Over the years, I’ve seen countless pitches for funding, as well as pitching for finance for my own businesses numerous times. Despite how quick and easy shows like Dragons’ Den may make it look – to stand any chance of attracting investment, you have to put in some serious groundwork so that funders have got faith in the credibility of your business plan as well as your ability to execute it. These are my top tips when you are pitching for investment, whether it’s in person or on paper.
- Know your business inside out – As I’ve said in previous blogs, real-life business is not like reality TV. If you’re pitching for investment there’s no room for faltering over figures – at best you look incompetent, at worst it looks like you’ve something to hide. If you want someone to inject cash into your venture, you need to know exactly how much money it has made to date, precisely what you think it could make in the future, and what every penny has been spent on so far. Having a thorough grasp of key metric’s like ‘Client Acquisition Cost, ‘Gross Margin’, ‘EBITDA’ to name but a few is essential – KNOW THEM & USE THEM!
- Upsell your profitability – It sounds obvious but it’s important to be clear about what is so special about your business and why it is going to make money. A good pitch should radiate enthusiasm and explain how the concept is different or better than anything else on the market, whether that’s down to price, service or a completely unique idea. Remember that ultimately investors want to see good returns on their money so the point of your pitch is to make sure you sound like a good gamble. That said, make sure your positivity is just based on polishing the truth – a good investor will have a clear grasp of your business from early in the pitch (or should do) and if your claims and plans are fantasy bullshit, they’ll be out the door in no time!
- Ask for the right amount – Many investment pitches are turned down because they don’t justify the amount of funding that they need. Asking for too little is as bad as asking for too much. Don’t just pluck a figure out of thin air – if you want investment, it has to be for a specific area of growth so you need to calculate how much you need carefully. Some pitchers ask for too much – more than is viable for their turnover or often more than they will ever receive for their required equity in a million years! And don’t forget, every penny of investment you take is going to cost you your precious equity so keep your cash needs tight and don’t waste unnecessary funds on frivolous crap or things that aren’t going to generate income. Pitches can be turned down by asking for too little as well though – if you only need a small sum, would-be backers will wonder why you need investment rather than obtaining a business loan or simply trading yourself into a better position. You and your backers also need to know that the amount you are asking for is enough to see you to cash generation and profitability. Unless a further fund raise is part of your plan from early on, if you take too little funding early on only to burn through it and hit a brick wall then you will find your investors have you by the balls if you have to go back for more – that is if they are even still speaking to you!!
- Be confident and convincing – If you’re delivering a pitch in person, your own presentation counts for a lot. If you’re fronting up your business on a day-to-day basis, potential investors have to believe in you, as well as your ideas, so that means coming across as confident and polished. Not all pitching scenarios are like Dragons Den – you may just be talking to investors on a one-to-one basis – but if delivering your presentation is likely to turn you into a nervous wreck, you need to practice, practise and practice some more until your delivery is flawless. If that still fills you with fear, think about whether there’s someone else appropriate within your company to deliver the bulk of the presentation – if you are the sole owner of the business though, you’ll still need to be heavily in the picture though.
- Make it look pretty – These days it’s unlikely you’ll be pitching without some sort of visual backdrop, whether that’s a presentation running in the background or a striking document that you can hand over. If design isn’t your forte, and for most people it’s not, it is worth paying a professional to tart up your graphics so they have the wow factor. First impressions count in almost every aspect of life, and pitching for investment is no exception.
- Prepare for a grilling – Like anyone handing over serious sums of money, investors want to know what they’re paying for, and they are likely to quiz you to find out. Treat your pitch like a police interrogation (although there is no opportunity or ‘no comment’!), and make sure you can answer every query from who your target customer is to what your career successes have entailed in the past.
- Make the exit clear – Even if you can’t ever see yourself leaving your business, all a potential investor wants to understand is how he is going to get his money back and a return on it. In a pitch, you need to make it clear how the exit strategy will work, and at what point you see it happening, so that would-be funders can view your venture as a route to making money. A future sale doesn’t have to be the only route – a highly cash generative business could provide sufficient returns for investors via the payment of dividends or even provide the ability for you to buy them out when the time is right.
If you are looking for investment, need some tips about finding funding for your business (whether that is investment or loans), then Get in touch!