S2Ep18: Three Things Every Investor Pitch Must Have

In today’s episode, Allan discusses why having a financial investor is so important to scaling your business.  He explains in detail, three elements that need to be presented when pitching an idea to an investor.  Entrepreneurs looking to grow their business need to understand their competition and have a great pitch in place. This is an episode you don’t want to miss!

Allan has started and grown several multi million dollar businesses, his mission is to help you do the same. Welcome to The Business Growth Pod, building the future one entrepreneur at a time.

There are three things that you need to bring when you go pitch a potential investor. And the first of those three things is you have to bring your vision with you, your vision, your plan for the company. We’ll get into that in a second, I’m going to list these three things first. So number one, vision. Number two, you have to bring some type of financial plan. And number three, you have to be able to answer the question, why does the investor need you? Hey, everyone, welcome to the show. I’m Alan. I’m a family man and attorney and an entrepreneur. Each week, we provide resources and advice to help build your business. Are you ready? Then let’s go.

Hey, everyone, welcome to the show today, I am actually flying solo for this episode. And I have a very specific reason for doing that. And that reason is I get pitched ideas, business ideas, you know, 2030 times a week, and I love it. Actually, if you guys, you know, whoever’s listening, if you want to pitch a business idea to me, you know, you’re welcome to go ahead and schedule an appointment to do so go to my website, Allan Draper Comm. There’s a scheduling tab there. And I will be a sounding board for you and provide feedback and help any way I can. I’ve recently been talking about different ways of raising money to grow your company. And one of those ways is by adding or finding a strategic and monetary partner, right? a partner that could be a mix of somebody to help you grow the company, on one end of the spectrum, to just being a financial investor, right, a silent type partner in anything and everything in between. So and there’s goods and Bad’s to having partners, right. One of the things that I struggle with, one of the things that I am working on as I’m developing businesses in different industries, and working with a number of different partners, is understanding how that dynamic works. And you know, what’s interesting is when you work with a partner, you ultimately have the same goal. And that is to, you know, build a successful company, you might have different definitions of what that means, what a successful company is what it looks like, maybe little different visions of what the company should ultimately end up being. But at the end of the day, you want the company to be successful. But partnerships are such a difficult thing. Because there are trust issues, there’s personality issues, there are issues, agreeing about what the best course of action is, and things like that, I’m actually not going to get into that at all. Today, I am just going to focus on the actual pitch to a financial partner, and what that pitch should include. Now I’m an attorney turned businessmen, I’ve never really made a big pitch for money or investment. So this is more the things that I would want someone to include in their pitch to me, if that makes sense. So this is just based on experience. This is what are the things that I am looking for when somebody has an idea. And they want me to invest in it. They want me to provide some type of financial support to help them get their business off the ground. So let’s talk about those for just a few minutes. I think ultimately, there is this aspect. A lot of times people come to me and they think all I need is an idea. And there have been quite a few different ideas that have been brought to me over the last eight months to a year ranging from you know, something super simple to something that I never thought of that sounded very novel that didn’t exist. And I think a lot of times people come to me and they think yeah, if I just have a good idea, that’s all I need. And that’s just not true. And actually, there is one facet that we’re going to get into where the actual idea comes into play. But it is a minor part of the entire presentation. So this episode is for those Have you who are in a position where you want to grow your company, or you’re in a position where you have a business idea that you want to go after. And you don’t have the financial resources to get there, or you’re looking for a partner to kind of help carry the load, carry the risk and things like that. So this is for you, there are three things that you need to bring when you go pitch a potential investor. And the first of those three things is, you have to bring your vision with you, your vision, your plan for the company, we’ll get into that in a second, I’m going to list these three things first. So number one, vision. Number two, you have to bring some type of financial plan. And number three, you have to be able to answer the question, why does the investor need you? Which is kind of ironic if you think about it, because you’re the one going to them with the idea, right? Let’s do those in order. So number one, and I actually think these are in order of importance as well. So number one, what is your vision? What helps here is a really good story, right? Hey, I came up with this idea, because I really needed it. And, you know, I shopped around for a year I went, you know, on Amazon, I talked to people and I just couldn’t find anything like it. And I really needed it. And it you know, the concept just seems like it’s something that will help a lot of people and I know that you know, not having it has affected my life. And, you know, just creating that having that story about basically how you came up with the idea. And you really shouldn’t have as your story, hey, I was thinking of ways to make money. I mean, and good ideas do come from that. But that shouldn’t be your story, you’ve got to pitch it from a different angle.

A lot of this will include your why for doing it. Right. And I’ve spoken about this before, in webinars and in this podcast and different episodes about how your y cannot be tied to money. And the number one reason why it can’t be tied to money is because money is not as good of a motivator as people think it is. And when push comes to shove, if money is your number one motivator, you’re going to quit. And investors, people with money people that have been in the business world a while they know this, they know that if they’re getting a partner, they’re investing this money, they’re going to want somebody that is not going to quit. So you have to create that why. And for me, that is the biggest component of this.

Alright, number two, what is your financial plan? This is a tough one, because startups especially now this is different if you have an established company that has three years of financials or whatever the case is, and, you know, projections for the next four years, that’s a little easier, but you need them nonetheless. So let’s talk about a few of those. One is, what’s your budget? Okay, what does, it looked like, for a month or a year’s worth of expenses. And the best way to do this is to create kind of this clause I or actual p&l profit and loss statement, right, where you start at the top with gross revenue projections. And I know this might hurt some of your feelings, but everybody overshoots what they think what the actual sales are going to be what they think the sales are going to be 99% of the time is higher than what actual sales are for that given timeframe. And that’s okay. But you do want to make it realistic. If your numbers aren’t realistic, then this entire exercise is futile. So you have your top line revenue, you go through your cost of goods sold, or your cost of service, whatever the case is, and you want to include on this p&l, every possible expense, and create a line item for it and keep it nice and organized. I already mentioned this, but you’re gonna want to get into your sales projections. And you’re gonna want not just on this Kwazii or sample p&l, you’re gonna want to get into it, you know, have it as a separate document with an ability to justify why you think those your cells are going to meet those expectations and those projections, your financials are going to be imperfect, right? They are for my companies and we’ve been in business for several years. And my projections and my budgets are off and that’s okay and investor will know that But I think a big part about this exercise is showing that potential investor that potential partner that you’re willing to get, you know, super granular that you’re willing to go through the process, you’re willing to think this out, step by step, be super deliberate about your idea, because you’re so passionate about it, you’re so dedicated to the idea. And you’re so confident in yourself, and this idea that you are willing to put in the time to do your homework with these financials, and to create these financial models about what it will look like, a big part of this is going to be a plan to profitability. That’s difficult to predict, right? Because what usually happens is two things, you usually sell less than you project, and it costs you more than you project. So a lot of time and effort needs to go into this process. And make sure that you’re calling vendors, you’re getting estimates for different types of services that you’ll rely on, you’re piecing together this plan, and a lot of people talk about, you know, ask me, Hey, do I need a business plan? I think there are aspects to a business plan, they’re super helpful. I’ve written them in the past. Some aspects, some exercises within a business plan are just few tile and not necessary. So you’re going to want to in step two of this, right, developing your financial plan, include as much detail as possible about where the company is headed, including what its costs are. And don’t forget to create profitability, landscape. So an investor is going to, you know, treat this like comparing an investor is going to compare this investment to other types of investments, right? So, and investing in a startup is one of the riskiest things an investor can do with his or her money. So the question is, how can I make this pitch seems so attractive to an investor, that they are willing to take this additional risk, because the opportunity for reward is so large, and my presentation has identified how I can take steps to specifically reduce that risk. So and there are opportunities out there right now, to be frank, there are ways to get investment type money, because people are looking to make more than, you know, a percent or even less with it just sitting in their bank account. The nice thing about it being in their bank account, is that it’s, you know, insured and, you know, there’s little risk involved. But if you get the opportunity to be in front of somebody that is them saying, Okay, I’m at least interested enough to consider risking my money on this venture. Okay, so that’s number two, what is your financial plan, put as much detail into this as possible, this is really where you’re going to be able to sell yourself and show that you believe in what you’re doing, and that it’s important to you to share this idea with others. And this is great preparation for getting your company started Anyway, you have to go through this process, you have to see what type of competitors are out there. And all of that should be part of this analysis. And it’s great because you need this anyway, another part of this, as I just mentioned, is including a competitive analysis about what competitors you have. And if you think you don’t have any competitors, then you haven’t done your research enough. And that’s not to say that your idea isn’t unique. It’s just that if you think about it, people are surviving every day without your idea. If it’s this novel invention, let’s say this new product, they’re surviving every day. So you have to find out what are they doing to get by without my product, and that is my competitor, even if it’s in a different category or whatever. So if an investor asks you who your competitors are, you have to have an answer for that. Alright, number three, you have to be able to answer to an investor the question, why the investor needs you. Right? I had somebody pitch me an idea. Just I think it was a week or two ago. And she said something about starting a pest control company. Now granted, it wasn’t a state that I don’t currently have a pest control company. But you know, I was super nice to her and after a while, I just asked that question. Wait, what Do I need you for, you know not to be mean, but I already have the infrastructure for that. And to be honest with you, not only would I be able to have more equity in the company, right, take a higher ownership percentage if I don’t use you. But I already have the infrastructure that would make it a lot more efficient. And I would be able to profit a lot faster if I just did it myself. And so this is your chance to really sell yourself. The second step where you’re developing your financial plan. And you’re showing that is how you show that you’re invested in the idea and you’re doing your homework. But this step three, showing why an investor needs you is important, because you are able to put their mind at ease, this is a huge part of helping them kind of feel, okay with the amount of risk. And it doesn’t necessarily just have to be, you know, something novel about the actual business idea, there were a lot of things now, that is important, you have to show that they simply, you know, wouldn’t be able to snap their fingers and do this on their own, I’m going to give you a hint here, a big part of this is going to be the time investment required by an investor. So if you can show them that you can get from A to B with this company, you can get to profitability with this company. And a minimal amount of work will be needed from this investor. That’s a great reason why they need you. Right? Because that’s one thing time that investors never really have enough of. Right, they are looking myself included, they’re looking for partners to come up and hustle. While they can help with consulting, they can help with strategy, they can help with these things. But they’re not wanting to necessarily buy a job. So another reason that you could say that a particular investor needs you is surrounding your specific idea. Now, if it’s something like starting a pest control company, well, you know, I could just do that. And most ideas regarding something like that are not protectable in terms of intellectual property. So if you tell an investor that even if it’s a pretty good idea, chances are, they would one not think that idea is good enough for them to enter a particular industry. or number two, they’ll just steal it from you. And I’m just being Frank, that’s just how it goes, if you’re presenting an idea that cannot be protected, and it is enticing enough for them to do it. And that is all the value that you have to offer. Well, they no longer need you. I hope that makes sense. So I wanted to keep this episode super short. And right to the point on purpose, I have some other ideas surrounding this topic of going out there and getting money from investors, this is a really exciting way to grow. Investors are cool, because they are right along with you cheering you on trying to, you know, put you in the best position to succeed and grow your company, because they have a financial stake in it. When you borrow money, it’s a little different, a bank or other type of lender will, they’ll want you to succeed only because they want to get paid back. But as long as they can get paid back, they don’t really care. And to be honest with you, you’re really not going to hear from a bank, you’re not going to have this cheerleader this, you know, consultant, this partner, unless you default on the loan, and then you know, lended money becomes kind of this weight on your shoulders, because they can, you know, exercise certain rights under their agreements to you know, call loans do and stuff like that. So, so those three things, number one, come with your vision slash goals. Number two, make sure that you have your financial plan and get as granular as possible. And number three, you have to be able to answer the question with clarity and confidence, why the investor needs you in the first place. If you have any questions or you want to run your ideas by me, I mentioned this at the start of the episode, but schedule an appointment with me Allan Draper calm. I have a scheduling tab there. And I’ll kind of help you. You know, I’m not going to do the homework for you. But I’ll let you know what’s missing or what things you already have. That is sufficient for this type of pitch. Now keep in mind, this isn’t all you need, and that there are a lot of investors out there that are different than me. These are the things that will really make my ears perk up if someone comes prepared with these three things. So Keep that in mind, and we will catch you next time.

If you’ve enjoyed today’s podcast, please leave us a rating and for daily inspiration and business tips follow Allan on Instagram. Until next time, remember we build the future one entrepreneur at a time.

Transcribed by https://otter.ai

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