How do you present financial projections and assumptions in an investor pitch deck?

1 Know your audience

Before you create your financial projections and assumptions, you need to know who you are pitching to and what they are looking for. Different types of investors have different expectations, preferences, and criteria for evaluating your financial performance and potential. For example, angel investors may be more interested in your vision, mission, and market opportunity, while venture capitalists may be more focused on your traction, growth rate, and exit strategy. Therefore, you need to tailor your financial projections and assumptions to suit your audience and highlight the most relevant and attractive aspects of your business model.

2 Use simple and standard formats

When presenting financial projections and assumptions, you want to make them easy to comprehend and compare. To do this, use simple and standard formats that are commonly used by investors and entrepreneurs. The most essential financial projections for an investor pitch deck are the income statement, cash flow statement, and balance sheet. The income statement reveals revenue, expenses, and profit or loss for a given period of three to five years. It helps investors evaluate how you generate income, control costs, and achieve profitability. The cash flow statement shows cash inflows and outflows over a certain period of time, usually monthly or quarterly. It helps investors assess how you manage cash flow, fund operations, and handle contingencies. The balance sheet outlines assets, liabilities, and equity at a particular point in time, usually at the end of each year. It helps investors understand how you allocate resources, leverage debt, and increase value. To create your financial projections in a professional manner with consistency, you can use templates, tools or software. Additionally, use graphs, charts or tables to visualize your financial data and emphasize key trends, ratios or indicators.

3 Explain your assumptions and sources

When you present your financial projections, it's essential to explain your assumptions and sources. Assumptions are estimates, calculations, or hypotheses used to project future financial performance based on current situation, market research, industry benchmarks, or historical data. Sources are references, evidence, or validation to support assumptions and show their reliability, accuracy, or credibility. Explaining assumptions and sources helps investors understand how you arrived at projections, how realistic or optimistic they are, and how sensitive or robust they are to changes in the market or environment. To do this properly, list the main assumptions used for revenue, expenses, and cash flow like customer acquisition cost, customer lifetime value, pricing strategy, conversion rate, churn rate, operating expenses and capital expenditures. Also provide sources such as market research, customer feedback, competitor analysis, industry reports and historical data. Show how assumptions and sources compare to industry standards and justify any deviations. Finally indicate the level of confidence or uncertainty in your assumptions and sources as well as how you tested or validated them.

4 Include scenarios and sensitivities

When you present your financial projections and assumptions, you should also include scenarios and sensitivities to show how your financial performance and potential can vary depending on different factors, conditions, or events. Scenarios are the alternative or hypothetical situations that you consider for your financial projections, such as best case, base case, and worst case. Sensitivities are the changes or variations that you apply to your assumptions or inputs to see how they affect your financial projections. This helps investors understand how flexible, adaptable, and resilient your business is to different outcomes, risks, or opportunities. To include scenarios and sensitivities in your presentation, you should select the most relevant and realistic ones based on market analysis, industry trends, customer behavior, competitor actions, and more. Additionally, define the assumptions and inputs for each scenario and sensitivity, calculate the financial projections for each one compared to the base case or original projections, and highlight any implications or recommendations that arise from them.

5 Align with your value proposition and traction

When presenting your financial projections and assumptions, it is important to align them with your value proposition and traction. Your value proposition is the unique benefit or solution you offer to customers, and your traction is the evidence of success or progress in your market or customers. Linking your financial projections to your value proposition and traction can help investors see how your financial performance and potential reflect your business value and growth. You should link revenue projections to the value proposition by showing how pricing strategy, revenue streams, and customer segments match it. Additionally, link expense projections to the value proposition by demonstrating how cost structure, operating expenses, and capital expenditures support it. Also, link cash flow projections to the value proposition by displaying how cash flow management, funding needs, and cash flow sources enable it. Finally, link financial projections to traction metrics such as revenue growth, user growth, or customer retention.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?