Concept → Project → Venture
Sixth Element works with its clients to
prepare for the investment community
Sixth Element helps create
Investor-grade pro forma design and analysis,
feasibility studies & business plans
Most Important Entrepreneurial Tool – The Dynamic Pro Forma
There are basically only two major subjects:
- A feasibility study – an ROI calculated from a pro forma
- Risk management – how the risks have been (or will be) contained or marginalized.
The pro forma creates an idea of what actual results could be if the inputs/assumptions hold true; it must predict, at least, an acceptable return (and enough cash for debt coverage) compared to the risks, for a project to succeed (or get financing). The pro forma analysis is simply an initial screening tool for investors to quickly learn if a project is worth their time and trouble (and, potentially, investment of funds).
A common format is a static pro forma, where the financial results are displayed only as values, or formulae with locked input cells (i.e., the entrepreneur cannot change the input values). The results are restricted to one scenario by the design of the spreadsheets. On the other hand, a dynamic pro forma has the financial results displayed as formulae, which grab data from unlocked input cells (i.e., the entrepreneur can change the input values).
The ROI is just the tip of the iceberg of the dynamic pro forma, which does not simply create a financial prediction, but reveals what is behind the numbers. A dynamic pro forma clearly illustrates how a financial result was determined, reveals the project risks, and defines the venture road map, resulting in improved odds of project success.
Sixth Element specializes in dynamic pro forma design and analysis.