Free Cash Flow, otherwise known as FCF, is the one of the most important financial metric that we look at when evaluating a startup.
This is because it helps to guide us on how much money the business will need to grow, and can help us decide how much money to allocate to an investment.
We've created a Google Sheets template of a general purpose FCF projection for one full year.
After the first meeting we have with a startup, we will normally ask them to complete a variation of this form (and also lend a hand if required to do it!). This is because once complete, we will be able to tell if the business really has potential, or if it's not something that we wish to get involved in.
We're not stupid enough to believe that what is written in the projections is what will happen, but this type of planning helps because you build a good model of the challenges that the business will need to overcome in order to be successful.
"Planning is everything, the plan is nothing." Dwight Eisenhower.