What are our historical financials and future projections of sales, expenses, and cash flow with underlying assumptions and metrics?
The financials slide presents historical, current, and future numbers backed by your underlying financial model (spreadsheet).
Think of this slide as the “mathematical map” of your business. It’s all about the numbers, presented in a format that investors find easy to digest.
As a founder, you want to showcase your growth business and explain how you will use investor cash to propel the venture even faster. It’s all about “knowing your numbers” and focusing on the ones that matter.
On this slide, you typically show your Profit and Loss (P&L) to date with 1-2 years of history, depending on how long your business has been in operation.
You add at least a 3 year projection that includes ARR/MRR, gross margin, expenses per functional unit, and EBITDA. Essential elements like cash flow projections, headcount, and key performance metrics are also outlined for each year.
If you sell in many regions and to different industries, it would make sense to break down and illustrate your revenues and expenses by these factors and roll it up to a summary level.
Investors need to understand two things upfront: -
- Where you are today (e.g., ARR/MRR, number of customers, MoM growth rate, monthly cash burn rate, cash in the bank, and churn rate (expressed best as NRR)
- What key assumptions have you made to deliver the expected growth? Are they based on historical data or simply hopeful numbers?
Again, depending on your venture stage, you may still be experimenting with your business model and trying to reach Product Market Fit. In any case, you must provide your best estimates and key assumptions moving forward. Your growth assumptions could be based on, for example, free trials.
For our earlier example featuring a therapy health app that fuses a marketplace of therapists and users, the financial slide would spotlight the following key metrics per period (month, quarter, and year), both historically and projected 12-36 months out:
▸ Total app downloads
▸ Historical month-on-month growth
▸ The current count of monthly active users (MAUs)
▸ Typical number of sessions booked per user & month
▸ Average fee charged per session (which can be claimed from insurers or the government, depending on market conditions)
▸ Total Revenue
▸ Average Cost of Goods & Sales (COGS) related to each session (if any)
▸ Gross Profit (and % Gross Margin of Total Revenue)
▸ Expenses divided into
▹ Sales
▹ Marketing
▹ Product & Engineering
▹ Operations & Support
▹ General & Administrative (G&A)
▸ EBITDA (Earnings Before Interest, Tax, Depreciation, Tax)
▸ Cash Balance
▸ Head-count
Next, you'll address user churn and strategies for boosting individual user revenue. Presenting projections for the next 12-36 months, you'll outline the anticipated growth trajectory and associated costs, particularly in advertising, sales, and product development. Additionally, you'll highlight the projected timeline for achieving profitability based on user numbers and specify the funds required to attain your next milestone.
Be as enthusiastic about this slide as you are about your product! Convey a compelling vision of how your venture will generate substantial cash in the future and how you will measure your progress month by month.
Anticipate key questions regarding:
- Profitability and Free Cash Flow: Clearly outline the path to profitability and free cash flow generation.
- Unit Sales and Break-even: Define the units you're selling (e.g., new or upsell customer contracts) and articulate the required sales volume and average contract value (ACV) for monthly break-even.
- Fixed and Discretionary Expenses: Distinguish between fixed costs (e.g., salaries, offices) and discretionary expenses (e.g., advertising).
- Next Milestone Funding and Sales Pipeline: Specify the funds needed to reach the next milestone and provide insight into your current sales pipeline.
- Financial Position and Burn Rate: Share your current financial position, including available funds, burn rate, and the runway, before requiring additional capital.
- Key Performance Indicators (KPIs) and Unit Economics: Highlight the KPIs and unit economics you closely monitor for business success.
This slide is your opportunity to proactively address critical queries, showcasing a robust strategy for future success.
If the investors wish to see more detail, you will have a few supportive slides from your financial model spreadsheet. Here, you have broken down your projections by month and quarter, including your KPIs and metrics such as monthly growth, NRR, CAC, LTV, and ACV.
In closing the financial slide it’s all about showing growth numbers and evidence that the company will continue to grow. But once you have convinced the investor, be prepared to show the underlying financial model and assumptions, or you will not go to the next round.
Behind your pitch deck, you must build a proper financial model with forecasts, income statements, and fancy graphs that you can add as supportive slides to impress your investors that you have done your homework.
You don't always need to build a financial model from scratch, but use an existing Excel or Google Sheets model. An existing financial model will give you templates to draft your company's financial projections more efficiently and professionally. It will also force you to think through your venture's financial aspects, like sales and hiring, and how much money you need to execute your plan.
Here are some free Excel models that you might want to explore:
- The Angel VC, Christoph Janz: http://christophjanz.blogspot.com/2016/03/saas-financial-plan-20.html
- Ben Murray a.k.a. The SaaS CFO: https://www.thesaascfo.com/saas-financial-plan/
Recently, we have seen some actual SaaS applications come to market for those who want to save time on something other than the Excel model. One of these is Causal (https://www.causal.app), an impressive application with many built-in templates, including two SaaS models.
Lean-case is another app that does the same thing (https://www.lean-case.com), but Casual is slightly more sophisticated.
