Step-by-Step Guide: Creating a Financial Plan

Posted on by Mikko Henrik Pitkänen

A compelling financial plan is both a strategic roadmap and a persuasive tool for investors. Follow these steps to craft a financial section that inspires confidence and communicates your startup’s potential. Are you ready for some spin?

TLDR – Quick tips

  • Tell your story with your numbers.
  • Show how investor capital leads to measurable progress.
  • Use clean visuals to back up your narrative
  • Be spesific and measurable with past numbers
  • Base your future projections on statistics and realistic assumptions

Step 1: Understand the Purpose of a Financial Plan

  • Define the role of financials in your pitchbook: they prove your business is scalable, fundable, and strategically grounded.
  • Think of your financial plan as both a decision-making tool and an investor communication asset. You are telling a story with words, images and numbers.
  • All aspects need to be coherent and part of the same story.

Step 2: Structure Your Key Financial Components

Let’s continue with a clear structure. Best is to break down your plan into these core elements:

Revenue Model & Projections

  • Define how your startup makes money.
  • Use bottom-up forecasting:
    • customer segments → pricing → conversion → revenue.
  • Validate using top-down logic:
    • market size → target share.

The revenue model and projections need to work from top down statistics and market research findings to unit cost per customer level details. When you can make these two ends meet you are done.

Cost Structure

This part describes: how to spend it right.

  • Categorize:
    • Fixed vs. Variable
    • Direct vs. Indirect
    • Identify cost drivers and scaling efficiencies.

Cost drivers give you the potential to create scenarios on different levels of business development and growth.

Cash Flow Projections

This part shows where the money comes from.

  • Create a 12-24 month monthly forecast, then quarterly for years 3–5.
    • Split cash flows:
      • Operating
      • Investing
      • Financing

Cash flow and cost structure of course need to be in balance. If you do not have a long journey into a break even reconsider the need for investment and take a loan to start business and aim for customer revenue as soon as possible.

Step 3: Build Realistic Financial Projections

Define Key Assumptions

  • Use industry research, benchmarks, and internal logic.
  • Ensure assumptions are internally consistent and defensible.

Use Forecasting Methodologies

  • Bottom-up: ground-up logic
  • Top-down: sanity check
  • Sensitivity analysis: show what happens under different scenarios

Develop a 5-Year Financial Model

  • Year 1: Monthly detail
  • Year 2: Quarterly detail
  • Years 3–5: Annual high-level view
  • Include full P&L, balance sheet, and cash flow statements.

Step 4: Translate Your Financial Model into Pitchbook Slides

Essential Slides

  • Financial Highlights
  • Unit Economics (CAC, LTV, Payback)
  • Funding Requirements & Allocation
  • Growth Metrics ( revenue, margin, user base)
  • Use of Funds
  • Path to Profitability

Visuals to Include

It is a good idea not to include heavy tables with numbers in visual presentations. Here are a few examples of visualisations that you could use.

Growth charts on revenue, profit margins, user growth are great in showing how the business is evolving based on your financial plan.

Growth charts, with user growth as an example

Use of funds is perhaps the most relevant plan for a realistic evaluation of what is the outcome of your business. Where will the money go to get the proposed results. In the below example you can see that the company is in product development and team expansion phase, perhaps not yet launched their product. Why else would they spend only 11,8% on Marketing and Sales?

Pie chart with use of funds as an example

Financial comparisons to how your competitors perform and how their pricing affects your financial estimates is a concrete way to prove the unit cost and pricing of your products and services.

Milestones are concrete stepping stones of how you plan to develop your business. Milestones need to be supported by a financial plan that clearly shows that you are able to achieve the key results as promised.

Timelines, with milestone plan as an example

Step 5: Outline Exit Strategy and Investor Returns

Exit Pathways

  • Potential acquirers
  • IPO possibility
  • Estimated timeline for exits

Return Scenarios

  • Conservative, Base, and Optimistic
  • Projected valuation & investor ROI/IRR

Step 6: How to avoid common mistakes

  • Unrealistic projections: Avoid hockey-stick curves unless justifiable.
  • Inconsistent assumptions: Keep alignment across your model.
  • Overconfidence: Show awareness of risks and model uncertainty realistically.

If you followed the guide up to here, congratulations, now it is time to perform and start building your pitchbook financial section. It might seem like a lot of work, but trust me not doing this work is much worse for your business. If you want to have a session to get started or review your plans feel free to schedule a session with our mentors.