Put yourself in the place of an investor!
By Catherine Snowman, Crowdfunding Coach
Here is the second part of about how to give presentations for potential investors.
I am especially taking about sales forecasts. Within most business plans forecasts are unusually high, and often unrealistic. This in turn leads to outrageous profit projections. You need to always ask yourself if your sales and expense projections are rationally supported and if they deviate too significantly from industry norms. Don’t start by projecting sales based upon a market share forecast. You need to develop a granular ground-up forecast. You should start with unit sales by month and its dependency upon the prior months marketing promotion and sales expense. Then start plugging in estimated unit price and cost. Calculate your gross margin and the gross margin contribution after your variable marketing and sales expense. In the early years, your market promotion and sales expense may be significantly higher than your revenue. By extending this forecasting exercise for several years, you will develop a “feel” for when the gross margin contribution after variable marketing and sales expense becomes positive.
Explain how your team is “tight” and your ability to compliment and support one another. Describe previous successful relationships.
Never Downgrade a Team Member
A paramount concern of an investor is whether you have the skill set, commitment and flexibility to reach the three to five year objectives. A key element is your skill to pull together individuals that can contribute to the objective and interact to overcome challenges. The moment you introduce a risk that a team member can not do the job or that there is conflict or lack of team preparation – you’re dead.
Integrate the Intangibles
In a meeting with one of the most successful Boston venture capitalists, he pointed to a bookcase of business plans that he funded and remarked “Solid plans, but the majority significantly changed within 18 months.” Business and technology are dynamic. Trends are often disruptive, technologies collide and lead to new innovation and economies crash.
Every listener or reader of your presentation (or business plan) needs to walk away with the strong belief that this is a great investment opportunity BUT, if the “assumption scenario” changes, the team will rapidly adapt and continue to build a successful, sustainable business.
To address the dedication of your team to build a business, there are four key “intangibles” that must be integrated into every presentation, discussion and business plan. They are…
- Develop a series of anticipated questions and answers
- Establish with team members the protocol for answering a question; include ways for you to curtail team member’s answer.
- If an investor asks a question – that has you stomped – acknowledge that it’s a good question and suggest that you’ll address the question off-line or after you do some additional research.
- Don’t volunteer information
- Keep the presentation about 30 to 40 minutes.
- Spend between 60 and 90 seconds per slide.
- Use videos, graphics, pictures and bullets – no paragraphs.
- Keep bullets to a minimum – limit 4 per slide
- Table discussions about your startup’s valuation.