Every entrepreneur struggles with the challenges that any new venture may bring. As they keep going, they will try to find ways to improve upon their idea and increase the potential profits that it can offer. Other business owners worry about not offering enough options to their customers, wondering about the possibilities that diversification may bring as an expansion strategy. All of these require additional capital to be invested into the business itself, so owners need to propose an opportunity to a set of potential investors or partners.
A business pitch can make or break the company because of the various reasons that cause an entrepreneur to start seeking investors. If the pitch becomes unsuccessful, they might not be able to get an idea off the ground, struggling with purchase orders, or forget about expanding the company entirely. Business owners have to get the pitch to hit the right notes as well as show the future investors or partners everything that could entice them to invest.
There are several things to prepare before entering an investor meeting. You have to make sure that you provide the correct answers, and that you have them in the first place because if you seem like someone unaware of the important details of your company, it can create an untrustworthy image from the perspective of investors. They will want to put their money in a company with owners they can trust and communicate effectively with. So, here are 3 top questions you should have convincing answers to before you pitch in front of investors:
1. How Much Are You Worth?
Being aware of your company valuation before you present it to your investors is one of the crucial details that can set you apart from the amateurs. It will help you determine how much capital you should ask for in exchange for a stake in your business. You should know your company’s value so that you will not be cheated out of a deal. Investors tend to negotiate for a better piece of the pie- a larger stake for a lower price. When you know how much your business is worth, you will be more open to negotiating a fair deal, or you can be firmer on your initial offer.
2. Why Do You Need The Money?
If your business is already successful as you make the pitch, investors may be scratching their heads as to why you need their capital to make more money. It can be a red flag to them if you cannot explain the reasons why you need additional income. You have to be upfront about debt and previous financing terms you might have when you dealt with other institutions. After all, when looking for ventures to invest in, the investor has to make sure that they know where their money is going.
You can inform them of purchase orders for your product or a great demand for your service that you do not have enough capital for. This will indicate the feasibility of your business and a possible short payback period on their investment. On the other hand, you could say that you need financing to cover up the expenses to improve manufacturing processes to produce items at a faster rate so that you can scale your business appropriately. Whatever your reason may be, they will want to have an honest answer from you so that you can gain a vote of confidence from them.
3. Are You Committed?
Aside from an idea to invest in, investors look for an entrepreneur to work with. They want to make sure that by purchasing a stake in the company, they will help you help them get richer. If you cannot deliver on that promise because of commitment issues, they will be more reluctant to flush your accounts with a credit or any sort of capital.
You have to express your commitment and ensure them that you will push the venture toward success. Investors are willing to go all-in if you are also all-in in the business because an equal risk can indicate your motivation for the company to succeed in the future. Before you seek investors, you have to be dedicated to the enterprise you are about to build so that it will be easier to gain their confidence in you.
It may be nerve-wracking to handle all the finances and try to save the business with a pitch to some willing investors. But it will be all for naught if you cannot get them to invest.