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 have received tremendous coaching on raising capital or even seeking board advisors, and they certainly ask for financials. That is the only way they compare what their investment is. Now, I have only been asked for 3 years and yes they know they are going to change, but they need to see that you have a plan, because financials are also about - do you have a product/service portfolio, what is the pricing model, where is the profit coming from, etc.... A VC may not go deep into all of that, but they want to know you have.
Also, the financials I would provide would read like -
Revenue Forecast Year1 Plan Year2 Plan Year 3 Plan
Without Funding $60K $250K $325K
With Funding $674M $2.8M $6.2M
EBITDA $114K $440M $2.7M
Exit 7-10 years through acquisition
Hope that helps
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.
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.
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.
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.
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.
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
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.
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 think of Ex. Summary as the 1 to 1 1/2 page introduction in front of a business plan. And, the first main section of the plan is the Narrative, the second is the Appendix and that is where financial projections are usually found.
A few select #'s may be mentioned in the Ex. Sum or Narrative, but the "meat" of the financials is in the Appendix or in a 3rd section labeled Financials.
All plans MUST have a Cash Flow foecast by the month for 1 to 3 years. A Narrative alone is only part of a business plan. A Cash Flow provides the best guess if the company needs an infusion of money, when and how much.
I think it is very important to include this data, because it shows that the NEW company management is thinking about funds and how it will be spent. Including many other factors that are used for, gaining a funding loan(s) or V.C. funding as well.
No, financials and/or projections belong the body of a business plan.
The ES should be limited to a brief overview of the entire project.
The only reference to financials in the ES should be limited to the status of business today and future growth in the particular industry.
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.
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.
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.
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
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....
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.
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 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