An entrepreneur�s guide to the investment pitch

As the recent series of Dragons� Den finishes on British television, it is worth taking a look at some of the elements of a successful pitch.

1. The Hook

Investors are there to listen, because they want to spot a good thing and make an investment. So, on the face of it, you should not need to hook them; they should be paying attention already. But there are a lot of distractions and, at best, a weak pitch will lose that valuable attention quickly: at worst, it will never secure the attention of the right investor, whose mind is still on the last pitch. So grab attention right from the start, with a confident opening. And only begin once all investors are looking at you: that�s what your power pause is for!

2. Compelling, Persuasive and Powerful

Use your CPP formula to ensure that you hold attention, put your argument effectively and compel action: in this case, further questioning that will allow you to share further reasons to invest and to dispel reservations.

Compelling: People invest in people as well as in your ideas, so tell a story to hook, hold and captivate the investors.

Persuasive: Investors need to know that the product or service that you are proposing is a good one with a viable market, strong brand potential and the right price/quality ratio.

Powerful: People invest to make money: your whole pitch has to convince investors that the likelihood of a profit is high and the potential hassle factor is low � or at least commensurate with the risks and rewards.

3. The Numbers

Investors listen to numbers and viewers of Dragons� Den have lost count of the number of foolish would-be entrepreneurs who have been lambasted for not understanding the financial figures underpinning their business. There is no excuse: �I don�t do numbers� is not a badge of honour. It is, instead a sign that you don� care enough about making your business a success. Nobody with the knowledge and nous to start a business lacks the capability to understand basic financials. Here is a crib sheet.

�Turnover�

= Total sales revenue

= Price x Volume

�400,000

�Cost of sales�

= Direct cost of providing the goods/services and selling them

= Unit cost x Volume

�220,000

�Gross profit�

= Turnover � Cost of sales

= Gross margin x Volume

�180,000

�Overheads�

= The costs you would incur even if you sold nothing

�60,000

�Net profit�

= Your profit from operating the business
= Gross profit � Overheads

�120,000

�Unit cost� = cost to produce one item �2.75
�Price� = what you sell one item for �5.00
�Gross margin� = Price � Unit cost
= margin excluding overheads
�2.25
�Volume� = number of units you sell 80,000

Tax

�24,000

Profit after tax

= Net profit – Tax

�96,000

 

4. The Pitch

Keep your pitch simple. Look the investors in the eye and tell them a story that makes three things absolutely clear:

  1. What your business does
  2. Who and how many people or businesses will buy your product or service
  3. What you want from your investors and one or two excellent reasons why they should invest

5. The Question and Answer Session

If you think this is the easy bit, you are wrong. But if you also think you cannot prepare for it, you are wrong again: you can. Use friends, colleagues, or advisors to play the role of investors asking as many tough questions as they can. Practice the answers you will give, so you are sharp and clear in your delivery and precise in your answers. Practice answering the question you are asked without evasion, commentary or adding extra information. Practice clarifying the question when you need to, so you are always one hundred per cent clear what you need to answer. And practice reeling of the key statistics, data and facts on which your credibility depends. Ask a good friend to drill you hard on this part. Focusing just on your pitch is a big mistake.

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