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Investor reporting is one of the most important things managers can focus on to improve investor confidence and help fund future investments. A great investor report tells a concise and compelling story about the state of a business at any given time. These reports typically cover the core KPIs of all of the departments in your business, including:
We asked 40+ experts what KPIs you should include in an investor report as well as the best ways to use this type of business report to build a better relationship with your investors and ultimately increase funding.
Here are some KPIs our contributors consider important to include in business reports to inspire more investor confidence. These are the same KPIs and metrics you could include in a comprehensive financial dashboard.
Are customers sticking around for a long time? If retention is high, this means that your product is sticky and can help inspire investor confidence.
“The KPIs that our investors pay the most attention to are customer retention and month-over-month sales and revenue,” says Katherine Brown of Spyic, “Unlike viral media publications, investors look into factors that are crucial for the business’s success and what folds into the company’s more significant goals. It is likely financial gains and losses are the stems of our investor’s judgment of success though there are other factors to consider.”
Charting your top-line revenue going up and to the right might look great. However, if customer retention or profit is low, then you are in for a rude awakening.
Brian Donovan of Timeshatter says, “Our investors care about the profit we are making (and how that is increasing), and they also want to know that our clients are satisfied enough to refer us to new clients, which is one of our main ways to secure new leads.”
This conveys to investors how your business is progressing.
“Reports to investors should include projected income statements and balance sheets, followed by the actual statements vs. the projected after every quarter,” says Brian Dordevic of Alpha Efficiency. “This will show investors how your business is progressing based on projections. The projections will already show how profitable your business can be, but knowing your actual numbers will prove to your investors that the projections are achievable.
There’s a big difference between projections and real numbers. Projections can only paint you a picture of what could happen, while actual numbers will show you what is happening at the moment. That’s why it’s key to show both the projected and actual numbers so that investors know what to expect!”
Just looking at revenue and profit numbers can obscure what’s happening in the business. That’s why it is key to share revenue concentration data.
“Profitability over time and revenue concentration are the two most important KPIs,” says Jim Pendergast of altLINE Sobanco. “Profitability over time lets investors know how your revenue has impacted the company. Those who believe they aren’t making a good investment will pull funding, but if you can convince them that you’ve got proof that their contributions are making a difference, they’ll likely invest more. Revenue concentration lets investors know where your revenue is coming from.
For example, if you’re getting most of your income from one or two customers, there’s a possibility that you could lose revenue if one or both pull out. Investors like to see a diversified revenue concentration report.”
Another revenue KPI to pay attention to is ARPU, which is the average amount of revenue generated by a customer in a given time period.
“It’s crucial to know how many customers you’ll need each year to stay in business,” says Lynda Fairly of NumLooker. “The majority of C-level executives rely significantly on ARPU to make daily choices.”
Revenue and profit are financial metrics that show the health of your business. Cash flow is how much money you have in the bank.
“In what we usually do, we include a statement of cash flows that tells how much money went in and out of business during a specific time frame (e.g., monthly or annually),” says Amanda Royle of Imgkits Studio. “Because this is important to investors because it shows how much actual cash the company has generated. It also measures how a company generates money to pay its debt obligations and fund its operating expenses. And it gives the investors a vision of how much the company needs when it comes to funding.”
In order to hit your revenue, profit, and cash flow goals, you need people. That’s where operational KPIs like resources needed for execution can be helpful.
“Bear in mind that measurements should cover not only traditional marketing KPIs (engagement, traffic, conversions, etc.) but also existing technology, budget, and manpower,” says Tim Absalikov of Lasting Trend. “The latter is also known as the resources needed for execution. A digital business strategy must be aligned with what the company can handle or prepare it for certain technical assignments. Then, the plan will be put into force with no hurdles.”
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The other key component of a great investor report is how you actually present the data to your investors.
While there are numerous ways you can go about it, around 60% of our contributors suggested creating a presentation.
Here are top 6 tips our contributors shared on presenting investor reports.
First things first – you have to make sure your investors stay up-to-date on a regular basis.
So, how often should you report to investors? According to our contributors, it’s best to report either monthly or quarterly, depending on the nature of your business.
“When raising funds and keeping in touch with potential investors, it’s crucial to keep them on a loop and send regular reports, either weekly, bi-weekly or monthly,” says Jonathan Aufray of Growth Hackers. “In those reports, you don’t want to send too many metrics but rather focus on the most important ones for your business. In addition to those metrics, you can also mention the achievements and the progress you’ve made.”
Gerrid Smith of Joy Organics agrees and adds, “Regular reports create positive investor-firm relationships. Regularly updating investors builds and maintains mutually beneficial connections between you and your investors.”It occurs often when companies have the point on their agenda of how to create an investment app where they could track all the investment data online so that they could share data with investors regularly and with a single click.
When you keep investors informed, you establish trust and excitement. Rather than delivering a blanket Bcc version to all of your investors, go the extra mile and personalize your business dashboards.
Gerrid Smith of Joy Organics shares his opinion on the matter, “Direct your message to them and present information that is specific to their investments or interests. This will make them feel special and inspire them to get engaged with your company if they discover an opportunity that they are interested in. Send your tailored reports to recipients via a secure link so you can see if they’ve opened and read them.”
One way to build more trust is through radical transparency.
“From our experience, being transparent with their money’s ROI builds trust, which in turn reinforces our investors’ confidence in our company,” says Jake Smith of Absolute Reg. “From there, they’ll be more comfortable with providing additional funding, and we can use that to encourage other interested parties to do the same.”
Kyle Asman of Backswing Ventures agrees, “The more transparent you are with investors the more likely you are to increase funding. If you provide financials on a quarterly basis, as well as status reports on each of your investments, that will help to increase funding in most cases. We report on a monthly basis, which keeps our investors very informed and happy.”
A key part of being transparent is showing how their capital is being deployed.
“Your reports can be used to educate investors on your progress in projects and where exactly the funding would go,” says Jeff Goodwin of Orgain. “For example, if you find success when putting more money into the development of more products in a line, you can show that through your reports. Any trends, good or bad, can also contribute to your pitch and how those numbers will be further affected with more investment. Investors want to see that the deal they are making is safe and will make a return, so proving that as soon as possible is key.”
Matthew Ramirez of Rephrase explains, “Investors primarily want to know how you intend to allocate capital, which should be clear from your product and company roadmap. When you report figures to your investors regarding users, MoM growth, etc., include a note about capital allocation if you’ve made any significant changes to the plan they last saw and a note regarding what you would love to accelerate if you had more capital available.
In my first company, I found myself seeking capital for product and market expansion, and the best way I found for getting that capital was to have investors as partners in that process, always apprised of and able to my thinking around how best to allocate capital. “
Jonathan Baillie Strong of Spotlight Podcasting adds, “If they’re kept in the dark, they can start to doubt their investments and even your leadership. Most investors feel that organizations that communicate well do better, and that those who communicate are more likely to receive assistance from others. When your investors have faith in you and the performance of their portfolio, they are more inclined to be positive about the future and more eager to put money into it. When investor confidence rises, they prefer to invest at current prices.
When confidence drops, so does spending and risk-taking. When the news regarding the future is good, investors are said to be optimistic. You’re always thinking about the next round of fundraising as a fund manager. Building trust with your investors is essential for securing future investments and increasing the likelihood that they will refer other potential investors.”
Don’t just share the potential growth opportunities that you’ve uncovered. Instead, create actual forecasts describing your business’s trajectory.
“Reports should contain forecasts and any vital projections of the business’s future to convince investors to increase funding,” says Michelle Ebin of JettProof. “The only way to convince investors to increase their funding is to explain the potential growth of a business. Investors want to invest in a company that will experience growth to increase the potential returns of their money. The report needs to utilize data for investors to believe in its accuracy. You can’t convince investors to put in more money if you don’t show them concrete evidence that your business will experience growth after additional funding.”
One of the fastest ways to lose investor confidence is to have inaccurate reports.
Brian Corday of BullBear Partners explains, “One of the main reasons that potential investors look at is the effectiveness and quality of a startup’s financial reports. If you want to increase funding, you need to deliver high-quality financial reports. This means accurate numbers backed by solid data from your business dashboard software and presented in a compelling way.
It also means updating your investors regularly. Keeping them informed about your company’s progress and generating positive buzz about your business is a great way to increase funding. In a clear and concise manner, preferably with both the numbers and accompanying graphs/charts which you can print out separately or include directly in your report. You should make sure that all of your data is up-to-date and accurate”
In sum, your investor reports should provide a comprehensive snapshot of the state of your business. Creating these reports on a regular basis helps build confidence and can increase the likelihood that you’ll get more funding. Financial reporting software like Databox will cut your time for building reports in half and help present your results in an easy-to-understand manner.
With Databox, investors will never have to search for the bottom line again. They will easily get a summary of your business expenses and cash flow at a glance, view revenue generated and forecasted, and much more. Overall, you (and them) will never have to make financial guesstimates again.
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Jessica Malnik is a content strategist and copywriter for SaaS and productized service businesses. Her writing has appeared on The Next Web, Social Media Examiner, SEMRush, CMX, Help Scout, Convince & Convert, and many other sites.
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