I’ve seen several dozen business pitches in the last few weeks. That includes pitches for the angel investment group I’m in, plus pitches for two international business plan competitions.
I’ve been doing this since the 1990s. Styles have changed, expectations have changed, but the fundamentals haven’t.
Here’s a worst-ever moment: The person pitching is pulling in for a close, a financial summary slide goes up, and the investors have issues.
The sales forecast appears to rise like a hockey stick, but expenses do not. The profits are projected to be as much as 60 percent of all sales. And that’s in a hardware business, computer peripherals, in which profitability in the real world is less than10 percent.
As investors poke at that, highlighting the problem, the entrepreneur frowns, almost as if to acknowledge the concern. “Yeah, sorry about that,” he says.
“We had a finance major do the projections and he didn’t get it. We’ve been pushing for a complete redo, but he’s been failing to deliver. We’re going to have to change people on that.”
Needless to say, that pitch failed.
In, contrast, here’s another one: As the pitch draws to a close and the financial summary slide goes up, the investors have issues. One of them shoots the entrepreneur a challenge: “Those numbers are different from the ones in your business plan.”
“Of course not,” she answers, without the slightest pause, as if she expected the question. “That business plan is three weeks old now,” she says. “We’re always revising it.”
Both of these stories are true. The worst-ever scenario happened 10 years ago. The best-ever case occurred two years ago. Indeed, pitches, like everything else, are changing to reflect technology and other trends.
Here are five trends in business pitches that I’m seeing:
1. Pitches are becoming more visual and less wordy
It’s been 10 or so years since authors including Seth Godin, Guy Kawasaki, Nancy Duarte and Garr Reynolds, in books, blog posts and speeches, veered away from using boring bullet points toward offering more interesting visual and dramatic slide presentations.
It took a long time for that trend to reach high-level business pitches for investors. But it’s there now. I’m seeing a lot fewer boring bullet-point presentations.
2. Nowadays the live pitch has to be something radically different from just the slide show that’s delivered as a standalone
It’s a matter of form following function. Slide decks are often left behind after a live presentation or sent by themselves to be viewed. Yet when the entrepreneur is speaking, pictures are helpful.
So the person giving a presentation should create two slide decks: One, mostly of pictures, can be used for live pitches; and the other, with pictures and words, can be used as a leave-behind document or a standalone presentation sent to people who will watch it on their own.
The distinction is about the bullet points: The target audience ideally should not read the bullet points during a live presentation. But such text can explain the pictures for those not hearing a live presentation.
The two slide decks should match in their general flow and content, but each is optimised for their actual use.
3. Pitches are getting better in their presentation of the stories that drive the numbers
Numbers still help but investors want to understand the exact problem a proposed business will solve so that they can judge for themselves how big the market is.
So, for example, most of the dozen or so pitches I’ve seen related to medical technology started with the story of a problem faced by a single person with a name, and went on from that to the numbers about the larger market. It’s not that the numbers don’t matter, but they don’t stand alone very well.
4. Sales projections based on a small percent of a large market are more suspect than ever
The tired idea of aiming for just a small percentage of a multibillion-dollar market just doesn’t fly anymore.
The best pitches include bottoms-up projections that add up details like sales through channels, by market segments or by product configurations. Also successful are pitches that include projected downloads, web traffic and conversions of prospects into sales.
5. Early validation is more important than ever
The best validation is found in early sales, showing that people are already spending money, which happens a lot these days.
Kickstarter efforts show up frequently as evidence in pitches. And investors like pitches backed by real dollar figures gleaned from Kickstarter marketing (essentially promises to buy before the sales have begun). Purchase orders are convincing.
In absence of anything else, signed letters from future customers or from sales channels (distributors or retail chains are very helpful. And when possible, don’t just talk about documents. Take a picture and post it on a slide in the deck.
The Investor Sourcing Guide
How to attract and obtain investors to your established, high-growth business.
As an established, high-growth company, you may find that you need to source capital, identify a mentor, or work closely with other affiliates to prosper. In this case, partnering with an investment holding company can be a valuable growth tool.
So, what should you do if you want to be acquired by a holding company?
1. Research everything
If you’re considering a long-term investment partnership, make sure you conduct substantial prior research. There may be many potential investment partners out there, but each has specific venture and industry directives. Get to grips with these.
Related: Is Venture Capital Right For You?
2. Be candid with yourself
The amount of capital that you need will affect which holding company you choose. In particular, you’ll need to understand what your risk profile looks like relative to the returns you expect to provide. This will also help you to source, entice, and keep the attention of the most appropriate partner.
3. Identify your must-haves
Any investment partner you choose is likely to be able to provide you with funding, a broader network, and economies of scale. Beyond these, however, you’ll need to decide on your most important benefits (must-haves), so you can target the companies that can offer you the best fit.
4. Spell out your funding plan
You’ll need to be very clear on how you plan to spend the funding you get from your investor. This plan should stipulate, in particular, how you plan to grow.
5. Scrutinise each investor
Make sure to analyse your potential investors’ investment history, so you can get a clear idea of where your interests are aligned. Look specifically at things like:
- Where investors’ get their funding
- What their investment track record looks like
- What their investment directives are
- Their appetite for risk
- The returns they usually aim for
The crux of the matter
Research is essential, no matter which holding company you hope to be acquired by. This will help you to find, attract and retain an investor who gives you the funding you need, and lends you the support to be innovative, productive, and profitable.
6 Great Tips For A Successful Shark Tank Pitch
Whilst most of us are unlikely to appear on television shows such as Dragons Den or Shark Tank there is a lot we can take out from watching these programmes.
Whilst most of us are unlikely to appear on television shows such as Dragons Den or Shark Tank there is a lot we can take out from watching these programmes. Entrepreneurs will often need to promote their businesses to prospective customers, lenders, investors, employees and even suppliers.
All stakeholders would like to know with what and whom they are dealing. They will need to assess risk and will try and evaluate the business against others who are competing for those same funds.
1Know Your Product
You should be able to describe your business within 60 seconds, in a confident and positive manner. Let the stakeholder know what particular problem your business solves which makes it viable and attractive.
Your brand and how you intend to develop it is important in determining whether they will invest or lend you money. Share critical information with them such as large customers, patents and trademarks and details of forward orders.
If you are looking for funding or investment, make sure you have the relevant paperwork to back up what you are saying.
You must have your numbers at your fingertips. A true and successful entrepreneur will know his numbers instinctively and be able to recollect and present them convincingly. Stakeholders want to know your turnover (sales) over the last couple of years, your gross profit and net profit.
Investors want to know what they are investing in and whether there is strong potential for their money to grow. Lenders will want to assess their risk — how are you going to repay the money? Moreover, you as the business owner, need to be sure that you will be able to make the required repayments.
You must know what your margin is, as this will largely determine your viability as a business. Margin or gross profit is the difference between the selling price of the goods and their cost and is usually expressed as a percentage.
3Know What You’re Asking For
Be clear as to the size of the investment you want to give away and how that determines the ‘valuation’ of the business. Therefore, if you wish to raise R200 000 for 10% of the business, that means you value the business at R2m — be sure you can back that up or you will get taken apart.
4Have a Business Plan
The best way to fully understand your business is by way of having a detailed business plan, which has been prepared whilst working through every facet of your business, from the original idea to the finished product.
As the business owner, you need to live this business plan and be able to use it as your daily guide to success. Develop it, change it where circumstances require it, but most importantly know it and understand it.
In this way, you will be able to deal with most of their questions, be they about marketing, research, international expansion etc. It is also a good idea to know your competition and what they are up to.
In most interactions, you the entrepreneur, are selling yourself. Whether it is an investor, lender, customer or prospective employee, it is their impression of you and your capabilities which ultimately determine whether they want to work with you.
Be confident, defend your position where required, as you will need to parry some blows but do not behave arrogantly.
6Learn From Your Mistakes
Many entrepreneurs who have presented to the Shark’s Den and not been able to garner investment have turned their business into great successes. You need to be able to learn from the experience, and if rejected, bounce back even stronger.
3 Things You Must Have In Place To Get That Start-up Bank Finance
If you’re planning to secure funding for your start-up, you need to put the right foundations in place.
The South African landscape for raising finance is tough for any business, with stringent lending regulations. Here are three areas to focus on as you set up your start-up to ensure you’ll qualify for a loan or equity funding.
1Securing a Market
Most SMEs I have mentored or advised start with expressing how big the total market size is for their product or service, but, while this is important to understand, the big question is: What percentage of that market will you attract and how?
Look at the ‘how’ first and work your numbers backwards. For example, if you secure a R10 million contract to supply an item that has a market size of R37 billion you are capturing only 0,03% of the market. However, if you’re able to cover your monthly expenses (including your loan repayment) and make a profit, that’s what counts. You should be able to show this contract or letter of intent to procure, which shows how and where you will find this market.
2A Strong Team
When you’re starting out you’re likely to be the sum total of your team. If you’re going down the entrepreneurial journey alone, make sure you have identified who will mentor and guide you through the areas you don’t have competencies in and cost this into the business start-up and running costs.
Focus on who in the business is going to:
- Sell and market: Do they have the necessary skill, network, product and market knowledge?
- Control the money: Are they financially savvy and can they make sure that money is being used for the right things?
- Operate: Who has done this before? Can this individual manufacture the product or arrange the supply of goods or services, ensure quality control and sound human resource management?
Formalising your business is costly but necessary. If you don’t have a formal entity, shareholders agreements, loan agreements, financial statements, management accounts, tax compliance and so on, you will come short when looking to raise finance.
Understand these costs upfront and include them into your start-up budget — this will save you a lot of pain in the long run.
The truth is that finance is available for women who have the right business ingredients just as much (if not more — in the South African context) as it’s available for men and just as with men. And, resources such as these help to unpack and guide the core fundamentals that are needed to make business bankable/fundable.
Then it’s all about implementation and staying on track to translate all that you’ve done and all that you wish to do in a bankable business plan, and approach the relevant funder for your needs. The right business mentor can certainly help you on that journey.
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