financial-narrative-generator

# Financial Narrative Generator

## Overview

Transform financial data from spreadsheets into compelling narratives that drive decision-making. This skill encodes the frameworks CFOs use to explain performance, justify forecasts, and communicate financial health to boards, investors, and leadership teams. Numbers inform; narratives persuade.

## When to Use This Skill

- **Board deck financial sections** — Translating results into board-ready narratives
- **Investor update letters** — Monthly or quarterly investor communications
- **Variance analysis** — Explaining actual vs. plan with context
- **Forecast narratives** — Supporting forecast numbers with reasoning
- **Management reporting** — Monthly business reviews with insights
- **Fundraising materials** — Financial storytelling for pitch decks

## Core Narrative Frameworks

### Framework 1: The Results-Drivers-Actions Structure

Every financial narrative should follow this pattern:

```
WHAT happened (Results)
↓
WHY it happened (Drivers)
↓
SO WHAT we're doing (Actions)
```

**Example:**
> **Revenue grew 18% YoY to $4.2M** (Result)
>
> Growth was driven by expansion in enterprise accounts (+32%) and improved conversion rates from our new onboarding flow. Mid-market growth slowed to 8% due to longer sales cycles following the competitive price cuts in Q2. (Drivers)
>
> We're doubling down on enterprise with two additional AEs starting in August and launching a mid-market acceleration program in Q4. (Actions)

### Framework 2: The Variance Explanation Model

For any metric that deviated from plan:

| Element | Question | Example |
|---------|----------|---------|
| **Magnitude** | How significant? | "$400K below plan (8%)" |
| **Direction** | Favorable or unfavorable? | "Unfavorable variance" |
| **Permanence** | One-time or ongoing? | "Timing issue — will reverse in Q4" |
| **Controllability** | Could we influence it? | "External market factor" |
| **Response** | What are we doing? | "Adjusting forecast, no action needed" |

**Variance Narrative Template:**

> [Metric] came in at [actual] vs. plan of [plan], a [favorable/unfavorable] variance of [amount] ([%]). This was [primarily/partially] driven by [driver 1] and [driver 2]. [X%] of this variance is [one-time/recurring] and [controllable/external]. We [are taking action / expect resolution] by [timeframe].

### Framework 3: The SaaS Metrics Story

For software/subscription businesses, organize narrative around:

#### Growth Story
- ARR/MRR movement: Starting → New → Expansion → Contraction → Churn → Ending
- Net Revenue Retention (NRR) trend and drivers
- New logo acquisition vs. plan

#### Efficiency Story
- CAC Payback and trend
- LTV:CAC ratio
- Sales efficiency (Magic Number)
- Burn Multiple

#### Health Story
- Gross margin and trend
- Operating margin trajectory
- Cash runway
- Rule of 40 performance

## Audience-Specific Narratives

### Board of Directors

**Priorities:** Strategic progress, risk awareness, fiduciary oversight

**Tone:** Confident but transparent, forward-looking, minimal jargon

**Structure:**
1. Executive summary (1 paragraph: performance, key wins, key risks)
2. Financial performance vs. plan (high-level, focus on material variances)
3. Strategic metrics and milestones
4. Key decisions needed from board
5. Forward outlook

**Sample Board Narrative Opening:**

> Q3 was a strong operational quarter despite macro headwinds. Revenue of $4.2M beat plan by 8%, driven by faster-than-expected enterprise adoption. We achieved profitability for the first time (EBITDA: $120K). Cash position remains healthy at $8.2M, providing 18 months runway at current burn. Our primary concern remains the elongating mid-market sales cycle, which we're addressing through product-led growth initiatives launching in Q4.

**Avoid:**
- Excessive detail without synthesis
- Jargon without explanation
- Hiding bad news in appendices
- Forward-looking statements without basis

### Investors

**Priorities:** Growth trajectory, capital efficiency, path to outcomes

**Tone:** Professional, transparent, confident in strategy

**Structure (Monthly/Quarterly Update):**
1. Headline metrics (ARR, growth rate, runway)
2. What happened this period (wins, progress)
3. What we learned (insights, pivots)
4. What's next (focus areas, milestones)
5. Ask (if applicable)

**Sample Investor Update Opening:**

> Team,
>
> Strong month. July ARR grew to $2.4M (+15% MoM), our strongest growth in three quarters. Three enterprise deals closed totaling $380K ACV, including [notable logo]. Pipeline is healthy at $4.2M weighted, though conversion timing remains variable.
>
> The headline: our enterprise pivot is working. Our CAC payback in enterprise dropped from 18 to 14 months. We're now investing more heavily there while maintaining mid-market momentum.

**Avoid:**
- Cherry-picking favorable metrics
- Excuses without accountability
- Overconfidence on projections
- Forgetting the "ask" when needed

### Internal Leadership / Management

**Priorities:** Operational insights, accountability, course correction

**Tone:** Direct, analytical, action-oriented

**Structure (Monthly Business Review):**
1. Scorecard: Key metrics vs. targets
2. Deep-dives: Areas off-track
3. Wins: What's working and why
4. Risks: Emerging concerns
5. Actions: Decisions and owners

**Sample Management Narrative:**

> July closed at $890K revenue, 4% below the $925K plan. The shortfall was concentrated in mid-market (-$55K) while enterprise exceeded plan (+$20K).
>
> Root cause: Three mid-market deals slipped due to extended legal review. Two are expected to close in August (confirmed by champions); one may be at risk.
>
> Action: Sales Ops is implementing a new legal tracking stage in our CRM. Legal is adding capacity with outside counsel for routine reviews. Expected resolution: August, but we're adjusting the Q3 forecast down by $80K as a buffer.

## Metric-by-Metric Narrative Templates

### Revenue Narrative

**At or Above Plan:**
> Revenue of $[X] came in [at/above] plan by [%], marking our [Nth consecutive month/quarter] of plan attainment. Growth was led by [segment/product] contributing $[Y] ([Z]% of total). [Context on sustainability and forward trajectory].

**Below Plan:**
> Revenue of $[X] fell [%] short of the $[Plan] target. [Primary driver] accounted for [$] of the shortfall, while [secondary driver] contributed [$]. We view [X%] of this as [timing/recoverable] with the remainder reflecting [updated view]. Actions include [specific initiatives].

### Gross Margin Narrative

**Template:**
> Gross margin of [X]% [improved/declined] [Y] basis points vs. [prior period/plan]. [Improvement/pressure] came from [hosting costs, support scaling, pricing, mix shift]. We expect margins to [trajectory] as [reasoning].

### Cash Narrative

**Template:**
> We ended the period with $[X] in cash, [up/down] $[Y] from [prior period]. Cash [consumption/generation] was [higher/lower] than expected due to [timing of receivables, payables, one-time expense]. At current burn of $[Z]/month, runway is [N] months. [Commentary on path to profitability or fundraising].

### CAC Payback Narrative

**Template:**
> CAC Payback [improved/worsened] to [X] months from [Y] months in [prior period]. The [improvement/deterioration] reflects [change in CAC, change in ACV, change in gross margin]. By segment: Enterprise [N months], Mid-market [M months]. We're focused on [specific initiatives] to drive payback below [target].

## Forecast Narrative Construction

### Building Forecast Credibility

Every forecast narrative should address:

1. **Methodology** — How did we build this forecast?
2. **Assumptions** — What needs to be true?
3. **Confidence** — How certain are we?
4. **Risks** — What could make us wrong?
5. **Scenarios** — What does upside/downside look like?

**Forecast Introduction Template:**

> Our Q4 forecast projects revenue of $[X], representing [Y]% growth QoQ. This assumes [assumption 1], [assumption 2], and [assumption 3]. We have [high/moderate/low] confidence in this forecast based on [pipeline coverage, historical accuracy, leading indicators]. Key risks include [risk 1] and [risk 2]. In a downside scenario, revenue could be as low as $[downside], while strong execution on [initiative] could drive upside to $[upside].

### Assumption Documentation

Always state assumptions explicitly:

| Assumption | Basis | Risk If Wrong |
|------------|-------|---------------|
| 3 enterprise deals close in Q4 | Pipeline at 80%+ probability | -$200K revenue |
| Hiring 2 AEs by Oct 1 | Offers accepted, start dates confirmed | Q1 pipeline at risk |
| Churn holds at 1.5%/month | No major contract renewals at risk | -$50K/month if 2.5% |
| No price increases | Competitive pressure | Margin improvement delayed |

## Financial Communication Best Practices

### Writing Principles

1. **Lead with the headline** — Don't bury the key message
2. **Quantify everything** — "Strong growth" < "18% growth" < "$400K additional revenue"
3. **Provide context** — vs. plan, vs. prior period, vs. benchmark
4. **Own the narrative** — If you don't explain variance, readers will assume the worst
5. **Balance confidence and humility** — Be direct but acknowledge uncertainty

### Red Flags to Avoid

| Bad | Better | Why |
|-----|--------|-----|
| "Revenue was impacted by market conditions" | "Revenue fell 12% as three deals delayed due to customer budget freezes" | Specificity builds credibility |
| "We expect improvement next quarter" | "Pipeline of $2M at 60%+ probability supports our Q4 target" | Evidence over hope |
| "Costs were higher than expected" | "Implementation costs exceeded plan by $80K due to scope expansion on [project]" | Accountability |
| "We're performing well" | "We're at 108% of plan YTD, ranking #2 among peer cohort" | Benchmarking |

### Number Formatting Standards

| Type | Format | Example |
|------|--------|---------|
| Revenue | $X.XM or $XK | $4.2M, $890K |
| Percentages | X% (no decimals unless material) | 18%, 2.3% |
| Variances | +/- $X (Y%) | +$200K (8%) |
| Ratios | X:Y or X.Xx | 3:1 or 3.2x |
| Dates | Month Year or QX'YY | October 2025 or Q4'25 |

## Resources

### references/
- **metric-definitions.md** — Standardized definitions for SaaS and financial metrics
- **benchmark-data.md** — Industry benchmarks for context setting
- **presentation-templates.md** — Structure templates for different communication types
- **variance-categories.md** — Standard variance explanation categories and language

### scripts/
- **narrative-generator.py** — Generates narrative drafts from financial data inputs
- **variance-analyzer.py** — Automatically categorizes and explains variances

### assets/
- **board-deck-template.pptx** — Board financial section template
- **investor-update-template.docx** — Monthly/quarterly investor letter format
- **forecast-template.xlsx** — Forecast documentation with assumption tracking