Like it or not, money is the lifeblood of a business. If you’re on the hunt for capital and have landed a meeting with an investor, your first impression can either be a deal breaker or money in the bank.
1. Failing to include charts and graphs
If you aren’t sure how to go about making charts and graphs that relate to your financial projections, you can consider hiring a business student or a certified CA for a day to help.
2. Pie-in-the-sky guesstimates
Steer clear of promising potential investors that your start-up is going to be worth R1 billion by its fifth year. Investors want conservative estimates that they can trust.
3. Avoid a ‘hard coded’ financial spreadsheet in your presentation
That is, don’t make your numbers unchangeable in a spreadsheet. Present your information so that investors can play with your various financial inputs to see how your business model will survive in changing conditions.
4. Skip what’s known as a ‘top down’ financial forecast
Don’t assume that your company will automatically win a percentage of some existing market. Instead, use what’s called ‘bottom up’ forecasting, where you base your financial projections on an actual budget: Essentially, how many items you are going to sell multiplied by how much each is worth.
5. Focus on who you’ll really be selling to
Talk about the size of your total addressable market (TAM), but don’t focus on it. For example, if you are creating an iPhone game for women ages 35 and up, the size of the entire gaming industry would be your TAM and would be largely irrelevant.
Instead, research your serviceable addressable market (SAM), which in this example would be the total market for women over the age of 35.
Minimise Your Investor Risk. Use These 5 Tips