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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.

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A startup pro forma can be used to compare different venture opportunities by providing a detailed financial projection of each venture. It includes the cost, expected revenue, and the point at which the venture will break even. By comparing these factors, one can assess the profitability and feasibility of different ventures.

There are several ways to present a startup pro forma to non-financial stakeholders. One way is to use visual aids such as graphs and charts to illustrate the financial data. This can make it easier for non-financial stakeholders to understand the information. Another way is to provide a narrative explanation of the financial data. This can help non-financial stakeholders understand the context and implications of the financial data. It's also important to highlight key points and takeaways, and to be prepared to answer questions and provide additional information as needed.

A startup pro forma can be used to identify potential challenges in a new venture by providing a detailed financial forecast. This includes projected costs, revenue, and the point at which the venture will break even. By analyzing these projections, potential challenges such as insufficient funding, unrealistic revenue expectations, or a longer than expected timeline to profitability can be identified and addressed.

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Sheets highlights

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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.

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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.

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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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Overview

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.

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50 questions and answers
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The Pro Forma model helps in financial planning for a new venture by providing a structured way to forecast the financial performance of the business. It takes into account various factors such as sales revenue, operating expenses, and salary expenses. The model allows you to input your own data, which is then automatically reflected in the Proforma Summary. This summary includes key financial metrics such as Gross Revenue, Cost of Goods Sold (COGS), Gross Margin, Expenses, and Net Profit. The model also provides visual representations of the results, which can aid in understanding and decision-making.

The Pro Forma model is crucial for a startup as it provides a financial projection of the business. It includes various aspects such as sales revenue, operating expenses, and salary expenses. This model helps in understanding the financial health of the startup, its profitability, and break-even point. It aids in decision-making and planning for the future.

The Pro Forma model helps in understanding the investment and reward opportunities of a new venture by providing a detailed financial forecast. It includes various tabs such as Sales Revenue, Operating Expense, and Salary Expense which allow you to insert your own data. This data is then automatically reflected in the Proforma Summary tab which includes Gross Revenue, COGS, Gross Margin, Expenses, and Net Profit. This gives a clear picture of the financial health of the venture, helping to understand the potential returns on investment.

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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.

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Application

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.
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The Pro Forma model can help in identifying potential financial risks in a startup by providing a detailed overview of the company's financial situation. It allows the company to make predictions about future income and expenses, and determine the profit margin. By analyzing these predictions, the company can identify potential risks such as a decrease in income or an increase in expenses. It also allows the company to make allowances for major one-time purchases or gross expenses if necessary.

Some strategies to manage expenses in a startup include creating a detailed spreadsheet to track income and expenses, totaling all income sources and expenses to determine gross historical revenue and expenses, and determining the profit margin by subtracting total expenses from total income. It's also important to make allowances for major one-time purchases or unexpected expenses.

The Pro Forma model can help attract investors for a startup by providing a clear and detailed financial projection. It shows the potential profitability of the business by outlining the expected income and expenses. This gives investors a clear idea of the financial health and future prospects of the startup, which can increase their confidence in the investment. It also allows them to assess the risk and return of the investment.

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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."

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50 questions and answers
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Some common misconceptions about proforma in business include the belief that it is not a legitimate or useful tool for financial forecasting. In reality, proforma can provide valuable insights into a company's financial future. Another misconception is that proforma is only used to manipulate financial results to present a more favorable picture to investors. While it can be misused in this way, it is not its primary purpose. Proforma is meant to provide a clear picture of a company's financial situation by excluding non-recurring events.

Investors can benefit from understanding proforma as it provides useful information about a company's financial performance. Proforma earnings statements, when prominently displayed in the headline or first paragraph of a company's news release, have a much stronger impact on stock prices. Therefore, understanding proforma can help investors make informed decisions about their investments.

Proforma is highly relevant in today's business environment as it is a way for managers to impart useful information to investors. 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.

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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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