I'm just going to show you three examples of how people actually present their financial projections and just comment on it.
Because practically what I've noticed is that when people present the financial projections,
they get all sorts of flak from investors for not doing the right thing.
Now, whatever you do, you're never going to get it perfect. But some of the presentation techniques might be useful.
So the first one is how not to do it.
Financial projections. So what's wrong with you know, this is about a slide with financial projections.
There's there's a ton of information on this slide. The second is false precision.
All of these numbers don't mean anything. They've they've are the precise and they're hard to read.
And then the third thing is, I can't really see anything.
You know, the colour scheme is awful obviously,
but all I know is that there's an entrepreneur who is in deep trouble for two or three years and thinks that they're going to get out of it.
Not looking good at operating stacks.
This is the operating Sachs I didn't get a chance to talk about in detail,
but basically an operating stack says take my revenue and now match that against all of my costs.
How much of my spending on R&D, on marketing, on say, admin administration?
This is an example of an operating stack.
So this is great. The entrepreneur went through the trouble.
It's a very informative graph because I can basically see where does the money go relative to where the money is coming from.
Great idea. So I love the fact that they put an operating stack, they've projected it out.
I also noticed this is a great business because it spends 40% as a tech business, in this case,
40% of its R&D initially, 40% of its money on R&D, and it shrinks down to 10% and.
Basically you say, whoa, this is a great business. They're reducing their costs dramatically.
It's basically impossible. This is a sure giveaway that these people have just assumed that their costs are constant and their revenue is growing.
And if you assume that your revenue is growing and you're able to get all of that revenue at a constant cause, then you get a graph like that.
As an investor, I will immediately say, forget it.
That they don't have a realistic cost model in their business.
There's no way that a tech company can live with less than 10% of their revenue spend on R&D just doesn't exist.
And so those were examples of how not to do it. The next one, I think, is reasonable.
And they begin by stating their assumptions.
I really like that because it will give me some idea, oh, you know,
I have some premium package and I've got some unit costs that because we don't even know what this business is, it doesn't matter.
The fact is they've stated what it is that they're selling, how much it costs them.
So I know. And then they say, okay, the unit gross margin is 40% before showing me any financial projections of income statement.
They're actually telling me the drivers of what's driving the business.
I really like that. I think that's a good start. They go on, they state very explicitly.
Here are a bunch of assumptions I'm going to make to get to my financial projections.
I am going to assume that my inventory is 10%.
I'm going to assume that I have quarterly software updates.
I'm going to assume that 50% of the people will buy the premium package.
Just stating the assumptions makes it very clear for people to know what went inside the magic of these financial projections.
They're stating a profit and loss. So that's fine.
Fairly standard. Not easy to read, but not too bad.
And then we're getting some kind of revenue projections. They always look like a hockey stick.
This is not you know, this is a universal truth, but it's useful, Dave, giving some idea.
Look, at this point in time, we're going to get some seed money.
This is one. We're going to need some round one money.
At this point, we think our investors are going to get some payback. So it's a fairly useful, fairly useful graph here.
You've got reasonable operating stacks where you can see cost scaling.
And that's a you know, it's a story you look at as a provides a lot of information and is credible.
Also very short. I'm the third one. I'm just going to give you an example of a longer presentation and the kinds of detail.
Some of them are overkill, but some of them are very useful if you have the time in front of your investors.
So we're going to start here with some revenues, some details on market penetration.
Why not related? Basically sort of a top down, bottom up logic.
And I'm going to show people what market shares do I have.
I quite like that. I'm going to have a strategy.
How am I going to go to market? Very detailed.
But it says, whoa, this person is really thought about in the financial projections.
I'm going to have an headcount that is thought through.
I'm going to say what I'm going to do in my business in terms of developing the product.
I'm going to talk about the software. I'm going to talk about the hardware.
So this has nothing to do with financial projections, really.
This is telling the people, this is what my business will look like and that's the basis of my financial projections.
I'm going to state my assumptions similar to what we had in the previous one.
I am then going to show you of my financial projections. These ones have all the fancy slides that build, so it's kind of fun.
By the way, the presentation is it can really slow you down if you have every slide building and you want to go backwards and forwards you lost.
So I actually don't like the building too much, but here you've got some standard financial projections.
You've got your operating stacks there, you know, useful.
You would. This presentation would allow you to have a lot of time in explaining where all of this is coming from.
This is a really cool graph. I think what we're doing here is now we're explaining the cash flows of the company and we're explaining,
look, we're looking for 1.5 million in a series, a financing.
And at the burn rate and things that I've already shown you, I've talked about this earlier in my presentation.
Now you can relate it. Look, in order to go for the Alpha stage, I need $1.5 million and that's going to decrease me at this point.
I need to raise a series B, I need to raise $5 million because I'm going into beta and I'm going to start my distributor.
So I am linking very clearly my financing need to the underlying business projection.
This is a mirror where at the top we're mirroring what's happening at the bottom.
And so it's a very powerful I think it's a very powerful slide of explaining to people why it is that you need money,
which is a very simple question that every investor would like to have a clear answer to.
Thank you. Just in time.