Today, pro forma financial statements have become essential tools for startup founders. It is an effective way to plan and predict, control, and analyze risks associated related to business funds. In the next unit you are tasked with developing a pro forma. This will help you capture the attention of potential investors. You can draw the attention of potential investors by announcing your future earnings.

Determine your assumptions for the next 3 years. You will do so by looking at two factors:

Internal Factors: Think of your first year and what the drivers will be for revenue and expenses. Do you plan on upping your salesforce? Do you plan on investing in additional marketing channels? How would these drivers impact your revenue? What's the lead time for these factors to show an impact on your revenue? For instance, if you plan to ramp up the sales team, you need to factor in the ramping time before this shows an impact on your revenue.

External Factors: Factor in market, competition, and/or regulatory changes that might impact your product's growth. Market reports can help you understand growing trends in customer demand, and this will impact your revenue.