Make sure you show those investors that by putting their money into your business, they are securing a promising future.
Having a great business idea is not easy for some people, but for others it comes naturally; what is not so easy is getting the money to push that idea forward and turn it into a business that generates a return, in short, that is profitable.
Thanks to this same problem, investors emerge, which are people and organizations that have enough capital to invest, as its name indicates, in businesses that they see very promising.
What usually moves investors?
Many investors do not have the ability or time to think or dream of a business, but they do have the intellect (and the money) to know how to choose carefully which one they would like to work with. Let’s say they are metal detectors that can locate any kind of valuable jewelry in a desert and then exploit it to make a lot of money.
Another reason that motivates investors is not that they don’t have good ideas, but that they don’t have the time to lead each project, so they look for not only good ideas but good entrepreneurs capable of carrying out that and other projects.
An investor invests part for the idea and part for the entrepreneur. It may be the case that they like the idea but do not trust that the entrepreneur who offers it is capable of carrying it out, or vice versa, perhaps the idea does not convince them but they see so much potential in the entrepreneur that they try to see how to evolve or pivot the idea to reach an agreement and grow together.
If you have a good idea, in which you believe and have a lot of faith, but it turns out that you do not have the monetary capacity to execute it, surely you have already thought about contacting an investor, but how can you make him/her notice you, having so many people out there who, like you, dream of starting their own business?
First, you must make sure you turn that idea into a detailed and formalized business plan, which explains the reason for the existence of the future company. Investors get bored watching a person talk and talk without explaining why they thought of doing what they are doing, what they are doing to solve or improve, so it is important that you get to the point and start developing a good plan.
Practice your presentation to investors
If you’ve been dealing with these people for years, you probably won’t feel as nervous about dealing with them anymore, but if you’re an amateur entrepreneur, you’ll probably be a little uneasy.
- The first thing you should do is stop being uneasy, relax and feel like explaining your dream to a friend. It is important that you are punctual and that you leave well presented.
- Prepare the room where the meeting will take place and make sure you have enough and ingenious support material.
- Don’t make those typical PowerPoint slides with too much text, as they will bore the readers.
- Use good-sized, high-resolution images to capture attention, remember this is your chance to promote a dream, so show that you have put a lot of effort into it!
Use appropriate and uncomplicated language when expressing yourself. Write down the topics you want to talk about in advance and teach them as many times as you can so that you don’t leave anything out. The spelling used in the support material is very important, and the tone of voice you use will also be important. Ideally, don’t use a boring tone, but don’t use a tone that is too exalted or alarming.
And above all, be clear about your business plan. It’s your baby, and you’re supposed to have spent a lot of time shaping it, so be prepared for all sorts of questions that might be asked. One of the biggest mistakes entrepreneurs make is not knowing exactly – or even approximately – the money that will need to be invested to boost that business, and that bothers investors a lot because come on, it’s their money, they want to know how much, how and what they’re going to have to spend it on.
It shows passion and conviction, because if you had a good reason to fall in love with that idea, others can have it too, it’s just a matter of letting them know why you are the exception and why it is in their best interest to invest their money in you.
Be cautious about participation rates
One of the first things they agree to when they agree to finance your business is the equity you will give to those people, that is, the percentage of the company they will stay with. The more they own, the more money they will give you, but as tempting as these offers may be, never agree to give more than a third of the company to these investors. I know this seems to be the solution to all your problems today, but you can’t live in the present forever.
If you plan to continue your business in the future -which is the most obvious and sensible- then do not accept to give more than a third of it, because as time goes by you will probably need more investors and therefore you will have to give more and more parts of the business.
Know your numbers well
To calculate how much money to give and for how much percentage, you must have very clear all the numbers. First you have to value the company in an amount, be it 10,000, 100,000, a million… whatever, but they must be realistic and justified numbers in something.
There’s nothing worse for an investor than seeing inflated or overly optimistic numbers. You can believe a lot in your idea and make very promising calculations 3 years from now, but an investor wants real, consistent numbers.
Create an MVP (Minimum Viable Product)
If your idea is very good and you know how to sell it very well, maybe a few slides will be enough. But generally it is always better to have an MVP, something basic with which to start testing the market and selling your idea.
Sometimes a MVP can be a basic programming of the system you want to do (in case it is an app or software), in other occasions it can be a video, a simulation of what will be the product, either with a mock-up or a 3D. In others, the designs of the packaging, the name or the brand to be used, all that shows coherence and planning.
There are many ways to approach a MVP depending on the sector you are in and your idea, so investigate thoroughly, as it is a very important step, not only to find investors but also to test your target audience and see if they are interested, as well as receive feedback, ideas to improve or complement it. Here we leave you a post so that you can get more involved in the creation of your ideal MVP.
Make use of the wonders of the Internet
The Internet is here to stay and therefore a good step for you would be to take advantage of it. Promote your product or business idea (or your MVP) on social networks, especially on Instagram and Facebook. In the slides you will show to investors convey the reach they have had. By seeing how much people like it and reading the positive comments regarding the product or service, investors will be convinced that they are indeed investing in an idea that can become a complete success.
Know what investors want to achieve
There are many types of investors and with many types of personalities, but if there is one thing they have in common it is that they look at the same three things: Who is the entrepreneur? What is the idea? When will I get my money back if I decide to invest in your business? And this last question is the one that often makes no agreement.
To avoid headaches and disappointments, it is important that you get your head around the issue, as we have said above, and that you can demonstrate to investors in a quantitative way when and how exactly they will be able to recover their investment, including financial balance sheets and approximate dates. If you are a person who is intimidated by arithmetic and mathematics, hire a professional who can make these projections for you. You won’t be skimping because this point is extremely important for an investor to look at your business plan.
Stick to existing problems and don’t create new ones
Getting inside the heads of investors is going to be a difficult task, so trying to plant ideas in their minds will ensure a big “no” in response. To avoid this, you better study the problems that already exist, for them it will be more attractive to see how you can solve the problems they already have instead of seeing how you invent new obstacles for them to overcome later.
Think that you are just one of hundreds that they have to read or see every week, they don’t want complications, they want you to state your reasons confidently, solidly and of course with a very striking story behind it all. That your business plan is readable by anyone and very tasty, and always remember to select a problem and the solution for it, again, do not generate more problems, solve an existing one.
Get serious about your business
If you want to win over a very serious investor, logic says that you must also act as a serious entrepreneur. Most people are afraid or lazy to do detailed market research to find out how likely their business is to be profitable. When they don’t do this research, they don’t feel compelled to sell the idea to someone, so they choose to borrow money from family members or loved ones. What they don’t know is that at that point they put the noose around their neck.
When a trustworthy person is the one who lends us the money, the tendency is to go quietly, without hurrying to pay it back, thus generating stagnation in the growth of the business and breaking valuable interpersonal relationships.
This is why the best option is to contact a private investor, totally unrelated to you, who will motivate you to do all the research work that you would not do with a relative, because you must answer to this person for good reason.
Synthesize the business plan
After so much talking, some ideas may vanish or be forgotten, so a good alternative to this is to make a summary of your business plan and attach it to a document you can print out. At the end of the meeting you will give a copy to each investor so that they can calmly detail it and sleep on their decision.