Pro Forma Financial Statements: How To Create

Imagine this. You’ve got an idea. It’s a killer idea. One you’re sure will disrupt an industry, attract investors, and scale like wildfire. You sketch out your business model on a whiteboard, start running some numbers in your head but then someone asks: “Cool. What do your pro forma financials look like?”

And suddenly, you freeze. If you’ve been there, or suspect that moment is coming soon, you’re not alone. Well, you’re in the right place.

In this guide, we’ll break down everything you need to know about pro forma financial statements. Not in finance-bro speak. In real talk. The kind that helps you plan smart, impress investors, and actually understand the numbers behind your business dream. Let’s go.

What Are Pro Forma Financial Statements?

At its core, a pro forma financial statements are financial projections. They’re your “future-you” talking through numbers.

Where traditional financial statements (like your income statement or balance sheet) tell you what already happened, pro-forma financial statements tell you what could happen next.

Think of them as your startup’s “choose-your-own-adventure” game:

• What happens if you raise $1M?
• What if your customer base triples next year?
• What if your costs balloon because you didn’t factor in shipping from Indonesia?

Your pro forma financials are where you run those simulations. They don’t just make you look legit. They help you think like a strategist.

Why Pro Forma Financials Are Essential for Startups

Startups are built on uncertainty. But investors, they crave clarity. That’s where pro forma financial statements come in.

They help you:

• Paint a picture of your future: Not just growth, but how you’ll get there.
• Spot problems early: What if you run out of cash six months in?
• Build confidence: For yourself, your team, and your potential backers.
• Make better decisions: Whether it's hiring, product pricing, or launching a new market.

And let’s be real, when you’re pitching to VCs or angels, no one wants to hear “we’ll figure it out later.” They want to see you’ve already thought it through. And, you have thought it through in numbers.

What Goes Into Pro Forma Financial Statements?

There are three core parts of any pro forma financial package. Let’s break them down:

1. Pro Forma Income Statement (aka Projected Profit & Loss)

This shows your expected revenue, expenses, and profit over a future time period, usually monthly for the first year, then quarterly or annually.

Example: Let’s say you’re building a subscription-based meal delivery startup.

You estimate:

• 500 users in Month 1
• $50 average subscription
• A growth rate of 10% each month
• Variable costs (ingredients, packaging) at $20 per user
• Fixed costs (rent, salaries) of $20,000/month

Your pro forma income statements would model how those numbers evolve and whether (or when) you turn a profit.

2. Pro Forma Balance Sheet

This statement forecasts what your business will own and owe in the future: your assets, liabilities, and equity.

You’ll include:

• Cash (from funding or revenue)
• Inventory or equipment
• Outstanding debts or loans
• Investor equity

Think of this like your company’s future financial snapshot. Healthy balance sheets make lenders and investors breathe easier.

3. Pro Forma Cash Flow Statement

This tracks the timing of cash in and out of your business.

Even if your income statement shows profit, you could still run out of cash if payments don’t line up with expenses. Let us tell you that it happens more often than you think.

Your pro forma cash flow shows:

• When customer payments arrive
• When you pay vendors or staff
• How long your runway is before needing more capital

This is where many startups win or fail.

A Realistic Pro Forma Financial Statements Example

Let’s go beyond theory. Imagine you’re launching an eco-friendly skincare brand. 

You’re planning to:

• Launch an e-commerce site in September
• Spend $25,000 on inventory
• Allocate $15,000 for marketing
• Hire a part-time operations manager

You estimate:

• 300 sales in Month 1 at $60 each = $18,000 in revenue
• A growth of 20% in sales monthly
• 45% gross margin

Using this, you build:

• A pro forma income statement projecting increasing revenue, margins, and monthly profits
• A pro forma balance sheet showing how your inventory turns into cash and how your funding impacts equity. A pro forma cash flow statement that shows when cash runs tight (maybe Month 4!) and when to consider raising more capital. 

This isn’t just helpful. It’s essential.

Pro Forma Financial Statements Template: What to Look For

If you're building your first projection, templates can save a ton of time and brain cells.

What should a good pro forma financial statements template include?

• Monthly and annual projections
  Linked statements (income → cash flow → balance sheet)
  Clearly labeled assumptions (growth rates, margins, CAC, etc.)
  Editable inputs for funding rounds, debt, team expansion
  Easy-to-read charts or summaries

You can find free or paid templates online, or use startup tools like:

• Google Sheets templates
• Excel forecasting models
• Software like LivePlan, Finmark, or Causal

Start simple. You can get fancier later.

When to Use Pro Forma Financials

You should always have a version of your pro-forma financial statements on hand. But especially when you’re:

• Raising Capital: Investors want to know how their money will turn into more money.
• Budgeting Internally: Align your team around realistic targets and spending.
• Launching Something New: New product? New market? Pro forma it.
• Talking to a Bank: Most lenders will require projections before offering loans or credit.
• Getting Serious About Growth: If you want to scale, you need to model how.

Basically, any time you’re making a big move, pro forma is your map.

How to Present Pro Forma Financials to Investors

Building your pro forma financial statements is only half the battle. Presenting them with confidence and clarity is what seals the deal. Whether you're speaking to a room full of VCs or sharing a slide deck over Zoom, here’s how to make your financials stand out:

1. Tell a Story with Your Numbers

Investors don’t just want spreadsheets—they want a narrative. Use your projections to walk them through your growth journey.

For example: We project 20% month-over-month growth based on the success of our beta launch, where we hit $10,000 in sales with no paid ads.

Now they see a story, not just a formula.

2. Highlight Key Assumptions Up Front

Don’t hide the logic behind your projections. Show it.

For example: We’ve assumed a 5% churn rate, $70 average customer spend, and 40% gross margin, all based on real customer data from our pilot. 

This proves you’ve done your homework and aren’t winging it.

Focus on What Matters

Don’t overwhelm investors with 20 tabs of financials. Instead, zoom in on what they care about:

• Revenue growth
• Customer acquisition cost (CAC)
• Lifetime value (LTV)
• Burn rate and runway
• Break-even point

Make these metrics clear and easy to read, ideally in one summary slide.

Be Prepared to Defend Your Assumptions

Good investors will ask you, “Why do you think you can grow 3x in 12 months?”

Don’t take it personally, it means they’re interested. Just be ready with data, comps, or reasoning to back up your answers.

Keep it Clean and Professional

Use simple fonts. Consistent formatting. Color-coding helps too: green for revenue, red for costs. Don’t make them squint.

Better yet? Use a well-designed pro forma financial statements template with linked sheets and charts.

Remember: Clarity = Credibility.

Common Mistakes Founders Make (And How to Avoid Them)

Let’s be real: financials can be scary. So here are some common pitfalls and how to avoid them:

Unrealistic Revenue Projections

Everyone wants to say “We’ll hit $10M in year 2.” But will you, really? Base projections on real data: comps, pilot tests, past performance.

Ignoring Customer Acquisition Costs (CAC)

If it costs you $80 to acquire a $50 customer, you’re not growing, you’re losing money.

Forgetting Seasonality or Delays

Sales won’t always be smooth. Account for slumps, product delays, or external shifts.

Neglecting Cash Flow

Many startups are profitable. They just didn’t have enough cash at the right time.

Never Updating the Model

Your business changes. Your projections should too. Update them monthly or quarterly.

Investors Love Founders Who Know Their Numbers

Here’s the truth: Investors don’t expect your numbers to be 100% accurate.

What they do expect: Don’t hide the logic behind your projections. Show it.

“We’ve assumed a 5% churn rate, $70 average customer spend, and 40% gross margin, all based on real customer data from our pilot.”

This proves you’ve done your homework and aren’t winging it.

Pro Forma Financials vs. GAAP: What’s the Difference?

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For early-stage startups, pro forma financials matter more. Why? Because you may not have much history—but you do have a future to pitch.

Learn the Language of Investors (and Build Like a Pro)

If you’ve read this far, you now know more about pro forma financial statements than 90% of new founders.

You understand:

• What they are
• Why they matter
• What goes into them
• How to build them smartly

But this is just one part of the startup finance puzzle.

‍Learn With Angel School

At Angel School, we teach founders and aspiring investors how to confidently speak the language of venture capital. In our Venture Fundamentals course, we go beyond just projections, we cover:

• Valuation models
• Term sheet terms
• Cap tables and dilution
• Real-life examples from startup founders and investors

Whether you’re prepping your first pitch deck or considering writing your first angel check, we’ve got your back.

Turn your vision into real numbers with Angel School’s Venture Fundamentals course. Happy learning, happy investing!