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A strong financial model is one of a founder’s most powerful tools for fundraising.
Your model not only tells a story about your financial performance and forecast, but also represents your business to stimulate confidence and gain trust with investors. An investor should look at your financial model and know exactly where to go to find decisive information presented through palatable visuals and bottom-line transparency.
On the flip-side, a weak financial model – typically created in Excel – makes your investors work to find the information they need, dilutes key metrics with superfluous data, and ultimately creates unnecessary friction in the fundraising process.
The financial gurus at Forecastr have a few simple formatting techniques to help you clearly communicate your vision to investors.
1. Use a Table of Contents
The table of contents serves as a map for what may otherwise seem like an information overload for your investors. As the first tab in your model, a table of contents efficiently directs investors to key metrics and creates a showcase for your financials. Ideally, format this page to resemble a presentation deck introduction for a high-impact first impression.
The example above illustrates a few key features.
Logo: This simple image builds brand association and catches the readers eye.
Website: Always link your company website to promote easy access for investors and encourage further research.
Hyperlinks: This tool provides pivotal organization in your financial model, highlights crucial information, and sets a tone of transparency for your investor relationships. If your financial model has more than a few tabs, a table of contents is critical.
2. Include a Dashboard
A smart graph or chart in Excel allows investors to instantly absorb a large amount of data and envision a financial picture. Rather than forcing investors to sift through tables and numbers, create an accessible bird’s eye view of your financial summaries and most pertinent metrics.
How do you select what data to showcase? Determine what metrics are crucial for your business’s current standing and future growth. Ask yourselves what numbers warrant further discussion with your investors. For example, are you focused on paid ad cost per click over time? Or the optimization of conversion rates for direct sales? Display these metrics along with summary financials, unit economics, or analysis of cost per spend. Take the time to fine-tune the visual presentation and eliminate unnecessary discussion on metrics that are hiding within the depths of your Excel model.
3. Utilize Tab Organization
When you send your model to an investor for the first time, remember they have never seen your model before. Utilize tab organization to further promote efficient navigation and highlight essential data.
Take a look at the example above.
Colored tabs: Do not underestimate the power of simple color coding. In this example, Forecastr colored our organizational tabs in green, input tabs are yellow, and output tabs black. Group similar tabs together to prevent unnecessary scrolling. Even better, organize model sections to include tabs related to statements/output, revenue drivers, expense drivers, and balance sheet items.
Overall, these simple formatting techniques and visual tools save your investors time and streamline financial discussions by highlighting the numbers they need to see. As founders, invest your time on the front-end to create a vastly improved engagement experience, build your brand based on transparency, and strengthen your pitch toward gaining investment.