[vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ width=”1/1″ tablet_text_alignment=”default” phone_text_alignment=”default”][vc_column_text]They say time is money. For investors, this couldn’t be any more true. On a daily basis, they are inundated with pitches from companies of all shapes and sizes, all looking to raise the capital needed to take their businesses to the next level. With such a symphony of stories, investors can only afford to give each CEO a small window of opportunity to state their case and convince them to invest.
Such a competitive, overcrowded environment and scarcity of opportunities make raising capital one of the toughest challenges you’ll face as a CEO. That’s why, when your opportunity to stand in front of potential investors comes, you and your team need to be as prepared as possible. You need to know your business insight out; the numbers, the opportunities, the challenges, the risk. All the nitty-gritty details. Investors want to know that you’re more substance than style and that you’ve done all the necessary deep diving to produce a rock solid plan. Most importantly, you need to tell the financial story of your business. Framing your pitch as a story helps create a human connection between you and your audience far better than information overload and shotgun style pitching.
Though this sounds like a no-brainer, you’d be amazed at the number of CEOs and Founders investors turn down because they don’t have confidence in their ability to build a business. Not make money, but build a business by maximizes value and ROI for investors. To ensure you are in prime position to seize your opportunity to raise capital and grow your company, you need to know everything about these 5 critical items:
1. Your Business’ Numbers:
Sounds obvious right? That’s because it is! Before speaking with any potential investor or partner, you need to have confidence in your financial performance, your business model, and accounting team – which is not the CEO or Founder… You must be able to explain as clearly as possible where your money is currently coming from, where it goes, and WHY!. An easily understandable profit model should be one of you and your finance teams key deliverables when meeting any investor, which clearly illustrates every stage of the growth process and how money is expected to be made.
You also need to align the numbers between past and future. If you have one million in sales in 3 years and your projections say something completely different without a solid support element as to why investors will walk away because it looks like you’re guessing and not being realistic.
2. The Owners Trap
As CEO or Founder, you’ll undoubtedly be as immersed in your business as possible. It’s your baby after all! However, in order to ensure the long-term viability of your business, you need to demonstrate to all potential investors that your company isn’t in stuck in “The Owner’s Trap”. This is a situation a business can find themselves in when the CEO or owners becomes so central to a company that their absence leads to the business struggling or worse, coming to a complete standstill.
“Think about transferability. Investors and buyers want to know how much working capital your business is going to take without you! “
– Scott L. Thompson – President, Foresight CFO
As CEO, you’ll need to demonstrate to investor’s that while you are able to steer the strategic direction of your company, you have also built an incredibly strong team around you who you trust to take care of their duties for the business. Showing that there is a united core of people all using their expertise to guide the business demonstrates to potential investors that the fate of business doesn’t weigh on the shoulders of one individual. This drastically increases the transferability of the business and the value when you sell!
3. How Much Money You Need & When You Need It
Again, this might seem obvious but many CEO’s fail to clearly demonstrate just what it is they plan to do with investor’s hard earned money.
You’ll immediately gain credibility by showing them exactly how much you need and why you need it. By illustrating clearly where their investment will go and how it will help grow your business (along with all the benefits this will reap for them and you), investors will be better prepared to assess the feasibility of your plans and be more comfortable knowing where their investment is going. Building and presenting a detailed financial plan is key to this step and a quick reminder, it must be realistic as it always takes longer and more money to do anything.
4. Industry Benchmarks & How You Measure Up
As Sun Tzu’s said in his masterpiece “The Art of War”, CEO’s need to know their enemy – i.e. their competitors. All successful CEO’s have taken the time to analyze the other players in their market and be familiar with how their business measures up to industry benchmarks. This doesn’t mean just knowing who is the biggest player in the market but knowing how every facet of your business (production costs, logistics, manufacturing process, margins, marketing cost, etc) measure up to the other players in the market.
By doing this, CEO’s can clearly show investors where their company sits in the industry, how they measure up to industry benchmarks and, more importantly, the size of the opportunity the market presents.
“If your overhead growth rate is 8% and 20 competitors in your industry have a rate of 4%, you are leaving 4% profit on the table and you are not competitive long term as you are not performing the average. “
– Kirk W. McLaren – CEO, Foresight CFO
5. Know Who You’re Talking To
The final step of your preparation is to make you know who it is you’re asking to part with their money to help grow your business. Do your homework and be aware of their backgrounds, their business style, their previous deals (which were successful & which weren’t) and their network. At the very least, this is the respectful thing to do, but when it comes to preparing how you will plan and deliver your presentation, knowing your audience will ensure your message lands as clearly & effectively as possible!
We can’t stress enough just how difficult raising capital can be and just how important it is to your company’s future growth. If you integrate these 5 major points into your investor preparations long before the day you need investors, you will grab the investors attention and they will be willing to take the next step with you as the CEO.
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