When you’re pitching to an investor, your financial forecast will need to stand up to scrutiny. Nick Kingsbury advises how to avoid one of the big pitfalls for entrepreneurs raising capital – a rickety revenue projection.

Watch technology investor Nick’s video and check out his Q&A for more.

Why have you picked three years and £5m in revenues?

I want to focus on a future point where revenues have climbed significantly and where the financial plan is based on a model of how you expect the business to build. If the timeline is shorter, the plan is just an extrapolation of the here-and-now; if longer, it is too fanciful. £5m is probably a good average of the plans I actually see. None of this is exact of course but illustrative to make a point.

What should I expect from sales?

From your early-stage business sales team, expect unpredictability! There are models of what average salespeople sell in well-established businesses (£500k to £1m in new sales per annum) but you are not well-established. You probably have a novel product that takes some explaining and requires your customer to figure out best to use it. Sales achievement is hugely variable at the best of times.

So, how can I build a revenue forecast?

A better question is, “how should I build my business?”. Early sales are hard; it’s the “doing the impossible” phase. Try and be focused on a sector or a niche within it. Be utterly compelling to that sector. With a business application it is easy to think about this – the sector could be “insurance brokers” and the niche be “tier two brokers that focus on general insurance”. With horizontal plays, it could be niches around the nature of the platform or the tech they us.