Many businesses require outside funding in their startup days. If you’re in the process of starting your own business, chances are you will need to obtain financial backing or risk running out of cash.
Although securing funding can be one of the biggest challenges of starting a small business, you have access to a variety of different funding options, most of which will require you to pitch your idea.
Going into a business pitch, it’s important to have a comprehensive business plan, prepare a concise presentation, and anticipate the questions you’ll be asked. Use the following tips to increase your chances of securing an investment for your startup.
Have a Solid Business Plan
Before pitching your business to investors, you’ll need to create a comprehensive and inviting Business Plan. A business plan is the skeleton of your business and describes your vision and growth strategy. You can make your business plan stand out by following these basic guidelines:
Presentation: First of all, your business plan should look professional. Have it printed and bound to give it a polished look. More importantly, the content should be written in full sentences, free of errors, and properly formatted. A business plan with spelling mistakes or inconsistent formatting might send the wrong message to your investors.
Organization: Sound business plans have descriptions of company structure, marketing strategy, day-to-day operations, and financial operations. Another key part of your business plan is the executive summary—a one-to-two page snapshot of your business written for the benefit of potential investors. The executive summary should contain your capital request, which includes the amount of funding you need, your plan for the money, and an exit plan for the investor.
Analysis: Investors often sneak a peek at your financial statement before the pitch begins, so you’ll want to use appropriate formatting, such as spreadsheets and graphs, to make this section easy for your readers to scan. If investors can get quick access to important numbers such as net income and cash flow before you start, they won’t be distracted by those questions while you’re making your pitch.
Remember, as important as the business plan is, your ability to convincingly sell yourself and your business to investors will determine whether you leave the meeting with a financing deal.
Perfect Your Sales Pitch
Venture capitalists, angel investors, and investment bankers sit through dozens, even hundreds, of business pitches. To capture an investor’s interest in the short amount of time you are allotted, try to anticipate what they are looking for and cater your information to your audience. Ask yourself:
- Who is this investor?
- What do they value?
- Where do I fit into their investment strategy?
- What information do they need to know about my business?
Remember, you need to set yourself apart from the competition and convince a potential investor that you’re the safest bet. Picture yourself in their seat: what would you want to know about a startup before trusting them with your money? If your company aligns with their interests, values, or business objectives, you may get a deal.
Another thing to keep in mind is that investors are busy people and will generally only give you a few minutes to make a good impression. Respect their time by boiling down your presentation to one or two minutes. When you’re asked questions, keep your answers brief and always choose simple language over jargon.
Lastly, you’ll want to appear relaxed and confident. The best thing you can do is practice your pitch in front of family and friends until the words flow naturally and your passion shows through your nerves.
Have them ask you questions so you’re prepared to address any concerns raised about your business. Investors are quick to decide whether or not they’ll give you funding, and the quality of your delivery can definitely sway their decision.
Be Prepared for Questions
Once you’ve introduced your business and requested a sum of money, your audience will likely have a range of questions for you. You may be happy to know that investors tend to have similar questions and concerns, so you can probably anticipate the questions you’ll be asked.
For example, investors may make the following inquiries during your pitch:
Do you have proof of concept? Most investors choose to fund businesses that have proof of concept, meaning evidence of the product or service’s success. That evidence can come in a few forms, but investors will likely look for a few key things:
- An established audience or healthy sales to date
- The success of similar products on the market
- Other outside funding such as an SBA loan or a crowdsourcing campaign
- A strong management team to run the business to its full potential
What is your marketing strategy? Essentially, marketing is about driving sales. You should have clear goals and objectives for your company, and a plan to drive growth. Investors know that to successfully drive sales, you, as the business owner, must know:
- The problem that your product or service is solving
- Your audience and the market size
- What makes your product stand out from competitors
- What pricing strategy and revenue model will drive growth
- What channels you’ll use to sell your product or service
- Potential production and liability issues
What are your numbers? It’s best not to exaggerate the valuation of your company, because the truth will come out at some point. Be honest and transparent with your numbers, and provide insights about your opportunities for growth.
Your business plan should have a complete financial statement, but make sure you know these numbers when asked:
- Your net income: your revenue from sales or services minus your expenses (such as production materials, rent for your premises, and employee salaries)
- Your net worth: your debts (what you owe) subtracted from your assets (what you own)
- Your cash flow: the difference between cash coming in and moving out of your business, to show how efficiently it’s operating
- Your capital requirements: the amount you’re requesting from investors and what you need it for
Securing an Investor for Your Startup
When considering whether to finance a startup, investors want the lowest risk for the biggest reward. Therefore, they are looking for a strong indication that your business will succeed. You’ll only have a few minutes to convince them why your startup deserves their money, so try to make the most of that time.
You can set yourself up for success with a solid business plan, which will push you to consider your vision and goals, as well as your opportunities and challenges. A well-prepared, well-delivered presentation and your ability to answer tough questions will also work in your favor.
Above all, you should be able to convince your audience that investing in your business is an opportunity they can’t miss.
What are your tips for giving a convincing business pitch?