How to Create Financial Projections for Crowdfunding

CrowdAlthough the rules for equity crowdfunding for non accredited investors still have not been established by the SEC, there may be some expectation, for business owners attempting to raise capital through crowdfunding, to provide some level of financial projections for potential investors.  The Jumpstart Our Business Startups Act opens up a new world of potential funding sources for small businesses and early stage companies.  The Act already outlines certain financial statement requirements based on the amount of investment you are looking to raise, but it does not appear to specifically outline requirements for financial projections or forecasts for a company.

I intend to update this blog post as new rules are released from the SEC, but for now I am going to speculate on a few things, and outline how I believe you should develop your financial projections for your crowdfunding campaign.

Basic Financial Projection Structure

First I think your projections should have the following characteristics:

  • 3 years
  • Monthly projections with annual summary sheet
  • Balance Sheet
  • Profit & Loss
  • Cash Flow Projections
  • Assumptions that demonstrate how you came up with projections

If you provide this level of detail, my guess is that you will be far ahead of the game.

Now let me show you with ProjectionHub exactly how I would create projections for three potential crowdfunding structures.

  • Equity – this is where you actually give up a portion of the ownership of your company to the crowd
  • Revenue Share – this structure allows you to keep ownership of the company and instead you pay a royalty on each sale back to the crowd until they have received the agreed upon return on investment
  • Loan -  this structure allows you to keep ownership and will have set repayment terms

 Step #1

First I am going to start by going to and creating financial projections for an existing business.

Then I am going to choose the Investor Level Projections as seen below:

Investor Projections


Step #2

Now it is time to start setting up your sales projections.  I am going to assume that I am selling a consumer product, and I want 3 years of projections.  First you will be asked to name the product, enter the price, your sales assumptions which should be based on data when possible, and how many days does it take  you to get paid by your customers.  Below is an example for our consumer product:

Crowdfunded Product

Step #3

Now you will enter the number of units of this product you expect to sell each month for the next 36 months.  Again, potential investors want to know that your sales projections are based on data and realistic sales assumptions.  So in this example I am going to assume that we raise the funds in month 3 and we see an immediate 25% increase in sales.  Then I am going to keep in mind the seasonality of our consumer product business, so we will see higher sales during the last three months of each calendar year.

Step #4

Once you have entered in your sales projections it is time to enter in your Cost of Goods Sold.  This can be somewhat tricky depending on which type of crowdfunding you are raising.  If you are doing a revenue share structure, then you should put the royalty amount that goes back to your investors on each unit in one of the Cost of Goods Sold options.  So for this example, I am assuming that our consumer product price is $75 per unit, and we have an agreement with investors that requires us to pay 7% of each sale back to investors until they make their money back plus a given return.

7% of $75 is $5.25 per unit.  I am also assuming that the direct labor cost per unit is $3 and the direct material cost per unit is $5.  I am going to add the royalty to investors in with the material costs per unit since there is not a royalty per unit option.  So the total material cost per unit will be entered as $10.25 per unit as seen below:

Crowdfunded COGS

Step #5

Next you will need to enter in your monthly expenses for the next 36 months.  If most of your expenses are monthly, quarterly, or annual, hopefully this will be a quick section to complete.


Now it is time to enter in your funding that you expect to raise from the crowd.  If you are simply borrowing from the crowd, you might just add a new loan like this:

Crowdfunded Loan


If you are raising equity investment or revenue share investment, you will simply need to enter the investment like this:


Crowdfunded Investment

Step #7

Now you can enter in other assets that you have already purchased or will purchase like equipment, furniture, land, or buildings, and then enter in your current balances for your existing balance sheet.

Step #8

Download and customize your financial projections.  Once you are done you will be able to download an Excel file with your 3 year financial projections which you can then customize.  Here is an example of what your file will look like.

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