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Writing the Pro Forma

An investor or lender wants to first know when you will start to make money on your venture. The pro forma gives the reader a clear view of the financial viability of your company. The pro forma shows where your money comes from and where it will be spent over a specific period of time, normally three to five years. It could be based on an annual calendar—January through December—or your tax year. You can see a sample of a pro forma in Appendix B, “Sample Elements.”


As mentioned earlier, your financial plan should include a minimum of two (but no more than three) pro forma scenarios—one based on sales revenues below your expectations, and one showing sales revenue above those expectations. In either case, your plan's readers expect the company to show profitability within a year to 18 months. As a rule of thumb, angel investor Cal Simmons, coauthor of Every Business Needs an Angel, advises that “entrepreneurs should plan to reach profitability within half as much time as they're raising money to cover. For example, six months if they're raising a year's worth of funding.”


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