• Originally published: 10/08/2016 14:50
Last version published: 20/06/2017 12:45
Publication number: ELQ-39361-6
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# How to Make Your Financial Model Stand Out to Investors in 18 Ways

## Introduction

The median investor looking at your proposal is in her 40s. Her eyes are going, not to mention her brain. I look at a lot of spreadsheets and analytic reports, and way too many are difficult to read and therefore hard to understand.

To help me come up with these steps, I interviewed the two most knowledgeable people I know about financial modeling. My colleague Paul Bianco serves as interim CFO for a number of ff Venture Capital’s portfolio companies, and has built and reviewed hundreds of financial models. I also spoke with Michael Hutchens, CEO & Cofounder of BPM Global, which helps organizations more efficiently build and maintain financial models.

• Step n°1 |

## Include a key to abbreviations and terms

While many investors are familiar with terms like DAUs and QoQs, why not make it unambiguous for everyone? In addition, make sure to formally define all terms.

E.g., when calculating “Daily Active Users”, does “active” mean “visited the website once”; “performed an engagement action”; or “bought something”?

• Step n°2 |

->Use commas for all numbers over 1,000; long series of digits are difficult to parse.

-> Use an appropriate number of significant digits. It’s misleadingly precise to have two digits to the right of the decimal in a CAC/LTV multiple for year 3 of your forecast (“Customer Acquisition Cost”/”LifeTime Value of Customer”). It’s too imprecise to show only 1 significant digit right of the decimal when showing a \$2m topline income statement formatted in millions.

->All figures should have a denomination, either in its formatting or at least in the column header.

• Step n°3 |

## Use logical color coding

As a general rule, font coloring is a great way to distinguish constants from formulas, e.g., put your assumptions in blue.

You can use fill coloring to distinguish assumptions cells, so that model users don’t inadvertently make changes to formulas and non-assumptions.

However, when choosing font and fill colors to do this, bear in mind that about 8% of all men are colorblind, and many spreadsheets are printed in black and white. Also, you can’t sort data sets by color coding. Hence, different color shades should ideally be readable even to a color-blind person. To ensure this, the official Standards recommend that assumptions sheets use a light grey fill color, and white/no fill for output sheets.

• Step n°4 |

## Use a minimum font size of 10 points

Font size is the #1 driver of readability. If you have to fit a report on one page, shrink your column sizes and use less white space.

• Step n°5 |

## Do not use hard black lines to divide rows and columns

They make the page very busy and therefore hard to scan. Instead, use alternating shaded lines or use soft dotted gray lines (suggestion courtesy Edward Tufte).

## Any questions on How To Make Your Financial Model Stand Out To Investors In 18 Ways?

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