Do you recommend including financial projections in a startup's executive summary?
I have heard some VCs say they don't care about the projections at an early stage since it is so uncertain, but other investors want to see them.
I'm not sure which VC would say they don't care about the money. I would like to meet them though because I have a great idea of selling air in a box. Anyway, when I write business plans for clients, I estimate I spend about half the time just doing the financials/pro forma. Absolutely necessary to do as an exercise. At the very least, you begin, as an entrepreneur, to really think through your idea.
I agree with the comments here - it is a good planning step to create these financials and you will certainly want to have them ready if the VC conversations move forward. However, detailed financials are not required in the Executive Summary deck. I usually suggest that you add a slide around "comparables" so that your industry fit and growth goals are obvious to investors. Happy to talk more if you'd like.
I never do, personally. That said, it is very business dependent. For very high growth businesses, the financials they want to understand generally elate to customer acquisition costs and overall market size which are not the projections you are talking about.
For consumer product companies, financial projections are very important to the executive summary.
The summary should not speak tot he plan so much as to the advantages and why you (above all others) will win this battle.
First, I think building the financial projection is a good thing. It brings you down to earth and help you understand the flows (in and out). What is important is to do some reflection and identify potential risks - use Five Forces model to document them for you own critical review - this will help you to document the perspective. Now, when it comes to projection, showing it as a simple graph with few simple bullets on R/I and Impact/Capability would help communicating your message and demonstrate your sincerity to any VC whether they ask for it or not - that does not matter. Advantages and benefits of doing it are immense in my personal opinion.
I don't include financials in an executive summary. Although you may want to state what your expected revenues will be in the first year and how long you think it will take to get to profitability.
Full financials are only shared with your business plan and with someone who has signed an NDA or MNDA.
Hope that helps.
hi Mary Alice
Firstly a financial proforma is a very important aspect of the business plan period. Your question is confusing because the one page executive summary is just that a concise summary of the business plan and not a stand alone document. I'll assume you are on track and agree with Bernadette about a short little note
yes one way around financials is to say that they will get a piece of the market in the first year and 3% more in the second year and market is 1 b
I would include financial projections in the executive summary, even if some say they don't care about. Including them shows that you are concerned with cash flow, which is what investing is ultimately about.
Yes include financial summary in executive summary. It helps you define, size and defend the opportunity and the valuation with would be investors. The investors will scrub and recalculate your projections and valuations, which is expected - but make it a two way game, and hold your ground based on possibilities, justifications and performance.
By my experience all serious investors and business angels do want to see the financial implications and calculations. We are representing many companies looking for investors and they always need help on making proper business plan, since without that they do not look serious....
Whether you are a startup or an established company - having financial projections is essential as it comforts investors. It also helps you as a CEO/Founder or executive leader to know potentially how much revenue targets they need to hit each month, quarter, and a year.
Hope this helps. Feel free to reach out to me for further questions - firstname.lastname@example.org
Absolutely, if just to show that you've done your homework against comparable companies and ventures. You can state that they are projections only and for comparative/research purposes - it shows that you have a firm grasp on the realities facing your business venture. Anyone who doesn't do solid, research-based projections really cannot honestly state that they've done their due diligence, and I wouldn't invest or partner with them.
Oh yes I must add, though, not in the Exec Summary, but in a separate financials or projections section, or as an appendix, depending on how your plan is structured.
Mary-Alice, some really good comments here, especially Michael Gilman's, where he notes the importance of knowing who it is going to and with what purpose. As you note, as many opinions as people responding.
Let me throw a different perspective on it, one that I have used as both an investment banker and an entrepreneur, successfully raising money. To me, the executive summary is the very first impression someone will have of your business. So treat it almost like a marketing document. And remember who your "prospective customer" is - an investor! You're selling as much if not more, than telling. And make sure the document is slanted to their perspective, not your customer's. I think summary financial projections and summary use of proceeds are both a necessary part of the story to the prospective customer. Keep the numbers high level. If you have financial history, include it, and go out at least three years. Of course, they are going to be "best guesses" but I think most investors want to know just where you think the business is headed.
Hope this helps.
As you can see from all the responses the answer really is specific to what your goal is and to whom you are presenting to.. which speaks clearly to: Know as intimately as possible who you are presenting to.. Do your homework first and be totally prepared.
Most investors will want to see financials at some point; however, in my opinion and experience, the executive summary is too early to introduce such details. The sole purpose of the executive summary is to gain interest from potential investors so that they ask for more (i.e., biz plan, slide deck, phone call, meeting). Given that financial projections, especially at the early stage, are fictitious at best, I feel it's best to put more solid, convincing info into the executive summary. Info that you can clearly back up and be confident about such as your team's history, your targeted market(s), your competitive advantage, etc. You need to give potential investors a reason to come back to you asking for more. Again, just my opinion, but early-stage financial projections are not likely going to provide the compelling 'hook', so you might as well leave them out of the executive summary.
You should, however, include the amount your requesting and outline what you will be doing and will achieve with those funds.
I have my clients include them in a simple form. I find that some investors purely want to see that you did your homework, even though they don't put much weight on that information.
And I agree with most, the executive summary is not the best place for the projections.
Thanks everyone. Now I know why I've been struggling with this. Seems like there are many different opinions, but it's clear that an executive summary would not include full blown financials, but including a high level forecast for the next 3 years makes sense.
It is difficult, at best, to provide both realistic and meaningful projections for a start up. I would recommend providing scenarios... best, worst, and most likely. Provide very high level summary projections, only. At bare minimum, at least provide a burn rate projection to enable the reader to know how much capital will be required.
I would like to agree with what a few others have already said: A business plan absolutely must include financial projections but those projections don't belong in the plan's executive summary, they belong in the appendix.