Pro Forma Services

What is a startup pro forma?

Startup pro formas are financial projections proving your business model is viable. They are used by entrepreneurs and investors to validate a business plan.

What is a pro forma? Pro formas are a highly specialized form of a forecast. Most forecasts are based on historical precedent, but startups have no history thus requiring special assumptions and preparations. A skilled financial analyst will build defendable pro forma financials despite a lack of history.

Can I use a pro forma template for my startup?

There is no pro forma template that fits your business. Otherwise your business would not be very innovative, would it?

You may start with a template and adjust it to fit your business. Experienced financial analysts can do this successfully, but inexperienced founders often break formulas or use pro forma financial models incorrectly, resulting in major errors. Therefore, adjusting pro forma templates should not be attempted unless you are skilled with Microsoft Excel.

The safest route to have an accurate and defendable pro forma for a startup is to custom build from the ground up or hire a professional.

Example Chart showing company growth & exit value

How do I make a defendable pro forma?

Defendable pro formas paint an accurate and complete picture of your company over the next 5-7 years in a clear and neat format. To break that down into components:

Accurate pro formas

Get the numbers as correct as possible. This means thoughtful assumptions and error-proof formulas. Remember the basic rules:

  • Never hardcode in a formula
  • Clearly label assumptions with a consistent color scheme
  • Add comments or schedules to defend assumptions
  • Pressure test your formulas

Most entrepreneurs or young analysts put 98% of their effort into this step. This is where an experienced pro forma financial modeler can save you time.

Example of Pro Forma Chart Template
Never Hardcode! Use formulas that reference clearly labeled assumption for ease of use and modeling efficiencies.

Complete pro formas

A good pro forma covers all aspects of your business: marketing plan, sales strategy, pricing structure, supply chain, org chart, etc. A professional pro forma is comprehensive enough to describe almost your entire business plan without any additional support or description.

Many veteran entrepreneurs know the critical elements of their industry, but younger entrepreneurs should consider consulting an expert to ensure they captured all the elements. Share your model with an advisor or professional and ask for feedback. At CFOshare, we will always provide pro forma feedback free of charge.

example bar chart showing projected financials
Easy to Read Financial Metrics. Turn the details into easy to digest information for strategic decisions.

Clear and neat pro formas

When used for pitching to investors, your pro forma is a sales tool. That means aesthetics matter. Focus on user experience (UX) to take your pro forma from ok to great:

  • Does your excel sheet tell a story?
  • Does it flow effortlessly from one section to the next?
  • Can an investor see the critical elements of your business just by reading the model?
  • Is there sensitivity analysis to illustrate risk?

This step is what elevates your pro froma into the top 1%. When done correctly, investors will say, “Wow, this is the best pro forma I’ve ever seen!” (we hear that often from investors). It’s a high-quality experience that reflects on your brand and vision.

Remember, do not use a startup pro forma template unless you are an experienced financial analyst.

sales chart example
Defensible Assumptions. Clear & neat assumptions backed by internal data or industry standards.

Should I build my own pro forma or hire a professional?

That depends on you.

You can try the first round yourself before considering a professional, especially if you have a background in finance (or perhaps an MBA) or are short on cash. The process of struggling through the various pro forma financial models will give you an intimate understanding of your numbers.

Once you’ve gotten as far as you can on your own, take your model to an advisor or fractional CFO for feedback. At CFOshare, we will always provide free feedback on pro forma models. This will help you understand what you may have missed. Remember, creating an accurate pro forma is a powerful tool in making business decisions, so don’t just plug numbers into a pro forma template – bounce it off a professional and get valuable feedback. 

If you don’t have a finance background or you know nothing about forecasting, you may simply waste your time trying to build your own pro forma financials. That’s when hiring a professional is the fastest and most cost-effective approach.

If Alison’s story sounds like the results you want, you should hire a professional.

You should also consider hiring a professional pro forma modeler if:

  • You are raising outside equity funds in excess of $750k
  • You have complex balance sheet accounts such as:
    • Inventory
    • Vehicles or machinery
    • Deferred revenue
    • Complex AR or AP terms
  • Your business will be cash flow negative for more than 1 year