Early-stage financial models need to hit a few critical points to satisfy investors. Here’s what you can do to ramp up your game.

😶‍🌫️ Clarity is key

Logical revenue and cost drivers: How are you building your revenue and costs? How much is your marketing spend, and what is your expected number of conversions at what cost per lead, resulting in what number of customers? Similarly, what are your cost drivers, and how will you allocate key hires and your staffing plan?

Cross-check metrics: Check your assumptions. Unrealistic assumptions, like overestimated customer acquisition costs, will turn investors off.

🧚🏻‍♂️ Realistic assumptions

Industry benchmarking – make sure your numbers are in keeping with the averages for your industry. Unless you are Google, don’t expect similar profits in the first year. Know the market salaries and costs to avoid unrealistic projections.

Reasonable growth: a model that reflects typical growth rates in a mature industry will stand out from flagrantly high (or ‘stacked’) numbers that describe high but unrealistic growth in the early years and very slow growth thereafter. Don't overpromise with inflated numbers or undersell your potential.

🌊 Cash flow focus

Detailed cashflow projections: Show what is happening to money on a monthly cash flow basis and how you will squeeze out cash shortfalls.

💨 Attractive projections

Balanced ambition: Avoid extreme projections. A billion in revenue in five years might be a stretch, 10 million might not be ambitious enough – shoot for a scale that represents meaningful growth but without exaggeration.

Be coherent with investment goals:  Ensure your forecast supports a 10-15x return on investment. Your numbers should justify the amount you're asking for.

🛁 Tidy presentation

• Organized model: Keep your model clean and well-formatted. Label assumptions clearly and avoid clutter.

• Keep it simple: a simple, elegant model is better than a complex, messy one. Investors look for simplicity and clarity – too many numbers and they understand less, not more. 

• Stay away from hard plugs: Your model must be flexible without hard-coded figures that might hide errors.

• No valuations: Don’t include valuation in your financial model. It’s unnecessary and can be off-putting.