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How Startups Should Report Financial Results

I asked Rick Eaton, CFO of
Hashable, to write for you a sanitized version of some of the detailed reports that Hashable provides to its investors (which includes us).  He’s provided below a template for both the cover email and the detailed report.  Rick was previously CFO of our former portfolio company Quigo, sold to AOL for >$340m, so he has a lot of insight on this topic.


Getting ready for a board meeting is a busy time for most startups. Often, the financial statements and slides are prepared just before an agreed upon deadline. Sometimes, despite sending the package in advance, it’s clear that some members haven’t had the time or physical venue to open and review the various attachments. They need the information in a form conducive to viewing on a mobile device. It’s also the case that some people find it easier to digest financial information when presented as text — instead of in spreadsheets and tables.

While it’s not always practical to prepare a cover email summarizing the results, there is great value to providing a text-only cover email allowing for mobile access of the results. In the group dynamics of a board meeting, anything surprising or misunderstood can really hinder the flow and effectiveness of the team. Giving members the basics in advance and in a form that is easy to digest from a mobile device can avoid surprises and unnecessary tensions. An additional benefit is that the process and discipline of verbalizing the results also helps catch errors and forces a deeper understanding of the operations. So, if time is available to prepare a short email cover narrative about the financial results, it can tee up a more constructive exchange during the board meeting.

Here are some guidelines for things to address in such a cover note.


At a minimum cover this:

1. How much cash do we have?

2. What is the current burn rate and what is expected?

3. How long will cash last? When will we need to raise more capital?

4. How many options are left in the option pool expressed as a % of fully diluted shares?

5. How many employees do we have?

6. How many employees do we expect to hire near term and will the option pool be sufficient to get us through the next capital raise?

Ideally cover this as well:

7. Revenue variances as compared with the budget and descriptions of key drivers of revenue growth or lack thereof vs. expectations set at the previous meeting

8. Try to express variances in terms of both rate and volume.

9. Gross profit or contribution profit variances with plan and key drivers.

10. Express margin impact in terms of both cost rates and volume.

For “extra credit” as you grow and gain traction, it helps to marry the financial data with operations data and provide a narrative on key performance metrics as well. This is often difficult for companies in the startup phase to do in a manner that is both efficient and meaningful, but expansion stage companies are more likely to be able to provide this and it pays dividends in making meetings productive.

11. There are many important metrics. A sampling of this information for two different business types appears below.

I. Subscription revenue business – key metrics for customers:

Revenue per customer

Cost per customer

Contribution profit per customer

Cost to acquire a customer

Average life of a customer

Churn rate

Lifetime value of a customer

II. Advertising revenue with a sales-team driven business

Number of customers active during the period

Revenue per customer

A narrative on the health of the sales pipeline

Revenue per sales person

Quotas assigned to sales personnel

Number of sales people on track to make quota

Progress of new sales personnel towards making quota

Commission expense as a percent of revenue and gross profit




On a year-to-date basis through MONTH, YEAR, we posted an EBITDA loss of ($XXX), which is $XX or X.X% favorable to the budgeted EBITDA YTD loss of ($XXX). We averaged XX.X FTE’s (full-time equivalent employees) during the X months ended MONTH, as compared with a budgeted average of XX.X FTEs, and this accounts for most of the favorable EBITDA variance. Our average FTE has cost us about $XX.X per month during this period.  Notably however, this average declined in MONTH to approximately $XX.X, largely as a result of a savings from switching health insurance providers. Our cash balance at the end of MONTH stands at $XXX, approximately $XXX favorable to budget.


For the month of MONTH, we posted an EBITDA loss of ($XXX), which is $XXX favorable to the budgeted loss of ($XXX). The favorable variance is principally attributable to running with lower FTEs at a relatively lower cost per FTE and from lower marketing activities. We ended MONTH with XX full-time employees, which was lower than our budget of XX employees. Our EBITDA loss in the MONTH of ($XXX) compares favorably with an EBITDA loss of ($XXX) in MONTH-1, ($XXX) in MONTH-2, and ($XXX) in MONTH-3.


We expect, as compared to the budget, to continue with a lower number of FTEs on average and lower benefit costs. We expect to [INVEST MORE OR LESS IN MARKETING]. Accordingly, we expect to see the monthly EBITDA loss in the ($XXX) range in MONTH+1 and then [INCREASING OR DECREASING] to the ($XXX) range as we INVEST MORE OR LESS IN MARKETING and add X FTEs in the next fiscal quarter. There is an additional one-time expense projected for the month of December of approximately $XX, cushioning [A ONE TIME EXPENSE]. We expect to post an EBITDA loss for the year that is over $XXX favorable to budget. Naturally, this view is subject to change depending upon opportunities that may arise.


We ended the month of MONTH with approximately XXX registered user accounts, up from XXX registered user accounts at the end of MONTH-1 and up from XXX at MONTH-4. The increased growth rate in registered accounts during MONTH was primarily attributed to [REASON]. We had been averaging XXX signups per day in MONTH prior to [REASON]. We averaged about XXX signups per day after [REASON]. For the first 14 days in MONTH+1 we averaged XXX signups per day as a result of [REASON]. We ended with XXX registered accounts on the 14th day of MONTH+1. We expect the daily signups to [INCREASE, DECREASE, OR REMAIN CONSISTENT] as compared with this experience rate.


On a trailing 30-day basis, we’re seeing about XX% of our registered users as active. This percentage rose to the XX%-XX% range towards the end of MONTH and through the first two weeks of MONTH+1, buffeted by [REASON]. We’re seeing about XX% of our registered users as active on a daily basis.


For the month of MONTH, employee compensation, bonus accruals, taxes, and benefits totaled $XXX, accounting for XX% of our EBITDA loss of ($XXX). Contractors, another way to pay for personnel, were $XX or XX% of cash expenses. So, XX% of our cash expenses went for labor.

Our next largest item remains the $XXX per month we spend on IT/operations, comprising XX% of cash expenses. We made an improvement in MONTH that [REASON] should save us $XXX per month going forward.

Occupancy was $XXX during the month of MONTH and represents XX% of monthly cash expenses. It’s largely fixed. We held sales & marketing expenses to $XXX in MONTH or XX% of cash expenses, as compared with a budget of $XXX. G&A expenses were at about $XXX, or XX% of monthly cash expenses, largely because of lower XXXXX expenses. We expect this trend to continue for several months.


We expect to end the year with a cash balance of $XXX, which is $XXX favorable to budget – and continue to expect that cash balance to get us through MONTH, YEAR, targeting a financing by early [SEASON].

Our equipment financing debt balance stands at $XXX as of the end of MONTH. We expect that payments for debt service of $XXX per month will continue to bring the debt balance down to about $XXX at the end of the fiscal year. We have $XXX available for additional borrowings under our credit facility, subject to our [MOST RESTRICTIVE COVENANT].

The attached model shows our projections on a monthly basis through the end of the fiscal year. In making our projections beyond the end of the fiscal year, we’re assuming we adjust the then expected normal monthly EBITDA loss of $XXX as follows:  $XXX for annual bonus payments and taxes to be made in February 2012; $XXX in incremental marketing; $XXX to settle the debt balance; $XXX for a month’s trailing non-payroll cash liabilities; $XXX in capex and $XXX per month in cushion on the monthly burn estimate. Naturally, if things change and we hire more headcount, the burn will be higher and the runway will be shorter – probably by about $XX per month per incremental FTE (fully loaded).


There is currently XX% available for grant in the pre-approved employee stock option pool. Our targeted headcount additions suggest the pool should last us until [MONTH, YEAR].

Please feel free to call with any questions you may have.


For Revenue Generating Company, add:


Revenues for the X months ended MONTH, YEAR were $XXX, favorable by XX% to budgeted revenues of $XXX. Revenues of $XXX in the month of MONTH were also favorable, by XX%, to budgeted MONTH revenues of $XXX. The revenue trend for the last several months is: MONTH-1 $XXXX, MONTH-2, $XXX, MONTH-3 $XXX and MONTH-4 $XXX.

Driving the increase in revenues on a year-to-date basis and in MONTH is a combination of [Rate and Volume]. Average price was XX% higher than expected. Both average deal size and number of deals has been higher as well. Average deal size was $XXX as compared with a budget of $XXX and we were running XX deals as compared with a budgeted number of XX deals. We expect this trend to continue for the next several months and are taking up our projections accordingly.


Gross profit for the X months ended MONTH, YEAR was $XXX, favorable by XX% to budgeted gross profit of $XXX. The additional volume was the key driver of the favorable variance as expected costs per deal were higher than anticipated. We believe the reason for the higher costs resulted from [DESCRIBE REASON]. Our margins suffered slightly by XX points as a result of this with gross margin coming in at XX%, as compared to budget of YY%. We expect this trend to continue for the next several months as well. We are [DESCRIBE PLAN] to address this margin pressure.

(Image via CrunchBase)

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