Asking investors for capital can be the most difficult step in expanding a business for a lot of small-business owners and entrepreneurs.
This is because most small-business owners are experts in their own products or services, rather than in business practices in general.
Sure, you learn a lot along the way, and if you reach the point of seeking outside investors you’ve likely gained some genuine business savvy. But that doesn’t necessarily mean you’re prepared to present your company in the most effective manner when it comes time to persuade someone to put money into your company.
The process differs in each individual instance, depending on the business at hand and the potential investors involved. But here are a few general tips that can help you to put together a convincing and effective presentation.
Always remember when you’re meeting with an investor that your goals and theirs may differ. Yes, you both want the business to succeed so that you can both make money. However, in the short-term, you need capital to keep growing, and the investor is trying to decide if he or she can make money by trusting you with an investment. This means that an investor is primarily concerned with whether or not his or her cash will be put to good use.
For that reason, one of the most important things to be prepared to do in a meeting with a potential investor is to account for your spending, so as to demonstrate that you use cash effectively. This can be very reassuring for an investor.
Admit To Your Failures
You may be tempted to portray your business as a completely smooth and flawless venture when meeting with an investor. Indeed, you certainly want to appear professional and successful, and admitting to any failures can make you feel vulnerable. But not many investors will buy the notion that a budding small business is operating without any shortcomings or difficulties. They want to see how you’ve coped.
For this, it’s actually helpful to refer back to some valuable advice I once came across with regard to pitching one’s candidacy for business school. Written by MBA application coach Alice van Harten, the advice is to discuss a genuine failure (as opposed to a false one, such as “I care too much”), be honest about how it set you back, and to explain how you have addressed or plan to address the situation.
This same advice applies very naturally to how to present a small business when meeting investors. You don’t necessarily have to bring up a shortcoming, but if it’s relevant, don’t avoid it either. Be honest and use the experience to show that you can deal with hard times.
Practice Your Presentation
You may have a rock-solid small business and a thoroughly designed plan for how you want to move forward. In some respects, this can seem like just enough to convince an investor to trust in you and inject some capital into the business. After all, from a strategic standpoint, proven effectiveness and a future plan are absolutely vital elements.
However, it’s important to remember that you and how you present yourself are also extremely important factors. Many investors will ignore a promising business opportunity if they don’t believe they’ll be able to work effectively with the person running the business.
This point is nicely articulated in a Forbes article about pitching a business plan. The article also tied in the idea that your presentation itself should demonstrate your efficiency and clarity regarding business practices. In fact, the author ultimately argues that the presentation is more important than a business plan itself.
Pitch Business, Not Dreams
When pitching your business to investors, you want to appear passionate and fully engaged with your company. You want to make it clear that the business has 100 percent of your attention and that you care deeply about where it’s headed. But in actually talking about where it’s headed, it’s important to avoid lofty rhetoric or dreamy expectations.
Certainly it’s possible to run into an investor who appreciates passion above all else, and buys into vision as much as business plans. But this is rare. Disciplined investors typically care more about a concrete plan for the evolution and growth of the business. This is important to keep in mind, particularly if investors start asking challenging questions.
In the end, having a successful business to demonstrate is most important. But so long as you can effectively demonstrate that your idea is working and/or has potential to work, these tips can help you to present your business as effectively as possible in a meeting with potential investors.
Paul Bryant is a New York City-based entrepreneur and has an MBA from New York University.