore, investors need to have an accurate headcount and an estimation of what it will cost them.
The cash position is vital to the success of the startup. If you run out of capital, it could mean failure. Various factors can affect the cash position of your company that doesn’t show up on typical income statements. Ensure to include the following in your financials:
- Starting cash position
- Amount raised from investors
- Loans or credit the startup currently has
- Assets, including buildings, office spaces, or equipment
- Accounts payable and receivable
- Deferred revenue if you have any
The importance of a financial plan in your pitch deck
Investors are often more versed in finances and business plans than they are in tech or your particular product. As a result, they will dissect every slide of your pitch to determine your company’s growth opportunities and potential risks. Of course, their main goal is to profit, so thought and precision are required when putting together your financial statements. There are two fundamental things to remember in terms of finances – if your finances are attractive, and is it realistic?
Finances in a pitch deck are essential for the following reasons:
- Increases the chances of getting funding
- It’s a reflection of your startup’s financial health
- It’s an accurate snapshot of all your startup financial data
- It gives you an indication of current traction and its future position
- It shows if you know what you are doing
Where you should include your finances in a pitch deck
The finances of the pitch deck are usually added among the final slides. You begin by selling them the concept of your startup, the competition, a solid marketing plan, and consumers. Once you have them hooked on why your startup will be a success in its market, you will follow with the money. They need to know that their funding will help you to successfully execute this plan.
Do you have the best product and an excellent team to execute the business plan to perfection? That’s great. But do you have a good financial plan for the foreseeable future? Investors won’t look twice if they can’t see a profitable future.
Alejandro Cremades is a serial entrepreneur and the author of The Art of Startup Fundraising. With a foreword by ‘Shark Tank‘ star Barbara Corcoran, and published by John Wiley & Sons, the book was named one of the best books for entrepreneurs. The book offers a step-by-step guide to today‘s way of raising money for entrepreneurs.
Most recently, Alejandro built and exited CoFoundersLab which is one of the largest communities of founders online.
Prior to CoFoundersLab, Alejandro worked as a lawyer at King & Spalding where he was involved in one of the biggest investment arbitration cases in history ($113 billion at stake).
Alejandro is an active speaker and has given guest lectures at the Wharton School of Business, Columbia Business School, and NYU Stern School of Business.
Alejandro has been involved with the JOBS Act since inception and was invited to the White House and the US House of Representatives to provide his stands on the new regulatory changes concerning fundraising online.