You’ve dreamed up a big, original idea for a product or service that consumers need in their lives. Months have been spent fine-tuning the strategic details of the business and its offerings. You want to launch, but there’s an obstacle blocking your way: lack of capital. Most entrepreneurs don’t have an endless well of funds to draw upon when they first start their businesses. Many apply for loans, grants, or even crowdfund their companies. Others choose to seek out financial assistance from investors. Requesting funding from an investor means putting your best foot forward from day one. Before you pitch, pay attention to some of the most common dos and don’ts associated with the process.
DO… Have a well-written business plan at the ready.
The most detailed business plans include an executive summary that outlines who you and your business are, what it does, its location, why consumers will want its unique offerings, and how the company will make money. A business plan should include information relating to company goals and where the company is at in its development stages. An industry and market analysis should be conducted along with a look at each member of the team. Tables related to financial projections, like profits and losses and cash flow, should also be included. This all leads up to the financing request. Here, entrepreneurs outline the amount of funding they’ll need from investors.
This is a crucial document that potential investors will want — no, need — to examine before proceeding forward. Even the strongest pitch requires a solid business plan for further review. By writing a thoughtful business plan, entrepreneurs give investors a critical look into the future of their startup.
DON’T… Be vague about the amount of funds you’ll require.
Money is a difficult topic to talk about in any capacity, especially one where you’re literally asking an investor or firm to give it to you. Don’t be shy about your request for what your business needs to thrive.
Crunch the numbers first. Then, use the financing request in your business plan to articulate exactly how much you need. Detail your plans for how this money will be spent. Cover even more bases by adding a section for strategic financial situational plans. This encompasses the company’s future, from acquisition to debt repayment, and how you will prepare for great and difficult times alike.
DO… Come prepared with a proof-of-concept.
What is a proof-of-concept? This can be anything that shows investors you have gone beyond the heavy lifting phase of your company’s growth. Steadily growing site traffic and a working prototype of your product and/or services are two examples of proof-of-concept. These can further back up your business and allow investors to grow comfortable with the inner workings of your company.
DON’T… Assume you don’t need to practice your pitch.
Will you wow investors with a cold pitch or one where you prepped in advance? While I can’t speak for every entrepreneur, I recommend practicing your pitch before meeting with investors.
Practicing your pitch is highly beneficial for all entrepreneurs. It allows you to relay your knowledge about your offerings and address problems the business can solve for consumers. Entrepreneurs may then weave these elements into a narrative. The pitch can then be presented through storytelling to investors. A good story will further engage them, and their emotions, in what your business does and has to offer.
As a side note, practicing also helps you time the pitch. Ideally, you want to keep the pitch (and its story) short and sweet for investors. A half hour pitch that roams and goes off on tangents isn’t a good look for any entrepreneur.
DON’T… Forget to do your homework on the investors and/or investment firms.
Your business plan is ready, your funding request is in place, you have a proof-of-concept, and your pitch is awesome. Before you go all out to impress these investors, learn all you can about them.
Entrepreneurs want to make sure they’re working with legitimate investors who have funds available for their businesses. Visit their websites and research their existing portfolio of clients.
It’s also a good idea to figure out their investment criteria. Many investors, like angel investors or venture capitalists, will receive a stake in the business in exchange for their capital. It’s better to know in advance what they will require before taking the meeting and finding out that it’s too much for your business too late in the game.
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation.