Why pro forma matters to a first-time founder
Pro forma figures let you test a future plan or show how a transaction might have affected past results. They can support hiring, fundraising and cash planning, but assumptions drive the outcome. Presenting optimistic adjustments without equal clarity can mislead investors or lenders.
Examples of pro forma
A company earned £300,000 last year. It models £420,000 next year after hiring two salespeople, assuming each adds £60,000 and costs £35,000. The pro forma statement shows the resulting revenue and expenses, but the additional sales remain assumptions, not recorded results.
Common misunderstanding
It is not a pro forma invoice, the draft bill sent before delivery. Pro forma does not mean audited, guaranteed or automatically compliant with accounting standards. It can describe a forecast or an adjusted view of historical results. Readers need to know the period, assumptions and exclusions, especially when management removes costs described as one-off.
When to use it
Use it for scenario planning, budgets, funding discussions or modelling an acquisition. Label assumptions clearly, show a realistic downside case and keep actual results separate. If sharing figures publicly or with investors, follow applicable disclosure rules and avoid adjustments that create a deceptive picture.