One of the strongest obstacles that entrepreneurs face in their journey to grow a business from scratch is associated with their ability to raise capital to fulfill the business' financial needs.
This struggle can be easily understood when one researches the background of most founders, as their technical skills are often stronger than their 'pitching' skills.
For example, a tech business founder may feel more comfortable when writing and proofreading thousands of lines of code while the process of identifying and securing the best small business loans for his company can be quite unfamiliar.
If you feel this is your case, the following article aims to help you in understanding what it takes to pitch your business idea or company in a compelling way for your potential investors.
Following the 'pitch deck' approach
A pitch deck is a summary of a business's key facts.
Investment professionals and business owners often use these presentations - commonly displayed as a set of PowerPoint slides - to understand what the company is all about in a matter of minutes.
Although you may not necessarily pitch your business idea in this exact format, you can follow the common structure of a pitch deck to talk about your company to people who might be interested in taking a stake in it.
The problem-solution match
The first thing that pitch decks portrait is how the business solves a problem for its customers.
Seasoned investors often look at this problem-solution match as the key to identify potentially profitable ventures by analyzing if the problem is actually as important as it sounds while also assessing the solution to make sure that it does help the customer in getting rid of the issue.
Showcasing this match between what your business does and what your clients need is essential to convey how valuable it might be.
Research your target market
Knowing the size and distinctive characteristics of your target market will tell your investors that you have done your due diligence in determining if there is enough demand out there to justify the effort of building a business around it.
Although market research reports can be quite expensive for an early-stage company, you can still use free tools like government census information or data obtained from well-documented journalistic pieces to back your statements in regards to how your prospective market looks like.
That said, you can also look for the best small business loans out there to finance the purchase of in-depth reports that can help you understand who your potential buyers are.
The size of your potential audience and your ability to conquer a share of the pie will determine the potential revenues that your company can produce as it keeps moving forward.
The importance of having a strong team
A team of seasoned professionals who help you manage the business' different areas can be a valuable asset - often as valuable as the idea itself.
This is the reason why some founders research the credit market to find the best small business loans to cover the first months of operating expenses for their startups - including the salaries of these top-notch professionals.
A savvy investor will look at your team to determine if you have enough hands on deck to accomplish all the goals you have set forth for your project.
Know your numbers
A business's ultimate goal is to deliver value to its shareholders over time.
For this reason, providing your investors with the financial information they need to understand the business potential as a profitable investment is crucial to increase its appeal.
This is a brief list of some of the key metrics and data that you should know about your business financial performance:
Revenue growth over time.
Profit margins.
Average $ amount per order/client/month.
Forecasted profits or losses for the next 12 months at least.
Cash burn rate (for money-losing companies).
Amount and conditions of any debt you may have taken.
How much is your business worth?
Finally, the valuation of your business can be a deal-breaker if you have not put much thought into it before pitching your idea to an investor.
In most cases, valuations are determined by using multiples of the company's sales, operating income, or net earnings.
The actual multiple that you should give your business will vary depending on the industry in which it is in, market conditions, interest rates, and other similar factors.
Before you assign your company a random number, make sure you run it through someone with experience in the financial industry so you can convince your investors that it is the right number for your venture.
