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Congratulations on your latest business idea. Now, to build your business, you need to attract investors. Whilst pitching your startup or small business may seem daunting, OnMarket is here to help. We work with Australian start-ups and investors every day, so for the purpose of getting you pitch-ready, we’re sharing our knowledge with you.
Here are our top 8 tips on how to sell your business to investors.
Tip #1: Do your research
Before meeting with your potential investor, make sure you do your homework. There are two areas you should research:
Area #1: Their previous investments / investment portfolio.
What kind of companies have they invested in? What kind of people and teams have they backed monetarily? How are you similar? This is multi beneficial. Firstly, it assists you in acknowledging the areas of their business that would be of most interest to them so you can focus on it in your pitch. Secondly, it demonstrates your familiarity with their work and encourages them to believe you have approached them for specific reasons.
Area #2: Who they are as an individual.
Learn about their hobbies, interests, and anything that you can use to connect to them on a personal level. By understanding what interests them as an individual, you can use specific examples and analogies that will resonate with them and easily cement the point you are trying to articulate.
Tip #2: Speak their language
By conducting the research in tip #1, you are able to speak their language. Similarly to how you would personalise advertisements for specific audiences, you need to personalise the business highlights you elaborate on to suit the investor.
Don’t focus on certain operations and ambitions if your research has shown you these areas would not be of high importance to the investor.
Don’t focus on financial forecasts if your research has shown you the potential investor is driven by passion rather than profit.
Don’t ‘speak corporate’ if they prefer a casual conversation.
You could have the best idea in the world, but if your investor doesn’t understand or relate to the value of the business, they will not invest.
Tip #3: Practice your pitch - but don't memorise it
You must create a standard pitch deck to use for all pitches. This should include your main operations, market figures, and reflect your company’s branding. Whilst you should be able to talk to the points on each slide, you should not memorise a 30 minute pitch. Why? Because you will need to tailor your pitch to the audience you are pitching to. People, in general, are motivated and encouraged by passion and emotion. If you try to memorise your entire pitch, you may sound monotone and rehearsed - which will not excite your audience.
The only area of your pitch you must memorise is your 30s-1min elevator pitch. You must be able to ramble this in your sleep. In this elevator pitch, you must cover the high level:
Market problem
Business solution / value proposition
Market opportunity / size
You only have a few minutes to set the stage for your pitch and intrigue investors - make sure you use the time wisely.
Tip #4: Know your numbers
Ever seen an episode of Shark Tank? If not, definitely watch a few episodes before pitching (consider this a bonus tip). If you have seen an episode, you’ll know at the end of every pitch there is a set of questions - and each investor inquires about different elements of the business (this is where investor personalisation comes into play). You need to make sure you are an expert in the industry your business aims to operate in, the valuation and profit of similar businesses or competitors, and the numbers of your business. The numbers you must know about your business include:
Valuation
Profit margins
Operational costs
Break even
Total addressable market (nationally and internationally)
Sales & growth
If you are pre-revenue, collect primary data that you can use to make educated assumptions. How? Here’s an example.
Let’s pretend you are eager to sell skin care products specifically catered for teenagers who suffer from eczema. Find a hang out area of your target audience (such as a Facebook group or advertisement in a skin care magazine) and collect information on how likely that focus group would be to use your products (you can offer a free sample as an incentive). Then, multiply that with public data on how many teenagers in (specific area) experience eczema. This market research supports your claims with data-driven facts, and illustrates the market need/want to your potential investor.
Tip #5: Have examples and references
The simplest and quickest way to cement a point is to use an analogy or example. Your business product or service will be innovative or niche, and whilst that’s exactly what a new business should be, you need to ensure your potential investors understand exactly what it is you are trying to do. By using well known market or brand examples, you eliminate any confusion and help them grasp the concept of your business efficiently. You also demonstrate the potential of your idea by likening it to successful businesses.
Tip #6: Show your personality
Although we’ve mentioned this a few times in the article, it’s so important that we wanted to give it its own subheading. Be yourself! Demonstrate your passion for your idea and industry. Clearly illustrate why you’re the right person to grow this business and lead the team. It’s not enough to have an excellent idea, you must also show your potential investors why you’re unique, why they should back you, and why you’re the person who will get the job done.
Tip #7: Always follow up
After you’ve first spoken to your potential investor, follow up… with something of value.
If you follow the above six tips, you should have mentioned specific resources, numbers, examples, and references throughout the duration of your pitch. You should have also created a personal connection. This creates the opportunity to send said a personal email, with resources you mentioned in pitch. You can thank them for their time, add a link to a personal topic of conversation, and a link to the appropriate business information.
A sneaky idea is to leave a few resources for a second follow up. If you haven’t heard back from your potential investor within seven days (or the period of time they mentioned they would get back to you within), send a follow up with a message with additional information that may help them make their decision, and offer a phone call to walk through any questions they may have.
Tip #8: Request feedback
Your potential investor will either invest in your business, or pass on the opportunity. Regardless of the outcome, always ask for feedback. If the investor decides to back you monetarily, you may want to ask questions similar to:
For marketing purposes, what resonated with you about our products/services?
What comes to mind when you think of our business?
What do you think our value proposition is?
Who do you think would be interested in our products/services? Why?
Your investor is now your brand advocate because you both have a common goal: growing the business. Make sure you use the additional team member to your advantage.
If the investor doesn’t invest, these are some questions you may want to ask:
What elements of our business did you like most?
What areas of our business model do you think needs the most improvement?
What numbers/figures/goals/areas of my pitch resonated with you the least?
Would you be content with me reaching out again when our business is in a later stage of growth?
It may take you a few practices to nail your pitch and sell your business in a manner that attracts investors, however, you’ll learn something new each run through and become more comfortable as you progress. The above 8 tips cover all your pitching basics and will help you sell your business to investors. Good luck!