--- title: "How to create a financial forecast: This is what startup investors need to see" id: "415424" type: "post" slug: "financial-forecasting-for-startups" published_at: "2025-01-29T09:49:51+00:00" modified_at: "2025-01-29T09:49:51+00:00" url: "https://seedlegals.com/resources/financial-forecasting-for-startups/" markdown_url: "https://seedlegals.com/resources/financial-forecasting-for-startups.md" excerpt: "‘How much money should we ask for?’ It’s one of the most challenging questions startup founders face when raising equity investment. At the heart of the answer lies your financial forecast." taxonomy_category: - "Startup Guides" - "Funding Guides" - "Find Investors" --- 4 min read Expert reviewed This article has been fact-checked by a SeedLegals subject matter expert. [Meet our experts](https://seedlegals.com/authors-and-experts/) and learn more about our review process and quality assurance in our [editorial policy](https://seedlegals.com/editorial-policy/) . # How to create a financial forecast: This is what startup investors need to see Published: Jan 29, 2025 Contents [Why a strong financial forecast is critical to your pitch](#why-a-strong-financial-forecast-is-critical-to-your-pitch) [How to calculate your funding “ask” (with examples)](#how-to-calculate-your-funding-ask-with-examples) [Determine how much cash you need now](#determine-how-much-cash-you-need-now) [Build a story about how you’ll turn numbers into impact](#build-a-story-about-how-youll-turn-numbers-into-impact) [Need help crafting your forecast?](#need-help-crafting-your-forecast) [Writer Hatty Fawcett Founder, Focused For Business](https://seedlegals.com/resources/author/hatty-fawcett/) [Editor Kirsty MacSween Senior Copywriter](https://seedlegals.com/resources/author/kirsty/) *For this post, we hand over to Hatty Fawcett, Founder of [Focused For Business](https://focusedforbusiness.com/) , to explain how to prepare a convincing financial forecast that will impress investors.* *If you’ve joined one of the [webinars](https://seedlegals.com/events/) we co-host regularly, you’ll already know Hatty for her practical advice on building a compelling case to secure funding.* *For other aspects of getting investor-ready, such as sorting out your [cap table](https://seedlegals.com/start/cap-table/) or securing [SEIS/EIS](https://seedlegals.com/start/seis-eis/) status, SeedLegals has you covered. We’re here to help with those, as well as the legal documents you need to take investment, whether you’re raising a [funding round](https://seedlegals.com/raise/raise-a-round/) or taking [one-off investment](https://seedlegals.com/raise/raise-before-a-round/) .* --- ‘How much money should we ask for?’ It’s one of the most challenging questions startup founders face when [raising equity investment](https://seedlegals.com/raise/raise-a-round/) . At the heart of the answer lies your **financial forecast**. The financial forecast in your pitch isn’t just about impressing investors with your ambition. It sets out your strategy to grow, hit milestones and avoid running out of cash. In this guide, we’ll explore the essentials of financial forecasting and how to confidently calculate your funding ‘ask’. ## Why a strong financial forecast is critical to your pitch A well-thought-out financial forecast is your strategic growth blueprint. It’s a tool to clarify your funding needs, avoid unnecessary dilution of equity and demonstrate to investors that you understand your business inside and out. Too many founders approach their forecast as an academic exercise, but done right, your forecast becomes the backbone of your pitch. A detailed and realistic forecast not only builds investor confidence but also ensures you raise enough money to achieve your goals without overextending. ## How to calculate your funding “ask” (with examples) Raising the right amount of money means balancing enough funding to achieve growth milestones without excessive equity dilution. Here’s how: ### 1. Know your current financial position Start with where you are now. Include: - **Cash on hand**: What’s currently in the bank? - **Revenue**: Monthly or annual revenue (if any) - **Expenses**: Your operating costs - **Debt**: Loans or other financial obligations This establishes your baseline and builds investor trust. ### 2. Map your growth projections Excite investors with your future potential. Highlight: - **Revenue growth**: Be ambitious yet realistic. Show strong ROI potential. - **Market expansion**: Are you entering new regions or launching products? - **Team growth**: What hires will drive execution? - **Operational costs**: How will these scale as you grow? Projections must be based on data and sound assumptions. Wild guesses erode credibility. ### 3. Set measurable milestones Investors back plans, not guesses. Define clear, measurable milestones tied to funding needs. For example: - **Product milestones**: Launching your MVP or new features - **Customer targets**: Acquiring 1,000 paying customers - **Revenue goals**: Achieving specific monthly recurring revenue (MRR) targets - **Profitability**: Reaching break-even **Link each milestone to a funding requirement.** For example: 🎯**Milestone 1: Product launch (6 months)** Funding required: £750,000 Breakdown: – Development team salaries: £300,000 – UI/UX design: £100,000 – Testing & infrastructure: £150,000 – Marketing: £200,000 🎯**Milestone 2: 1,000 paying customers (12 months)** Funding Required: £850,000 Breakdown: – Sales team: £180,000 – Marketing: £400,000 – Customer support: £120,000 – Product improvements: £150,000 Clear milestones **show investors how new funds will grow value** and lead to the next round or exit. ### 4. Assess your competitive landscape Consider your context: - **Competitor raises**: If others are raising more, consider adjusting your ask - **Market trends**: Hot sectors (eg, AI) often warrant larger rounds - **Unique strengths**: Proprietary tech or a standout team can justify a bigger raise ### 5. Align with investor expectations Research industry norms for your stage and sector: - **Average round sizes** and equity stakes - **Typical milestones** between rounds Deviating from the norm? Justify it with data and strategy. ## Determine how much cash you *need* now While your forecast should provide a vision for long-term growth, it must also address immediate realities. **At a minimum**, ensure you have enough to cover operational costs, product development, and marketing efforts, with a cushion for unexpected expenses. A well-crafted cash flow plan shows not only when funds might run low but also when you might need to raise again. Investors will scrutinise these details to ensure your request aligns with your business’s immediate needs and strategic vision. ## Build a story about how you’ll turn numbers into impact A financial forecast isn’t just a numbers game; it’s a story about how you’ll grow value. Each funding milestone you outline should translate directly into tangible outcomes, whether it’s developing your product, acquiring customers, or reaching revenue targets. For instance, securing funding to launch an MVP de-risks your business by bringing your product to market, while hitting customer or revenue milestones increases your valuation ahead of the next round. When you show how each phase of funding advances your business, you build trust and demonstrate your ability to execute. ## Need help crafting your forecast? A solid financial forecast can be the difference between securing funding and struggling to convince investors. It’s your opportunity to show you have a clear, credible plan for growth, and that their money will be put to good use. Focused For Business’ [Funding Accelerator programme](https://focusedforbusiness.com/raising-equity-investment/funding-accelerator/) helps startups build forecasts that unlock investment quickly and effectively. Using the forecast template provided on the programme, startups have impressed investors with detailed, actionable plans, with one founder raising funding in just eight weeks. If you’re preparing for investment but need help with creating a financial forecast that grabs an investor's attention, or want advice on the right amount of investment to raise, join Focused For Business’ free, online**[Funding Strategy Workshop](https://focusedforbusiness.com/funding-workshops/)**. You’ll also learn about startup valuation in the workshop and have a chance to ask any questions you might have about raising investment. Together, we’ll ensure your funding strategy is as compelling as your vision. ##### SeedLegals events ### Get on our guest list Keen for more expert insights? Sign up for the SeedLegals events newsletter for invitations to online masterclasses, panels, pitch and networking events. See you there! [Sign up](https://seedlegals.com/events/) #### Hatty Fawcett Hatty Fawcett, Founder of Focused For Business, is on a mission to make it faster and fairer for start-up founders and business owners to raise equity investment, particularly when they are doing so for the first or second time. [Read more](https://seedlegals.com/resources/author/hatty-fawcett/) [https://focusedforbusiness.com/](https://focusedforbusiness.com/) Fundraising tips from investors Insider insights from active VCs and angels. Learn how to sidestep common pitch pitfalls, and make a stellar first impression. Download your free financial forecast template Show investors how you'll actually grow and map projected revenue to customer acquisition, pricing and spend. ## Related posts [5 min read Why you can't validate your startup idea, and what to do instead Most founders think they have validated their startup idea. Here is why the evidence usually fails, and the three questi... Charles Hope](https://seedlegals.com/resources/validate-your-startup-idea/) [4 min read Most founders don't think about GDPR until someone asks for their data Of course you ignore GDPR. Right up until you get an email “Send me all my data. Delete everything you have on me.” Sud... Laura Brentnall](https://seedlegals.com/resources/most-founders-dont-think-about-gdpr-until-someone-asks-for-their-data/) [2 min read Sunbathing or scaling? Founder tips to beat the quiet season Summers can be slow for startups but Ava Shoraka and Yanki Kizilates are here to help founders gain momentum during thi... 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