these are some thoughts on how to build the right financial model for raising capital for growth:
- Keep it real. Don’t overstate sales projections. It is a common enough mistake to make because mankind’s nature asserts we need to put the best case forward. The solution os to have varied scenarios, assign some probabilities, and tell a speculator honestly what has to happen to reach the targets.
- State the hunches obviously in the projection, so the financier knows what it is primarily based on.
- Make it simple to adjust and show the results – what if sales are lower, what if churn is higher, what if our costs decrease, what if our main customer leaves? Investors are a ( justifiably ) cynical bunch, so you must be able to lay out a best case and a worst case eventuality.
- Show the effect of expansion on cash flow. As sales increase, what is the increased need for further capital. This will show a stockholder not only how much they will have to put in, but when.
- If you do not know something, that is OK. Explain the opening in the information and either how you’ll get the data, or its likely impact if you do not. If you claim to grasp everything, it will be clear you aren’t being honest.
- target readability – it’s easy to get wrapped up in the complexity of your own spreadsheet and end up with a wall of numbers which is unintelligible. KISS. Use clear labels, colour code, space, and remove less material modifications ( put them some place else ). Separate inputs and variables from calculations – so the user can see what they can adjust.
- Get in a professional. You could be shocked by what you can attain in Excel. For a small investment ( about a hundred to a couple of thousand bucks ) you can may build something which wins over a stockholder. Remember the standard of the temporary to the programmer may have a major impact to the success don’t make the assumption they know anything about your industry. Explain everything.
- GIGO. Get good input figures.
For more information on venture capital resources and additional tools to help you raise money for business through venture capital.
Click Here to download your Free e-book on “How to create a business plan that investors will read” from the Venture Capital Centre.
Additional Resources:
Venture Capital Resources – Guy Kawasaki Lessons
Tags: Business Plan, Financial Modelling, Sales Growth Projections, Venture Capital