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Pitching Your Idea to the Money People
Published on 28/10/09
by Carrie Brancheau, PHR
Starting your own business can be rewarding, but it will take an enormous amount of research, resources and sacrifice. You may have a great idea, but does it make dollars and sense?
You start with the research on your potential business: costs, competitive landscape, barriers to entry, potential sales, availability of resources, and logistics just to name a few. And then there is the capital needed to get started and to sustain the business until it can support itself…
Here is where you jump into the shark tank. I have been there more than a few times myself. There is a technique to the pitch and to providing the right data to your potential investor. It is very important that you, the business creator, understand all of the intimate details of the operations of your future business. But, when presenting your idea to prospective sources of capital, you will need to suppress the desire to overwhelm an investor with too many details of your plan and the business climate around it.
More is not always better. Papering a potential investor with a plethora of charts, graphs, colors and fancy data can serve to confuse them and lead them away from the critical information they are looking for to make a decision. It should go into your presentation only if it ties directly to the critical highlights you need to make your point for capital. You can keep your back-up data at hand for further questioning later.
You should be able to describe your business and why it will be successful in less than three minutes during your initial pitch.
Key talking and presentation points should focus on the following:
- A thorough, detailed pro forma. A pro forma is the complete financial plan for the business done in an accounting format on a spreadsheet. It needs to cover in detail your expected costs and projected income and do it in a way that is concise and easily scanned by the eye.
- Your analysis should also include a sources and uses statement. Your sources could include bank loans, personal investments and any angel investments.
- Your personal financial commitment to the enterprise. If it is an invention or other material aspect that is going into the business show the value that you will be bringing to the table. What makes you indispensible?
- Your plan data should be broken out by month and go out at least two years. Know what is in your plan. You should be able to quote the numbers without looking at your written data, demonstrating an intimate knowledge of your subject. An investor wants to know that you understand the business and a quick concise presentation will tell them that you do.
- Assuming your idea is sound, financial numbers are a primary interest for an investor, so providing detail and having well grounded numbers are important in obtaining financing.
- The final point of interest is to have an exit strategy. The investor wants to know how and when he/she will get their money back and the upside to investing—what his/her ownership piece is to be and the expected return on their investment. This may necessitate the sale of the company into bigger hands or seeking refinancing through banking sources after you have demonstrated a proven track record of success.
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