Pitching Investors 101
Here is a chapter from the book: Business Back Belt
Before you get too far into your business plan, you may want to read this…
Are You Raising Capital?
Do Not Sell Your Product To Investors!
They don’t want to buy your product, they want to invest in your business!
There’s a big difference.
OK, You Have a Great Idea…
Even if your product is guaranteed to save the world, few people will invest in your company if you cannot show that it will become profitable sometime soon.
Nevertheless, too many people spend too much investor face-time selling their product. Investors want to see how your business idea operates as a money-making vehicle.
For example, you are not only selling Coca Cola, you are selling the Coke machine!
Here is an example of a very common conversation…
I recently spoke with a customer who has a nutrition education / food line especially beneficial for obese children.
He went on about how great his product is and what the benefits will be, etc.,
but I stopped him to ask how this will become a profitable business?
What’s the best (economical) way to reach these customers?
Who might be good market segments to reach children?
Let’s presume that the kids aren’t going to buy it and reaching the parents is probably difficult.
Even better would be a qualified 3rd party in direct contact with the ‘customer’ who would recommend his product.
(We humans usually trust a 3rd party recommendation long before we will believe and act upon a direct sales pitch.)
Perhaps Pediatricians, Child psychologists, and maybe even 7-8th grade science / PE teachers would be good people to consider first.
Contact several pediatricians that you know.
Run your concept by them.
A Little Phone Etiquette…
Ask if they, “have a moment.”
(If they’re busy and you press on, they’ll be annoyed with you.)
Better to ask when you can call back. (And call back then!)
(Why are you calling?)
“I’m calling to ask for your guidance on a new nutritional product to help obese children.
It consists of a, b, and c, and I think you are in a strong position to recommend it in certain instances.
Do you have a moment.”
Answer their questions (log the questions).
Keep your answers short – when the response is positive, note the response so you can refine it and use it over and over again.
If the response is negative, try something else – keep notes.
This way you can develop a tight script.
Listen and write down verbatim everything they say – use their words, not your interpretation.
(If they say, “Lime-colored,” you write, “Lime colored,” not “green.”)
Pay attention and they will give you the keys to their kingdom.
Some Questions to Ask…
- How many children do you see in your practice that would benefit from your product(s)?
- What percentage would actually buy it?
- Who else do you see doing something similar?
- How would they pitch this to other pediatricians?
- Can you accept a commission on sales?
(Maybe not for this case, but perhaps yours…)
- How many pediatricians are there?
(You’ll visit the associations and publications for their ‘editorial calendar’ and membership stats.
More data/proof for your business model.)
- What associations do you belong to? Is it good?
Do you actually respond to their recommendations?
(Keep track of the percentages.
- Which publications do you actually read?
(Not just subscribe to – We all have magazines and papers laying around that we may read eventually – which ones are their priority?)
What pattern(s) do you see evolving?
Using their words, you can refine your presentation
(Especially, how they might pitch it to their peers.)
From the publications, associations, and websites, how much does it cost to run an ad,
get mentioned in their newsletters… how often?
Contact the other market segments in the same fashion.
Now you can quantify the cost of reaching your audience.
The idea is to reduce the hip-shooting to the absolute minimum and provide investors with many basic assumptions they can believe.
Investors, when doing their due diligence to verify your claims, will contact their own experts.
When you provide the proven pitch, the investors will likely get the same positive response.
Is This Too Much Work?
How much money are you looking for?!?
Do you really think anyone will give you money if you don’t have your act together?
Investors have many options — You’re just one of many.
It takes more than a pitch deck and a smile.
And you’re not going to BS your way through your business plan like you would a school paper.
Your audience is investors looking for something more interesting to do with their money than they can think of.
Would you really build a business without doing this bit of basic research?
In fact, this research may tell you that your idea, this time, isn’t ready for prime-time.
If it is, you may get some great feedback on how to make it sell and on how to sell it.
And, you’re just getting started on your plan.
But now you have a better picture of the promise of your business.
Can you see how choosing the top priority potential customers or distribution points and quantifying their responses can paint a credible picture for an investor?
I hope you found this bit of Business Black Belt wisdom useful!
Thank you for your business, and please feel free to
contact me if you have any questions or comments!
All the best,