How a strong financial story can help you secure more funding

By July 8, 2019July 10th, 2019No Comments

Your business is off to a great start. You’ve got a killer idea, a powerhouse team – now you just need a bit of funding to keep things going down the right path.

You’ve got a pitch ready for investors and some meetings lined up. And then they ask about your financials. Are you prepared?

Numbers tell a powerful story about your business, which is why these kinds of questions are inevitable. Investors want to see that on top of solving a real problem, your product is something people will pay for, you can provide at a profit, and you can grow. Plus, a business owner with a solid grasp on their customer acquisition costs, revenue forecasts, user economics and churn rate is one who has done their homework.

That’s why it’s so critical to tell your financial story without flinching – or else it might break your fundraising efforts.

So how do you prepare? 

You probably won’t go great detail in the pitch itself, but when you come armed with the full, in-depth picture, you’ll be ready for any curveball an investor may throw.

Know your current situation
Investors want to see that you’re running your business responsibly. Even if you haven’t launched yet, there are lots of ways they can gauge the health of the business you’re building based on your day-to-day numbers.

Be ready to discuss:

  • How much time and money do you spend producing your product or service?
  • How much does it cost to acquire new customers?
  • What are your key sources of revenue?
  • What are your biggest expenses?
  • How are you paying your team, your partners and your suppliers?

Make good projections
Investors want to see what they can expect in the future, both in terms of growth and sustainability. They know forecasts are never perfect and don’t expect you to get things perfect – but they do expect to see that you’ve done the exercise of going through and understanding every part of your business in detail along with some realistic numbers.

Be ready to discuss:

  • How many customers will you need to reach your goals?
  • What’s the lifetime value of a customer?
  • What are your best-case and worst-case scenarios?
  • When will you break even?
  • What assumptions have you made to build your projections?
  • How much cash do you need to sustain and grow your operations

See how you stack up
Investors want to see that your numbers make sense within your industry. Comparing your numbers to real-world examples – both successes and failures – and how your business fits within the bigger picture.

 Be ready to discuss:

  • How are your competitors making money?
  • How much are you spending to keep up or get ahead of your competition?
  • How and how much of your total market can you reasonably expect to capture?
  • What real-world factors in your industry could affect your projections?

Where should you start?

It all starts with your books. It’s the data that forms the foundation of absolutely everything on this list. Establishing good habits (especially around organizing your bookkeeping) today means you don’t have to go back and rework your financials at the same time as you perfect your pitch deck.

And it’ll also form the foundation of all the monthly and quarterly reports you’ll need to send investors once you secure that funding.

Not everyone has a head for numbers, though, or the time to pull all their financials together. It’s also a tedious work you need to do on a consistent basis. If you need help gathering or understanding the stories your numbers tell, a service like Element CPA is the perfect partner. We’re not just number-crunchers, after all – and we can help you make sure that next big pitch goes off without a hitch. Let’s talk!

About Element CPA

Element CPA is an innovative accounting partner that’s 100% focused on helping Canadian startups and small businesses get their books in order, operate more efficiently and plan for the future. We handle the day-to-day financial operations that make your business run, tell the story behind your numbers and provide advice as you grow.