S7 E33 Developing your financial plan – the heart of your pitch deck with Jeremy Gray

Episode 33 Developing your financial plan – the heart of your pitch deck. ​ Some experts suggest that potential investors will spend over 30% of their time evaluating the financial page of your pitch deck. As a typical pitch deck is 15 to 20 pages long, you will understand that the numbers get a disproportionate amount of attention. It’s probably only secondary in importance to your executive summary. If your executive summary has not caught their attention then they will not read further and never get to the financial page. Of course, your executive summary should include some high-level financials.

If you have been following me during this season you are well on your way developing a financial plan that can be summarized in your pitch deck. A financial plan that will stand the scrutiny of seasoned investors. In earlier episodes I have discussed: Demand Validation – you have confirmed that there is a demand for your product, people will buy what you are selling Assessing your competitions strengths and weaknesses and how you will outcompete them. As part of this assessment you understand what resources are needed to win the battle in the marketplace. You have estimated what it is going to cost you to produce your offering, and looked at ways to keep those costs to a minimum. Your pricing strategy has been reviewed and you have a good understanding on what you are going to charge for your goods or services. You have even considered an early customer loyalty program. A hiring plan has been developed, you understand who you will need to hire, when you need to hire them and what they are going to cost. The operating costs needed to start up and maintain your business have been evaluated. You have considered trading off lower initial profits against maintaining your cash flow. You know your burn rate and have estimated the cash you need to get started. You know the market size and have confirmed that a reasonable market share will deliver the sales needed to sustain your business. Its been hard work but now you can start to bring it all together and be sure that your business makes financial success. Avoid massaging the numbers to get to the answer you want. If the numbers are not adding up, go back to your assumptions to double check them. Maybe you missed something, is there a product feature you can eliminate that will save costs, do you really need a full time CMO, CFO, CHRO in the first years of operation – can you make do with part time? Can employees work from home rather than renting an office. The fundamentals of a financial plan. Often referred a three statement financial plan Profit and Loss Balance Sheet Cash flow All three are inter-related and all three show a different picture of your business. All three are needed for a complete picture of the financial status of your business. Established companies tend to focus on the P&L and the most easily managed aspects of the balance sheet which are the elements of working capital. Business management usually pay scant regard to the balance sheet As I start up I recommend you make your cash flow statement your highest priority with the P&L a close second. The balance sheet should be reviewed occasionally but as time will be at a premium this need not be your focus. Your cash flow will cover the important element of the balance sheet – your working capital. This can be an issue if you are outsourcing your accounting. Most services focus on P&L and Balance Sheet. Not your number 1 priority Speed is of the essence – financial statements produced 3 to 6 weeks after a month has closed are not very helpful. I have digressed slightly to emphasize the importance of cash flow but today we are talking about preparing a financial plan not your reporting mechanisms. I am not going to go into the mechanics of producing a three statement cash flow. There are many free templates available to help you prepare your P&L, Balance Sheet and Cash flow.