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Do you need to present the investment and reward opportunities of a new venture or project? Our Ultimate Startup Pro Forma collection is intended to help corporate individuals and entrepreneurs ready to propose a venture, display how much it will cost, how much revenue it will generate and at what point will cash flow become positive and the venture will reach its break-even point.

Sheets highlights

This slide will allow you to itemize and calculate your Sales Revenue – the initial profit figure listed on a company's income statement. It marks the starting point for arriving at net income and is used to calculate the gross profit margin.

With this sheet, take care of your Operating Expenses, which are extremely important. Their importance comes from the fact that Operating Expenses help to measure a company's cost and stock management efficiency.

Use this sheet to itemize and calculate your company's Gross Margin to share with your stakeholders. [Gross Margin is especially crucial because it demonstrates whether or not your sales are sufficient to cover your costs.

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This Ultimate Startup Pro Forma spreadsheet collection includes Sales Revenue, Operating Expense, and Salary Expense input tabs. These tabs allow you to insert your own data to be automatically reflected by the Proforma Summary tab. The final tab shows graphs and break-even charts that give a visual representation of the proforma results. All user inputs are displayed in blue font, calculations in green, and results in black. The Sales Revenue tab lists the Units Sold, Revenue, and Cost of Goods Sold (COGS) for each product per quarter over multiple years. The Operating Expense tab lists expenses by each department per quarter over the years. The Total Expense and Grand Total Expense lines automatically update based on your input. The Salary Expense tab displays data by Department Salary as well as Department Position. The Proforma Summary tab takes inputs from the previous tabs and summarizes them in a proforma model, including Gross Revenue, COGS, Gross Margin, Expenses, and Net Profit.

There are four main types of proforma statements:

  • Full-year proforma projection;
  • Financing or investment proforma projection;
  • Historical with acquisition proforma projection;
  • Risk Management and analysis proforma projection.

In this article, we are focusing specifically on investment proforma projection.

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Experts from Financially Simple recommend the following steps to create proforma financial statements that will impress investors. For more on this, check out our The Startup Way book summary.

  1. Create a spreadsheet – where you list past and future years across the top columns, and income and expenses down the side rows.
  2. Total all income sources – create rows for every income source. After what you've made from each income source is itemized, total them up to determine your gross historical revenue. Lastly, make predictions of your income growth rate for future years by multiplying actual revenue by 2.5 or whatever percent makes the most sense based on your historical numbers.
  3. Total all income sources – add rows for every expense your company incurs. Next, total them up to determine your gross historical expenses. Then, predict your future expenses.
  4. Determine your profit margin – here, you'll subtract your total expenses from your total income to determine your profit margin. It is important to make allowances for major one-time purchases or gross expenses if necessary.

Expert advice

In his article for Harvard Business Review, Baruch Lev – the Philip Bardes Professor of Accounting and Finance at the Stern School of Business in NYU, talks about proforma as one of the ways in which managers can impart useful information to investors. (For more like this, check out our Straight Talk for Startups book summary). Lev stresses that "research shows that proforma earnings statements prominently displayed in the headline or first paragraph of a company's news release have a much stronger impact on stock prices than proforma earnings reported elsewhere in the document."

Investors, he says, suffer from something called "limited attention –" a restricted ability to process and analyze vast amounts of information, in this case, information relevant to companies' values. The upshot is that investors are somewhere between naive and all-knowing. They care a lot about what drives a company's long-term growth and often need help understanding what those drivers really are. "That's where guidance, proforma earnings statements, and the narrative and tone of managers' communications come in," Lev writes.

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