Four Things You'll Need When You Pitch Financials
Finding the capital resources you need to get your business opportunity translated into a start-up is challenging to say the least. Without very deep pockets, bootstrapping your operation is probably not a good idea.
To get your venture headed toward profitability and success, in most cases, that means asking investors for the funding you need. Although angel investors are well-known for helping small business start-ups with investment capital, it still takes some convincing to inspire them to reach into their pocket books.
Profit and Loss Statements
When pitching your proposal, investors want clarity and simplicity. But more so, they want realistic calculations in your profit and loss estimates. If you can clearly demonstrate how business performance will generate profits, investors will be more inclined to fund your operation.
As you meet with investors, make sure you’re organized and ready to discuss any questions they have. In most cases they want to know about your profit and loss statement and see an accurate forecast of both monthly sales revenues and total expenses.
Cash Flow Statement
Investors want to know they’re investment is safe and that it will earn them a profit, so normally they also want to see a Cash Flow Statement. This gives them the chance to assess the potential for capital investments, while showing a projected balance sheet of assets, liabilities, and capital earnings over the first three years you’re in business.
Investors are savvy, business smart individuals that know what realistic cost estimates should look like. Be accurate when projecting assets and liabilities, accounts payable or balances of credit cards. Investors understand there will be expenses, but they also expect your business plan and pitch will reflect accuracy in its cost analysis.
Sales Forecast
When presenting your expectations for future sales, make sure there is consistency in your sales estimates. They need to be organized according to the first three years of business operations. It’s important that investors see steady and stable sales numbers. They want to know that your business has the potential to be consistent, even in a volatile market.
While pitching investors, they may ask you how you got the numbers to reach your calculations. It’s important to have your marketing analysis with you to show how sales estimates were calculated, and how the numbers reflect expected customer demand.
Break Even Analysis
The calculations that show the amount needed before your business start-up expenses are covered is called a Break-Even Analysis. For some investors, knowing how long it’ll take before they see a return on their investment can be a deciding factor on whether or not they invest in your business.
The break-even analysis should be clearly communicated so investors understand what the total fixed costs are and how they represent the selling price of your product minus the variable cost per unit. From this equation investors can determine what sales revenues need to be earned before your business starts earning its way out of debt.
If you can convince investors that your business proposal has less risk and more reward, they will be more confident to invest in your operation. The key is knowing the financials and then demonstrating the ability to balance the company budget. They’ll be more likely to invest in someone who knows how to manage costs and resources rather than someone who can’t exercise practicality in their spending habits.
