Time and time again, I see pitches and information packets about startup investment opportunities with a glaring weakness – the lack of viable, credible and detailed financial information.
I don’t get it. With innovations, technologies and company concepts into which an enormous amount of work has gone, why would a founder allow for a weakness in the associated financials. After all, many an investment decision hinges on strong financials – projected and historical, if applicable.
One trend I’ve noted over the past 15 or 20 years in the startup world, is a move away from traditional business planning towards wider acceptance of stand-alone pitch decks. Of course, pitch decks are the widely accepted standard now (and for good reason), but don’t miss the fact that the detail behind the deck is critically important. And a key element of that detail is the business plan and its associated financials. And that remains true even if the financials are only projections and there is no historical financial base. Beware of the potential investor that does not ask for the financial detail! It will make you wonder upon what they are basing their investment decisions and how that impacts their future expectations of you, your company, and their expected return on investment.
Here’s what I do get: Most founders prefer to spend their time on the development and refinement of their innovation; which is often to the exclusion of the boring, mundane and suffocating tasks surrounding the development of a detailed financial plan. But think of this: who is going to pitch; who needs to exhibit the mastery of the financials; how will the development of the detailed financials influence the ultimate rollout of the innovation?
This is an iterative process. The technical development of an innovation informs the development of the financial plan. The financial plan informs the development of the innovation. Back and forth it goes as you design your overall approach to the marketplace. Ultimately, the market will decide the value of your innovation and, therefore, your business. But, until the market speaks, you need to do everything in your power to anticipate how the market will treat you – and that is the value of your startup financials.
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