This month’s post was contributed by Digital Exits, a broker selling online businesses. If you would like to be a guest contributor to this blog, please send your idea for submission to email@example.com or use our contact form.
We’ve all heard stories about entrepreneurs who started with nothing and worked and worked until they built a large, successful business. In general, these stories are great. They remind us of the value of working hard and never giving up on our dreams.
But these stories also muddle the picture, for at some point in an entrepreneur’s journey, they will need to enlist the help of an investor. It’s that old saying, it takes money to make money.
However, pitching to investors can be both exciting and terrifying.
On the one hand, a successful presentation could be just what you need to turn your dreams into reality. But on the other hand, failing to impress investors could deliver a major blow to your confidence.
This high-risk, high-reward environment makes for great drama, which is why the show Shark Tank is one of the most popular television programs currently airing. But when pitching to investors, you’re not entirely at their mercy.
Remember: they are looking to take risks and make money. Getting someone to buy into your business is less about luck and more about telling them the right information in the right way. In general, this can be easier said than done, but if you make sure to include the following five things in your pitch, then you’re going to put yourself in a much better position for success
#1 Unique Value Proposition
Every business in the world exists to solve a problem. Never forget this.
Ideally, each business would solve a different problem, but there is bound to be some overlap. However, if your business addresses something already being done by someone else, then what do you do that’s different?
Do you offer a cheaper solution? Is it somehow better? More fun? More environmentally friendly?
Whatever it is, you need to make the reason your business exists abundantly clear. If there is any doubt that what you’re doing is unique, then you will most certainly lose the attention of those to whom you are pitching.
This can be done in a variety of different ways. You can tell a story, offer testimonials, ask questions, etc. It doesn’t really matter, as long as investors known within the first few seconds of your presentation why your business exists and what makes it different from anyone else trying to address the same problem.
#2 Proof Your Idea Works
When asking for someone’s money, you better have some proof to back up what you’re claiming. There’s an expression in business that good ideas are worthless.
Of course, this isn’t entirely true—an idea is the foundation of a company—but it gets at the idea that you need to go beyond just thinking about your business.
Spend some time talking about what you’ve already done. This will help show to investors that your UVP is real.
It’s one thing for people to think your idea is good, but it’s quite another for them to open up their wallets and give you money for it.
As a result, you need to have some tangible evidence that people are doing this. Set up a pop-up store, sell at some local markets, open a food truck. What you do doesn’t matter, as long as investors can see there is not only a theoretical market for your idea but also a practical one.
#3 Systems and Processes
Small businesses are notorious for being inefficient. Lack of experience often makes it difficult for new business owners to navigate the market, and this can lead to a lot of waste.
When it’s your own money, this isn’t such a big deal, although you should certainly try to avoid it. However, when you’re taking someone else’s money, this type of approach simply won’t work.
You need to have a plan for how you’re going to spend the money investors give you. But perhaps more importantly, you need to have systems and processes set up to prove you’re not going to waste it.
Part of the reason this is so important is because it makes your business more predictable.
If you ask for $200,000, but you don’t have systems set up for managing payroll, creating content, filling orders, etc., then investors will worry that this money will get lost in the shuffle of running the day-to-day business instead of its growth.
As a result, when pitching, it’s important to give investors a good snapshot of how your business runs. What occurs on a daily basis? And what are you going to do to make sure the money they give you contributes directly to the growth of your business?
Answering these question is critical to the success of your pitch.
Never forget that investors are looking to make money. They aren’t offering to help you solely because they want you to achieve your dreams. Instead, they are giving you cash so that you can turn it into more cash.
Because of this, it’s important you highlight in your pitch exactly how you plan to scale your business.
One way to do this is to show what you’ve done to grow in the past, as this will help demonstrate how additional funds could help you grow even further.
Another thing you can do is point to areas of the market you are not exploiting but that you could be if you had some additional money to play with.
For example, maybe there’s an international market that would be great for your product, or maybe there’s a demographic group that you’re not reaching.
No matter what it is, if you can show to investors that you’ve got room to grow and that their money will help you expand to the point where everyone will make money.
# 5 Future Plans
Most investors aren’t interested in giving money to people looking for a quick buck. Instead, they want to invest in companies that are going to grow up into something relatively permanent.
In fact, most investors will want a stake in the company, or at least a percentage of its shares, before giving you money, as this is a great way for them to garner a great ROI.
As a result, it’s important to show investors where you plan to take the company. Of course, everyone knows you want to grow it. But what do you want it to look like? What’s you mission?
This will help show to investors that you’re serious, and this inspires confidence and encourages action.
However, this part should really come towards the end. Make sure investors are clear about what they stand to get before thinking too far in the future.
It’s true that pitching can be a terrifying thing. The fear of rejection is strong in all of us. But if you believe in your idea and in yourself, and if you go in there with a plan, then your chances are good for securing the funding you need to grow your business and turn your dreams into reality.
Addendum – Looking for a Way to Document These Things?
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