“Designing a presentation without an audience in mind is like writing a love letter and addressing it ‘to whom it may concern” – Ken Haemer
In these challenging times, raising finance could very well be a matter of business survival, so knowing how to pitch to potential investors is a critical skill you should not neglect.
When you started your business, you probably did so because your life experience allowed you to see a gap in the market or the opportunity to make the most of your skillset in a new way. You almost certainly did not go into it because your skill was presentations and pitching for investment. This is a common scenario in the world of small business, and it leads to many great ideas being forgotten, or going without investment, simply because the new owner did not know where, how and when to sell the idea to those who could help with necessary funding.
Here are five common mistakes that people make when arriving to pitch for investment.
- Pitching to the wrong investor
One of the first things you should do when seeking finance is your research into just who is invested in the field, and who might be keen to take on a company of that kind. Not all investors are eager to diversify into all industries, and finding someone who understands your industry and further, wants to invest in it, is key if you want to find a business partner.
Once a connection is made or a name is mentioned, it is important to do your research into just who the potential investor is, what they are currently invested in, and what they are interested in. Showing awareness of who the investor is and what they like to invest in, will also help at the pitch level, because it will show them that you are the kind of person who does their due diligence as well as make conversation easier.
- Not refining your pitch deck
Many entrepreneurs want to get funding as quickly as possible. They construct a pitch and approach the people they think are ideal investors without properly refining the deck and ensuring they can answer all necessary questions. The first step when creating a good pitch is to look at other successful pitches to see what information they included and how you can best present your business.
Once you have constructed a best effort it’s time to start reaching out, but don’t head for the office of your favourite investors just yet. Getting a pitch right takes practice and getting in front of a few people who you suspect may not invest will help you to get your pitch just right by revealing the kinds of questions an investor may ask. When turning you down these non-ideal investors may also give you advice on your business, which will help strengthen the pitch for next time.
At the end of the day, you need to be able to provide short, clear answers to every question and getting the pitch and your presentation right will ensure that this happens. You can’t simply tell an investor that you will get back to them with answers as this provides a bad impression.
- Over-valuing your business
Going into a meeting it’s very important that a business owner not over value their business or its position in the market. Investors have been around and they will have a rough idea ahead of the meeting as to just what they think your business may be worth. Overselling it, or promising impossible returns simply makes it look like you don’t know what you are doing.
Entrepreneurs should further avoid making projections for growth that are unlikely. Telling an investor you will make 500% profit gains in a year with only 40% expense increases, only serves to tell them you are speaking about pie in the sky.
This is the same for your competitive landscape analysis. This part of your presentation is critical and you should not be going into a meeting saying that you have no competition – all that means to an investor is that you have not researched the field properly. If it is true that your product is unique you need to present the information on how the industry deals with the problem you are solving now, which companies offer the alternative solutions and why yours is better. Do not just say you are unique.
- Not understanding the risks
Any experienced investor is going to want to understand the risks of investing with you, and will want to see that you see them too and have planned for them. Inevitably any business has risks attached and if you understand yours, you instantly become a more bankable proposition.
Questions you should be able to answer might include: What are the principal risks to the business? Does the business have any legal risks? Do you envisage any technology risks in future? Are there any upcoming regulations which may impact upon your company? And are there any product liability risks attached? Just what are you doing to mitigate all of these risks?
- Not accurately explaining the benefits of your business
At the end of the day your business’s benefits and unique selling points are going to be what makes it successful. But a business is more than just its product or unique idea. It’s a wonderful idea to have a video or demo model of your product or your company, but if that’s all you have you will not succeed in attracting investors.
To bring an investor on board, a business owner must accurately understand the things that make it a potential success. If you are pitching a new product or idea you will need to be able to explain why users will care about your product or service, what makes it unique, and if it is unique what intellectual property rights you hold over the product. Further you will need to be able to explain why the team you have on board is the right one for making your business a success. Knowing your team’s strengths, weaknesses and capabilities and being able to demonstrate them will give a lot of confidence to a potential investor.
We offer a wide range of specialist services, including Corporate Finance services. For more information on how we can assist you with your financial activities and capital investment decisions including funding sources, click here or contact your contact partner at MGI Bass Gordon. Send an email to info@bassgordon.co.za or call us on 021 405 8500.
The article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.
