Going for the Ask - for Money
Every small business owner has to be a salesman. You have to be willing to ask for the sale of your product/service every day. You have a dynamite business plan all written out (something most entrepreneurs don't do), you've researched government loans and grants, checked out suppliers, looked at potential locations for your business and your family is solidly behind you.
Because you're aware that most small businesses fail because they're undercapitalized, you know you have to sell your concept to investors or to bankers. Hands down, this is one of the toughest sales for a small business owner to make.
Fortunately, there's good information out there to help you prepare for this daunting task.
Rob May, the Business Pundit (http://www.businesspundit.com), offers a number of tips for selling your company.
You may get only 10 minutes to impress investors, so - and this is critical -- you have to do plenty of preparation to make sure your presentation to potential investors is both professional and meaningful. This isn't a dress rehearsal, so you can't afford a misfire due to lack of preparation. Speaking of meaningful presentations, Rob recommends that you give investors a real reason to believe that your research numbers matter. You do this by finding a reasonably comparable statistic, or statistics, and using it in a meaningful context to which investors can relate. This real-world frame of reference will help them understand your concept and make a more informed decision. They'll be impressed and take this information into consideration into making a decision.
Rob cautions against using Chinese Math in presentations to investors. Entrepreneurs use Chinese math when they try to convince investors that the market for their product or service is huge, so will be easy to reach cash flow breakeven because of the market size. After all, they only need a small percentage of the market. The name stems from the idea that there are a billion people in China, so selling a $1 widget to just 1 percent of them results in $10 million in revenue. The assumption that is incorrectly applied here is that 1 percent is easy to get because it's a small number.
One way to avoid Chinese Math, he says, is to cite the potential of getting a small percentage a small percentage of a large population segment. It may be easier to market in the case where you need 100 out of 200 because it may be easier to identify your target audience if it is only 200 people. In that case you are probably in a niche that is easy to market to and don't just have to blanket your ads on the general public.
Rob also says it's good form to acknowledge your competition. However, put it into the context of how your product charges stack up favorably against competitors, how you plan to differentiate your company and why you think you'll win in the long run.
In summary, there's no magic bullet for pitching your business to investors. Just keep it simple and straightforward: Be honest, be clear, acknowledge your competitions and avoid Chinese math.
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Anita Campbell is editor of Small Business Trends (smallbiztrends.com), an award-winning web site where she follows trends affecting the small business market. She is also the host of the Small Business Trends Radio show. E-mail: anita@anitacampbell.com
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