Think like an investor or banker when pitching your business

July 7th, 2016 Cathy Rottinghaus
investor meeting

Pitching a business idea is a daunting task, even for experienced business owners, much less new entrepreneurs. You may have a great idea, but if you need investment capital to launch or grow your business, it’s vital to prepare carefully when pitching your company to investors.

Put yourself in an investor’s shoes to consider why they would want to risk their capital to fund your business. Besides being able to relay the basics of your business plan and how you will use the money invested, here are a few open-ended questions to consider before making your pitch:

What proof do I have about the potential success of my business?

Success for an investor equals profits – the potential for positive, strong returns on investment offset the investment risk. Nothing turns off an investor faster than start-ups that lack focus or owners who can’t see the flaws or risks in their own plans. No one is perfect; identify and address those weaknesses along with ways to mitigate the risks. Discuss the longevity and scale of your business cycle with specific marketing plans and goals. Show you are looking towards the future, not just riding a current business trend.

Explain how you determined market potential and demand for your products or services; tell who will buy from you, why, how often and how much. Discussing pre-sales and citing already committed investors can encourage others to invest, too. If you have proprietary technology, tell how you plan to protect it. Proven technology is important to investors to show a continued demand for products and services and how it will generate revenues and profits.

Why should the investor back me instead of a competitor?

As an entrepreneur, you had better be familiar with your business sector, competitors and the success barriers in the market you serve. You need facts on the potential targeted buyers and demand. Break down the true numbers and know them stone cold. If you don’t have the figures, your investors will quickly make their own assumptions and calculations, poking big holes in your business plan.

Investors need the specifics of where your company will be positioned and how you plan to differentiate the business and products. Focus on the expertise you and your team bring to the table, showing how well you work together. Talk about industry benchmarks and specific company goals, incorporating achievements to date. Clearly illustrate any past accomplishments and advantages that demonstrate your strengths compared to the competitors’.

Why should an investor trust me?

Investors really invest in people, not companies. If they don’t trust your character, judgment and skills – as well as those of your team members – it’s wasted time for both sides. Investors want to know everything about your start-up, so emphasize the important and unique details of your business model. Explain how your company will make money for the investors and when they will see the return on their investment.

Highlight cost control measures and propose compensation packages that are reasonable for the industry and compare favorably to other start-up companies. Be open to investor advice and handle criticism in a professional manner. Investors won’t risk capital if they perceive you lack integrity or if they suspect you might withhold information. Your team must have the proper qualifications and discipline to meet deadlines, implement plans, and meet company and investor goals.

Get the answer and investment capital you want

A business pitch that incorporates the answers to the three questions above will speak directly to the motivation of the capital investor or lender. Besides presenting a solid business plan that supports your good idea, make sure your pitch convinces your investors that you can be trusted to lead the business with their interests in mind.

About the author

Cathy Rottinghaus is Vice President of Commercial/Ag Banking for MidWestOne Bank.

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