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  • Mike Lingle at Rocket Pro Forma

The Best Pitch Deck Financials Slide

Updated: Jun 21, 2021

My 3-year financial projection template for startups


Today I’m going to give you my killer financial projections slide for your pitch deck. It’s exactly what investors want to see, and you can grab it here.


My formula is:

  1. One or two key metrics (KPIs)

  2. Income statement (Profit and Loss or P&L)

  3. Headcount

  4. Cash

This format gives both you and your potential investors everything you need to see to understand your startup's financials at a glance. It shows you everything you need at a glance, tells a complete story, makes you look smart, and helps you impress investors. It's also great for running your business—even if you're not raising money.


Here's a video walkthrough of my financial projections slide template:


When you're raising money it's important to have a financial plan to present to investors. They want to see that you've thought about your costs and your growth. They want to be able to talk with you about your numbers and the assumptions behind them—even though they understand that reality will turn out to be different than what you're projecting.


Imagine that you're the investor and you're about to hand thousands—or millions—of dollars to a startup. Would you want them to have a handle on their financials?


The good news is that you don't have to become a financial whiz or a math expert! You just need to understand the basics and be able to present them to investors. This article will help you get there.


The Best Financial Projections Slides for Your Pitch Deck

Here’s my favorite financial slide template. This is for a subscription (SaaS or “software-as-a-service”) company, and I'm using condensed version of the slide, which is my favorite simplified format to impress investors:


The Best Financial Projections Slides for Your Pitch Deck

Some founders push back that this looks too complicated, but I find it’s exactly what investors want to see. Believe it or not, I simplified this from a version I used to use with all twelve months broken out for the first year.


You can grab the pitch deck financial slide template here, and I've included a few different versions:

  • Condensed Version (quarterly in the first year) or Full Version (monthly in the first year)

  • Presentation Slide or Spreadsheet Tab

Want the full spreadsheet template for your financial projections that automatically creates this pitch deck slide for you? Check out Rocket Pro Forma.


What If You're Not Raising Money?

Even if you’re not raising money, it’s important to get in the habit of creating and sticking to a budget for your company. Successful startups know how to manage their cash flow. You'll get better at making predictions the more you practice.


Wait, you say you’re working on your product for the next few months? It’s still important to start thinking about cash management now. You’ll thank yourself later for being prepared before things start moving more quickly.


The first time I sat down to write out my business plan (yes I’m that old lol) I didn’t know how to do the “Pro Forma Financial Projections” so I just left it out. I didn’t even know what “Pro Forma” meant.


Since then I’ve helped raise millions of dollars for both my own and other founders’ startups. I’ve put together hundreds of pitch decks—and I’ve reviewed thousands more. In this article I’ll make it easy for you to create killer financial projections by sharing what I’ve learned.


Oh, and in the startup world, “Pro Forma Financials” mean forward-looking financials based on assumptions. They’re your best estimate of your future results.


Finance Is the Language of Business

Indeed, writing, when it first developed in ancient Sumer, was invented for financial contracting and accounting.
William N. ::, Yale School of Management

Some of the entrepreneurs I talk to are great with numbers. This is always refreshing, and it gives me confidence in their ability to execute.


Other entrepreneurs either don’t how to create their financial projections or they don’t know how to present their pro forma in their pitch deck.


It’s crucial for founders to either understand their numbers or find a co-founder who does (and even then you’ll want to learn what’s going on).


We’re going to tackle both issues, and I’ll give you my favorite financial slide template for your pitch deck.


Problem solved!


What to Expect

Yes we all understand that these financial projections are a guess. It’s important, however, that they’re your best guess. Your job as an entrepreneur is to make your best prediction…and then go out into the world and prove yourself either right or wrong. Then come back and update your best guesses based on what you’ve learned.


One major benefit is that you'll build a mental map of how your business works in terms of revenue, costs, and cash flow. You'll identify a ton of questions you need to start finding answers to. That's okay because it's part of the process.


Take the time to put something together that you think can work.


Don’t worry that it’s not perfect. You’ll improve it as you move forward, both from what you learn as you try to hit your numbers and from the feedback you receive from investors.


I was talking to an entrepreneur who said he was embarrassed by the first financial projections he put together. So was I! I told him that’s what’s supposed to happen. We all learn by doing so just get started.


Keep at it, ask for help, and don’t get discouraged. It took me a few tries and several years before I truly started understanding financial projections (and that was while I was already running my startup). But don’t worry because I’m giving you a huge head start.


How Do I Make Money and How Much Does It Cost Me?

These are the two main questions in every investors mind, and this slide tells them exactly what to expect.


It’s important to provide more detail in the first year. I used to do every month, but now I like starting with the first three months followed by the next three quarters. Sometimes investors ask to see every month of the first year, which is why I built my Rocket Pro Forma financial projections template to automatically create both slide versions.

Revenue is imaginary while expenses are real—until you prove otherwise in the real world.

I then show year 1 in summary as well, followed by summaries for years 2 and 3.


I used to build. 5-year financial projections but no one seems to be able to predict that far ahead anymore.


Investors are looking to sanity-check what the entrepreneur is telling them, so we’ll give them enough info to do this at a glance. It’s best for both your startup and your investors if you err on the conservative side, so that any surprises happen on the upside rather than the downside. Startups have a habit of underestimating their revenue while also underestimating their expenses.


Remember that revenue is imaginary while expenses are real—until you prove otherwise in the real world.


The Anatomy of an Income Statement

I find that financial projections work best when constructed as an income statement (also called a profit and loss statement) with a little bit of extra info at the top (key metrics) and bottom (headcount and cash flow). Let's do a quick review of the income statement.


The basic formula is Total Revenue minus Cost of Sales (COGS) equals Gross Profit, which is the money you have left to pay your Operating Expenses. From here, Gross Margin % equals Gross Profit divided by Total Revenue.


Subtract Operating Expenses (Sales & Marketing plus Research & Development plus General & Administrative) from Gross Profit to arrive at EBITDA (you may also hear some startups call this EBIT, although technically EBITDA is different than EBIT).


Here’s the formula for the income statement:


 + Revenue

 – Cost of Good Sold (COGS or sometimes Cost of Sales in an online business)

_______________

 = Gross Profit

 – Expenses

Sales & Marketing Expenses (S&M)

Research & Development Expenses (R&D)

General & Administrative Expenses (G&A)

_______________

 = EBITDA


Here are a few things to keep in mind:

  • The Income Statement lies about cash! Your startup can have a healthy income statement and still get into financial trouble. I actually made this mistake early in my career. That's why I include a cash line at the bottom of my 3-year pitch deck financials slide.

  • The Income Statements is also called the Profit and Loss Statement (or P&L for short).

Also, I remove the decimals and show the revenue numbers in thousands (because hopefully I’ll be generating enough revenue that all of the zeros will make my financial projections look crowded).


This means that I divide the dollar amounts by 1000—so $6,000 becomes $6 and $23,000,000 becomes $23,000.


The Key Ingredients of Your Pitch Deck Financials Slide

Here’s what investors want to see in your financial projections:

  1. One or two key metrics (KPIs)

  2. Income Statement / P&L (Revenue, Cost of Goods Sold / Cost of Sales, Gross Profit, Operating Expenses, EBITDA)

  3. Headcount

  4. Cash Position

The Key Ingredients of Your Pitch Deck Financials Slide

It's important to provide enough detail that investors can understand your business model, but not so much detail that your financial projections slide becomes confusing.


If an investor is interested you’ll have the opportunity to provide more detail, so don’t worry too much if you’re leaving some of the complexity of your business model out of this top-level slide.


A Walkthrough of the Financial Projections Template

Let’s review each component of the financial projections slide template individually:


1. One or Two Key Metrics (KPIs)

This should be whatever your key metric is that drives growth.


This goal is to give investors a quick glance at how many subscriptions, products, or services are you planning to sell. You’ll want to tailor this to your business model. In this case we’re using Paid Subscribers, since that’s the key revenue driver for this startup.


If you’re not going to have revenue for a while then this should be the key growth metric that drives the eventual success of your business—which in Facebook’s case might be Daily Active Users. Investors want to see growth somewhere, either in revenue or in usage.


Keep this section as simple as possible. It's fine if it's just one metric.


Here are some examples of KPIs (key performance indicators) you might use:

  • # of Sales per Period

  • Current # of Paid Subscribers

  • # of Active Users

  • $ ARR (annual recurring revenue) or $ MRR (monthly recurring revenue)

2. Income Statement / P&L

The Income Statement is also called the Profit and Loss Statement or P&L for short. Here we include the main elements of the Income Statement that investors care about in the first few years of your startup's growth:


Revenue

Revenue is a key driver for the income statement, and every business must eventually make money in order to survive.


I recommend including a line for "Revenue Growth %" to show how quickly your sales will ramp. Investors can use these numbers to sanity-check your projections, especially if they know your industry well. Revenue growth also gets investors excited.


For example, if you’re selling an IoT (Internet of Things) product like the Nest Camera you might have revenue streams from both unit sales and monthly subscriptions. Here you can see separate KPIs for Unit Sales and Paid Subscribers, along with separate revenue lines for both businesses:

Two key metrics for your pitch deck financials slide

If you want to simplify further, it’s okay to combine multiple revenue streams into a single line here. You can always dive into a detailed breakdown for investors who are interested.


Cost of Goods Sold (COGS or Cost of Sales)

Investopedia defines Cost of Goods Sold as “the direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good.”


This traditionally means:

  • Raw materials

  • Labor costs for turning raw materials into sale-able goods

  • Factory overhead

  • Shipping of manufactured inventory to your warehouse or distribution center (but usually not shipping to your customers).

Many of the business I've worked with sell software or other virtual products, in which case I like the term Cost of Sales (because there aren't any goods being sold). For a software-as-a-service company the Cost of Sales typically includes:

  • Web hosting and other costs to run your production environment

  • Salaries for customer support and training (but not your sales and marketing expenses)

  • Apps and subscriptions used by support and training teams

  • Cost of any third-party data or technology that is included in your delivered subscription

What’s not included in Cost of Sales is credit card fees or sales commissions. I know it sounds weird to say that sales commissions aren’t included in Cost of Sales, but they’re not because sales commissions aren’t part of the shipping product. Remember that this section originally came from businesses with physical inventory.


Same thing with Credit Card fees, which are usually viewed as optional.


You can’t make money in your business as a whole if you’re not making money on each unit you sell, so your gross margin should pretty much always be positive. Otherwise you’re literally losing money on every sale—and you won’t be able to make it up on volume. This is a place where many startups get themselves into trouble. Uber, for example, built a global business that loses money on each ride. Most of Uber's founders and investors have done well, but it remains to be seen if they'll ever turn a profit.


Gross Profit

Gross Profit is calculated by subtracting COGS from Revenue. It’s the money you actually have left over to pay your operating expenses, after covering all your costs of creating the product or service you’re selling.


The key here is the Gross Margin %, which is calculated by dividing Gross Profit by Revenue. Different industries have different Gross Margin %s, and you should aim for yours to be in the right neighborhood by year 3. Investors tend to focus on specific industries, which means they know what the typical Gross Margin %s are for those industries.


You can look up industry-specific Gross Margin percentages (start here and here), and you can also check out the income statements of publicly traded companies in your industry.


If an investor is looking at a SaaS business, for example, they’re usually expecting to see a Gross Margin % between 70% and 90%.


If your Gross Margin is above 90% then investors may view it as overly optimistic and therefore unrealistic.


Operating Expenses

Your operating expenses (sometimes called “OpEx”) make up the day-to-day costs of running your business. These are things like most salaries, rent, insurance, legal fees, meals and entertainment, etc. Operating expenses are typically divided into three categories:

  1. Sales & Marketing (S&M)

  2. Research & Development (R&D)

  3. General & Administrative (G&A)

As an investor I eventually want to see the breakdown—but for the financial projections slide it’s fine to just show a single line for all of your operating expenses. This is where startups typically spend more than they make in the early years.


Please note that purchases of land, buildings, office build-outs, and expensive equipment are handled differently. These are capital expenditures (often called “CapEx”) and they don't appear on the income statement. This is one way in which the Income Statement can lie about cash—which is why I include a cash section at the bottom of my financial projection template for startups.


“If the asset’s useful life extends more than a year, then the CapEx is recorded as an asset in the balance sheet and is expensed using depreciation to spread the cost of the asset over its designated useful life as determined by tax regulations.” —Investopedia


Most software startups don’t have CapEx, but other businesses do. Internet of Things (IoT) companies, for example, might purchase molds for manufacturing their hardware that degrade over 200,000 units. The purchase is recorded as CapEx and the expense is allocated proportionally to the COGS for each unit as it is produced. If the molds are $100,000 of CapEx that means the COGS for each unit produced increases by fifty cents ($100,000 CapEx / 200,000 units). You'll need to pay to create new molds after you manufacture 200,000 units, which will be another CapEx expense.


CapEx typically doesn’t appear on the income statement, which is confusing when we’re trying to figure out how much money a startup needs. For startups that have intensive CapEx, I'll sometimes add a CapEx line to the cash section of the pitch deck financials slide—to separate it from the regular operating expenses (OpEx).


“Depreciation” is simply reducing the value of a physical asset over its useful lifetime in accordance with tax regulations. When you buy a $10,000 piece of equipment for example, you record it as a Capital Expense (CapEx) and then depreciate its value over the number of years specified by the IRS.


You may also run into "Amortization," which is reducing the value of an intangible asset over its useful lifetime. If you produce a Netflix show, for example, you might record the production costs as CapEx and then amortize them over the number of years specified by the IRS.


EBITDA (sometimes EBIT)

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization . EBIT stands for Earnings Before Interest and Taxes. For early-stage startups they’re pretty much the same (unless you have CapEx). You calculate them by subtracting your Expenses from your Gross Profit.


And for our purposes, EBITDA and EBIT are usually the same as “Operating Income,” which tells us your startup’s profit or loss. Investors like EBITDA and EBIT because they’re upstream from where most financial engineering can occur, but neither is a perfect metric.


Companies may be acquired for a multiple of EBITDA once they’ve figured out how to turn a profit. Otherwise, if a startup is growing fast and attracting a ton of attention but still losing money, it may be purchased for a multiple of revenue, or a value assigned to its growth trajectory, or a dollar value per active user, or really whatever the buyer and seller can agree to.

“Basically, high-growth web properties are being valued on growth, the ultimate utility of the base they are creating, and the valuation floor created by prior funding rounds (assuming they are in a position of strength).” —Quora

EBITDA is the last part of the Income Statement. This financial projections slide template includes Headcount and Cash as well.


3. Headcount

It takes people to run a successful business, and investors want to see how many you expect to hire. Even virtual companies need management, developers, marketing, sales, and customer support. Modern companies talk about full-time equivalents (FTEs) instead of employees, but you'll still have a headcount number combining both employees and full-time contractors.