Make a plan you believe in, be prepared to justify it and show you have a good grasp of financial management if you want your venture to get funding from investors. Here are ways to get more tips for pitching business idea to investors.
Why Should They Invest in You?
Everyone will tell you that you need a business plan before pitching business idea to investors for your business. They’re right of course. There are many ways to go about preparing your business plan for potential investors, but also many areas where you can go wrong. One common mistake many entrepreneurs make when pitching business idea to investors is getting too caught up in selling the product or service they want to develop.
In the process of doing so, they forget the whole point of an investment from an investor’s point of view – to earn a significant amount of money in return for the risk they are taking in backing a stranger. This should be where you start when shaping a business plan for venture capitalists. So, before you get into the detail of the plan, remember to answer the four questions every investor will ask you:
- How much money do you want?
- What do you need it for?
- How much am I going to get back?
- When will I get it back?
It’s always prudent to have the answers to these questions before pitching business idea to investors, you should start telling potential investors about your product. Bearing these questions in mind will also help you focus on putting together financial statements they can believe in.
The Actual Pitching
If you’re serious about getting funding, it’s also important to realize that selling yourself verbally is only the start. Seeking equity funding is a tough and often bruising process. When people try to raise equity finance they often don’t know what’s about to hit them and fail to prepare for this or the time it will take.
Becoming familiar with financial reporting, legal and intellectual property issues and how shareholder agreements are structured will all be time well spent. It will also help increase your chances, because it will help you look beyond the business and see it through the eyes of the investor. If you can do a ‘dry run’ and expose your plan to close questioning from active investors you know, then so much the better.
A dry run may help to reveal any gaps or inconsistencies in the figures or in what you say, and it may make you realize you need to reshape the plan radically to attract investors. It will also help you keep your plan to the right length and to polish the executive summary so it is as convincing as possible.
Doing an elevator pitch – a one-minute presentation aimed at convincing investors to back the idea – is another good exercise. It will show the questions you may be asked that the business plan doesn’t cover. Entrepreneurs who can demonstrate in-depth knowledge of their business goals, and whose plans show high-growth potential have an advantage in gaining funding.
You will also need to show proof of your cash flow, and a forecast of how you expect to manage the money you’re hoping to get. Accounting software like QuickBooks Online can help you organize your startup’s finances easily and generate your balance sheet, financial statement, expense and sales reports with a few clicks.
With the right documents to show your sound financial management skills, you can help instill confidence in your potential investors. To learn more about how QuickBooks Online can help change the way you manage your business’s finances, visit our Small Business Center.