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The biggest problem entrepreneurs have when making a pitch is, quite frankly, that they have no idea what they’re doing. As an entrepreneur looking to fund your big idea, you go in, pitch your company to the lender and either get the loan or never hear from them again. If you fail to secure the loan, there is no input or advice about anything, so you don’t learn from your mistakes.

Because lenders tend to be stingy about handing out unsolicited advice on what went wrong, it can be difficult to figure out why you failed. It could be that your business was too risky or you simply weren’t a good fit with that particular lender. But, chances are, your pitch wasn’t up to snuff.

In this article we cover the steps you need to take to get the loan you need to get your company off the ground.

1. Talk to Your Customers Early:

Get out there and sell your product – even if you don’t have the actual product to offer yet. Seek out potential clients and customers, tell them about what you plan to offer and negotiate a commitment for their business. This will provide a client base for you to present when you are trying to secure funding. Lenders are typically more comfortable handing out business loans when they have some kind of evidence that people will patronize the company.On top of looking good on paper, customers can provide valuable insight about your product. Before you spend a dime on the product itself you will be able to collect input on your product from the people who intend to use it. Ask them what they consider to be the pros and cons and adjust accordingly. You can improve your product before it even hits the shelves and give the customers exactly what they need.

2. Try it Out:

Before taking your pitch straight to the lenders you need to practice, practice, practice. Start with family and friends. If you know anybody that has any small business, lending or investing experience, ask for their help. Make your pitch to them and ask for any helpful input on how to make improvements. Find out what worked and what didn’t work for them and apply that knowledge to your pitch.

After you have gathered advice from personal connections, take your pitch into the business world. Practice on your clients and employees (separately, of course). Find out what kind of concerns they have and how they would like to see them addressed. Each group of people will be looking for different things. Customers are looking for something that will improve their life or business while employees are interested in job security. Collecting advice from different sets of ears will make your pitch more diverse and prepare you for any questions that might arise from the lenders.

Ultimately you have to impress the lenders. If your first attempt at a loan proves unsuccessful, take something away from the experience and find out where you went wrong in their eyes. Ask them about their reservations and what kind of things they look for in a pitch. You will be able to better your pitch and, if you ever find yourself back in front of these lenders, you will know what they want.

3. Get Their Attention:

Lenders sit through countless pitches trying to stay awake while all of the information is going in one ear and out the other. You don’t want them to delete your name, face and proposition from their memory as you are shaking their hands and thanking them for their time. You want them to be salivating at the opportunity that you have just presented.

Invoke passion and excitement about your company. Ask and encourage questions. Incite conversation and debate about your business. Relate your business to them to create a personal connection. Promoting lively interaction keeps everyone involved, thus retaining their attention.

4. Provide Options for Investing:

If you are pitching to a bank this will not be a realistic plan because interest rates and options will likely vary depending on your qualifications. However, if you are looking to borrow money from friends, family or other investors, be flexible about how, when and how much you will pay them back. You can offer them high interest over a long period of time or low interest over a short period of time. Interest only, graduated repayment (payments that increase over time as the business grows) and seasonal loans (installments paid only during summer or winter months) are a few other options as well as equity in the company and later investment options if the company does well.

5. Get Organized:

Make sure that you have everything in order. Present neat documentation of your business operation (past, present and future), your loan request and any necessary facts and figures that provide a complete picture of your company.

6. Know Investor’s Motivations:

Understanding why the lender will want to give you money will help you to create a pitch geared toward their interests. You can count on the motive to be making money. The question is how? Some lenders are looking for cash payments with interest on a monthly, quarterly or annual basis. Some lenders may want nothing but equity. Some lenders (family or friends) may want to help you out for personal reasons but are still going to expect monetary compensation for their trouble. Find out what floats your lender’s boat and plan your pitch accordingly.

7. Keep It Simple:

Avoid getting too detailed about the specifics of your product. Lenders don’t care about what you are going to sell. They’re interested in how you are going to sell it and, more importantly, if it is going to sell and how well. They’re interested in the financial aspect of your company.

Don’t try to wow them with jargon and insider talk as you will probably just confuse them. Stick to layman’s terms. Make sure that you can say everything that you need to say in 10 to 15 minutes, speak loud, clear and fluent and make sure that everyone understands. If the lender doesn’t understand what you are talking about then they won’t have any confidence in you or your company and you won’t be getting the loan.

8. Have a Realistic Cash Plan:

A lender is going to want to know how much money you have already raised, how quickly you have spent it, how much you are currently spending and when you expect your revenues to generate a positive cash flow. Having a realistic cash plan proves to the lender that you are going to be a reliable customer.

9. Show Off Your Team:

If a team is only as strong as its weakest link then you want to prove to your lender that your company has no weak links. Outline the work history of all of your managers and employees. Experience with other successful entrepreneurial efforts will boost a lender’s confidence while corporate experience can demonstrate the ability to handle cash flow on a larger scale if your company expands faster than expected. Explain how each person is integral to giving your company a market advantage and why.

10. Keep It Flexible:

Just because your pitch worked last time doesn’t mean that it will work again. Time has passed and things have changed. Your business has hopefully grown into different needs, your team has likely changed or maybe you have taken your original business as far as you can and are venturing into a whole new market altogether. Whatever the case may be, change is the only constant in life so you need to acknowledge any changes that may have occurred and modify your pitch accordingly.

11. Present a Clear Mission:

In order to convince the lender that you have what it takes to be a successful entrepreneur, you are going to have to move past what a great product you have and focus on your mission. Explain the reason behind your business, how it is different from the competition and why it will succeed.

12. Brag on Product or Service:

While it is important not to dwell on how great your product is it is just as important to tout your creation. Describe your product and the competition that it will face in the market. Put some weight behind your argument by providing market research or technical analysis to explain why people will want to buy your product instead of the competitors’ product.

13. Tell The Truth:

A lender is more likely to do business with you if you are trustworthy and credible. If you fudge data, exaggerate the facts or flat out lie about your company’s potential, you will likely be called on it before you see a penny. And there’s nothing harder to repair than broken trust. Even if you are somehow able to transform falsehoods into a check the lender will expect you to perform. When you fail to meet those expectations the lender will lose faith in you and word will get around within your market and to other lenders. Your reputation will be shot. Nothing good can come from lying.

14. Expose Partnerships That Lend Credibility:

Securing well-known investors or corporate partners can aid the validity of your idea. It shows that successful entrepreneurs believe in your product and helps reinforce the idea that maybe you do have something worth taking a chance on. Don’t be afraid to promote these kinds of partnerships, no matter how small they might be, to instill an extra layer of comfort with the lenders about doing business with you. Just make sure that these partnerships are solid. If there is any kind of doubt that a company like this will not be involved then don’t mention it in your pitch. If they do end up pulling out then your credibility would take an unnecessary hit.

15. Find Money From Other Sources:

Lenders want to know whose money is involved. They want to see how much of the owner’s money is at stake, who else contributed, how much others have invested and how much of an equity stake is held by each investor. A clear and concise list of this information will help the lenders quickly ascertain who makes the decisions for the company. Also, if you happen to have the right names on your list then your company’s chance of obtaining a loan can be enhanced.

16. Cite Examples:

Come up with specific instances of exactly how your product has been or will be used. Explain who will use it, how, where, when and why. For instance, if you are planning to sell custom made T-shirts tell the lenders that the shirts could be good for high school seniors around graduation time. You could put the name of the school and the class of 2007 on the back or a class picture. You could put the student’s name on the front and they could have all of their friends and classmates sign the shirt that could be kept to remember that event in their life. These kinds of examples will help the lenders visualize your company and give them a good idea of what direction you are planning to take.

17. Make it Easy To Repeat:

A short, comprehensive summary of your pitch will bore its way into the minds of the lenders and better your chances of securing a loan. Easy to repeat is easy to remember and easy to remember makes it easier for the lenders to cut you a loan. Your company is now on the path to success.

REFERENCES

1. How to Change the World – The Entrepreneur’s New Year’s Resolution: “I Will Fix My Pitch”

2. Inc.com – The Savvy CEO’s Loan Pitch

3. Entrepreneur.com – How to Make the Kitchen Table Pitch

4. Financial Web – Improve the Odds of Getting that Business Loan

5. Business Week – Make Your Financing Pitch Sizzle, The Pitch Coach

6. goBIGnetwork – Everything Follows the Pitch

Staff :: Jun.18.2007 :: Features :: Comments Off

If you’re struggling to find success in your quest for venture capital, maybe you’re looking in the wrong place. Venture capital is not for everybody. For starters, venture capitalists tend to be very picky about where they invest. They are looking for something to dump a lot of money into (usually no less than $1 million) that will pour even more money right back at them in a short amount of time (typically 3-7 years). You may be planning for a steady growth rate as opposed to the booming, overnight success that venture capitalists tend to gravitate toward. You may not be able to turn around as large of a profit as they are looking for in quick enough time. You may not need the amount of money that they offer or your business may simply not be big enough.

Simply put, venture capital is not the right fit for your business and there are plenty of other options available when it comes to finding capital. From angels to credit cards, here are 25 alternatives to consider when it comes to funding your business.

1. Angels

Most venture capital funds will not consider investing in anything under $1 million to $2 million. Angels, however, are wealthy individuals who will provide capital for a startup business. These investors have usually earned their money as entrepreneurs and business managers and can serve as a prime resource for advice on top of capital. On the other hand, due to typically limited resources, angels usually have a shorter investment horizon than venture capitalists and tend to have less tolerance for losses.

2. Private Placement

An investment bank or agent may be able to raise equity for your company by placing your unregistered securities with accredited investors. However, you should be aware that the fees and expenses associated with this practice are generally higher than those that come with venture and angel investors. You will likely receive little or no business counsel from private investors who also tend to have little tolerance for losses and under-performance.

3. Initial Public Offering

If you are somehow able to gain access to public equity markets than an initial public offering (IPO) can be an effective way to raise capital. Keep in mind that, while the public market’s high valuations, abundant capital and liquidity characteristics make it attractive, the transaction costs are high and there are ongoing legal expenses associated with public disclosure requirements.

4. Bootstrap Financing

This method is intended to develop a foundation for your business from scratch. Financial management is essential to make this work. With bootstrap financing you’re building a business from nothing, which means there is little to no margin for error in the finance department. Keep a rigid account of all transactions and don’t stray from your budget.

A few different methods of bootstrapping include:
Factoring, which generates cash flow through the sale of your accounts receivable to a “factor” at a discounted price for cash.
Trade Credit is an option if you are able to find a vendor or supplier that will allow you to order goods on net 30, 60 or 90 day terms. If you can sell the goods before the bill comes due then you have generated cash flow without spending any money.
Customers can pay you up front for your services.
Leasing your equipment instead of purchasing it outright.

5. Fund From Operations

Look for ways to tweak your business in order to reduce the cash flowing out and increase the cash flowing in. Funding found in business operations come free of finance charges, can reduce future financing charges and can increase the value of your business. Month-by-month operating and cash projections will show how well you have planned, how you can optimize the elements of your business that generate cash and allow you to plan for new investments and contingencies.

6. Licensing

Sell licenses to technology that is non-essential to your company or grant limited licensing to essential technology that can be shared. Through outlicensing you can generate revenue from up-front fees, access fees, royalties or milestone payments.

7. Launch Customers

Find out if you have any customers willing to fund research and development in exchange for the product produced.

8. Vendor Financing

Similar to the trade credit related to bootstrap financing, vendors can play a big role in financing your new business. Establish vendor relationships through your trade association and strike deals to offer their product and pay for it at a date in the near future. Selling the product in time is up to you. In hopes of keeping you as a customer, vendors may also be willing to work out an arrangement if you need to finance equipment or supplies. Just make sure to look for stability when you research a vendor’s credentials and reputation before you sign any kind of agreement. And keep in mind that many major suppliers (GE Small Business Solutions, IBM Global Financing) own financial companies that can help you.

9. Sweat Equity

You may be able to find people willing to work for stock options in exchange for a lower salary or a delay in compensation until a later date.

10. Self Funding

Search between the couch cushions and in old jacket pockets for whatever extra money you might have lying around and invest it into your business. Obviously loose change will not be enough for extra business funding, but take a look at your savings, investment portfolio, retirement funds and employee buyout options from your previous employer. You won’t have to deal with any creditors or interest and the return on your investment could be much higher.

However, make sure that you consider the risks involved with using your own resources. How competitive is the market that you are about to enter into? How long will it take to pay yourself back? Will you be able to pay yourself back? Can you afford to lose everything that you are investing if your business were to fail? It’s important that your projected returns are more than enough to cover the risk that you will be taking.

11. SBA Loans

An independent agency of the Executive Branch of the U.S. government, the Small Business Administration offers several different loan programs. The SBA partners with private and other institutions as a guarantor of loans to help Americans start, build and grow businesses.

12. SBIR and STTR Programs

Coordinated by the SBA, SBIR (Small Business Innovation Research) and STTR (Small business Technology Transfer) programs offer competitive federal funding awards to stimulate technological innovation and provide opportunities for small businesses. You can learn more about these programs at SBIRworld.com.

13. State Funding

If you’re not having any luck finding funding from the federal government take a look at what your state has to offer. There is a list of links to state development agencies that offer an array of grants and financial assistance for small businesses on About.com.

14. Home Equity Loans

If you own a home why not borrow against it? Home equity loans are typically used to finance major home repairs, medical bills or college education but you can also use them to boost your business.
15. Community Banks

These smaller banks may have fewer products than their financial institution counterparts but they offer a great opportunity to build banking relationships and are generally more flexible with payment plans and interest rates.

16. Microloans

These types of loans can range from hundreds of dollars to low six-figure amounts. Although some lenders regard microloans to be a waste of time because the amount is so low, these can be a real boon for a startup business or one that just needs to add some extra cash flow.

17. Finance Debt

It may be more expensive in the long run than purchasing, but financing your equipment, facilities and receivables can free up cash in the short term or reduce the amount of money that you need to raise.

18. Silent Partner

You can enter into an agreement with a silent partner that will provide financing without participation in the management of the business in return for a share of the profits. Web sites like Prosper.com are available to link borrowers with lenders.

19. Friends

Ask your friends if they have any extra money that they would like to invest. Assure them that you will pay them back with interest or offer them stock options or a share of the profits in return.

20. Family

Maybe you have a rich uncle or a wealthy cousin that would be willing to lend you some money get your business running or send it to the next level. Again, make it worth their while by offering interest, stocks or a share of the profits.

21. Form A Strategic Alliance

Aligning your business with a corporation can produce funding from upfront or access fees to your service, milestone payments and royalties. In addition, corporate partners may be able to provide research funding, loans and equity investments.

22. Sell Some Assets

Find an interested party to buy some of your assets (computers, equipment, real estate, etc…) and then lease them back to you. This provides an instant source of cash and you will still be able to use whatever assets you need.

23. Business Lines of Credit

If your business has positive cash flow and has proven that it will cover its debts then you may be eligible for a business line of credit. This type of financing is a common service offered by most business banks and serves as business capital, up to an agreed upon amount, that you can access at any time.

24. Personal Credit Cards

Using personal credit cards to finance a business can be risky but, if you take the right approach, they can also give your business a lift. You should only consider using this type of financing for acquiring assets and working capital. Never consider this to be a long-term option. Once your company breaks even or moves into the black, ditch the credit cards and move toward traditional bank financing or lease agreements.

25. Business Credit Cards

Business credit cards carry similar risks as personal credit cards but tend to be a safer alternative. While the activity on this card goes toward your credit report, a business credit card can help you to build business credit, keep your business expenses separate from your personal expenses and can make tax season easier to manage.

REFERENCES
1. More Business – A Venture Capital Analysis
2. Score – 5 Tips on Vendor Financing, The Best Ways To Finance Your Business
3. About – 6 Steps To Effective Small Business Credit Card Management (Small Business Information)
4. Business Finance – Bootstrap Financing, Business Line of Credit, Silent Partner
5. Entrepreneur – Using Credit Cards to Finance Your Startup
6. Globes Online – Alternatives to Venture Capital
7. Corp21 – Alternatives To Venture Capital Funding
8. Washington Post – Innovators Find Alternative To Venture Capital
9. Wiggin and Dana – Alternative To Venture Capital Financing
10. Trizle – Why Bootstrap Financing
11. Startup Nation – Creative Business Financing Options: Self-Funding

Staff :: Jun.14.2007 :: Features :: Comments Off

There are many different ways that you can start a business without burying yourself under a mountain of debt, paying sky high interest rates on business loans or handing over stake and ownership to venture capitalists or other investors.

What if I told you that I could introduce you to an investor who knows exactly what you what you want to do, knows what you need to get it done, has the knowledge and dedication to make it work, has access to all of the resources that you need, is dedicated to making your business a success and has only your interests in mind? And, on top of all of that, this perfect investor is local.

It may be hard to believe that such a person exists but all you have to do is look in the mirror. That’s right, it’s you. Building a business using your own resources can be a daunting task but, it can also be very rewarding. The financing and resources that you need to get things up and running are all around you. You just need to know where to look and learn how to take advantage of them.

There’s only two questions that need to be answered before you can tap this valuable investor – Where do I get the money and how do I get started? We’re here to help. So, pull up your bootstraps and get ready to build a successful business on your own.

WHERE DO I GET THE MONEY?

You have to have money to make money. Whether you are able to use money that you have saved in the past or you need to rack up a temporary balance on your credit cards, there are plenty of places to find money. You just need to figure out which method best suits the needs of your business.

1. Personal Savings: This is the place to start when it comes to bootstrapping a business. Dip into your personal account and fund your business from money that you have saved. There may not be enough for this to be the sole form of financing but, if there is enough, you won’t have to worry about any debt or interest rates on loans.

2. Friends and Family: Ask your family and friends if they have any extra money that they would like to invest. Agree on a payment plan, with interest, and offer them future stake in the business if it turns out to be a success.

3. Your Home: A second mortgage or home equity loan is traditionally used for repairs and upgrades to your home. However, if you do own a home, this can also be a great source of funding to get your business up and running.

4. Credit Cards: It’s rare that you hear somebody suggest that you should accumulate credit card debt. They do come with high interest rates and you could end up paying them off for the rest of your life. Think of it as an investment in your future. The beauty of credit cards is that you can pay them off whenever you want without being penalized for it. When your business does start making money, use as much as you can to pay down this debt.

5. Licensing: Instead of sinking a bunch of money into producing and marketing your product, sell licenses to companies that have the need and the resources to make it work. The company gets the product they need, your product is in the market and you can sit back and collect the royalty check.

6. Trade Credit: Basically, this entails receiving goods from a supplier without having to pay cash up front. You may be able to get 30, 60 or 90 days to pay for the goods. This is a good, short-term method of freeing up working capital that can get you on your feet. Of course, you will have to sell the goods before payment comes due or you will be paying with your working capital anyway. If you use trade credit, expect to pay interest on the goods.

7. Customer Financing: Ask your customers to pay up front and use that money to buy the materials that you need to do the job. The most common place you might have seen customer financing is when a builder or contractor asks you to pay up front to put up a fence or hang gutters. The contractor then uses that money to buy the materials before he returns to complete the actual work.

8. Equipment Financing: Equipment can be real expensive. Talk to different equipment suppliers and find out what kind of financing options they have available. You can also look for rent-to-own deals on furniture and other equipment.

9. Lease: Until you get your company on its feet, consider leasing office space and large equipment instead of purchasing. This will free up thousands of dollars in the short run. Plus, when you outgrow your space or bigger, better equipment becomes available, you can upgrade without worrying about selling or being stuck with the older model.

10. Sell Your Accounts Receivable: This is a financing method referred to as factoring. A “factor” buys your accounts receivable at a discounted price and takes over all of the paperwork involved. You receive the cash that you are looking for and you no longer have to deal with the paperwork.

Once you’ve figured out which financing option is best for you the seed has been planted. Now, all you have to do is water it so that your business can sprout roots and begin to grow.

HOW DO I GET STARTED?

Simply having sufficient funds to start a business is not enough to make it successful. You’ve got to know how to spend efficiently. You have to know when to spend, how to spend, how much you can spend and when not to spend so that you are not wasting any money. A startup business usually doesn’t have a lot of financial wiggle room, especially in the beginning. Spend smart, watch your business grow and enjoy the benefits when it becomes successful.

11. Know Your Limits: Before you drain your savings and max out your credit cards to turn your revolutionary business idea into reality, step back and take a look at your situation. The plan is, of course, to pay off all of the ensuing debt and rebuild your savings from the piles of money that are going to be laying around after your business takes off. But how realistic is this plan? Can you achieve this goal? And, most importantly, can you afford to take the hit if the business fails?

12. Map Out Your Finances: Start from day one. Figure out how much money you are going to need for development, production, advertising, payroll, distribution and any kind of overhead that will be associated with running your business. Don’t overlook the small things like rent and utilities. Take into account that it might be days, weeks or even months before you see any money generated from your goods or services so don’t plan to use accounts receivable early on. You need to have a plan to cover all of your expenses three to six months in advance.

13. Cash Flow is King, Profit is a Plus: Forget about profits for now, cash flow is your primary concern. Keep track of everything – how much you have, how much is going out, where it’s going, when it’s going, why it’s going, how often it is going and, eventually, how much is coming in from where, when and why. Most of your cash is going to be flowing out at the beginning so there won’t be any profits to worry about. But, when you do start to see extra money accumulating, you’ll know you’re on the right track.

14. Create a Realistic Forecast: Top down forecasting is a big no-no for a startup entrepreneur. Don’t determine your goals from the size of the market. Determine your goals through the ability of your business. Forecasting from the bottom up, you can figure out what kind of numbers are achievable from the projected output of your business and how much of the product you will be able to get into the market. Planning to attain 1 percent of the market and trying to boost productivity to reach that goal is unrealistic and bound to fail. If selling 100,000 widgets in the first year gets you one percent of the market while your company is only capable of producing 10,000 widgets a year, then you have no chance of reaching your goal. Planning to sell 10,000 widgets in the first year would be a winning strategy.

15. Hire a Young Team: The knowledge and expertise that proven teams offer comes with baggage. They have expectations about the way a company should be run and are accustomed to a lifestyle that you simply can’t provide. They are expensive. Hire young people, straight out of college who are looking to make a name for themselves. They are cheaper, eager to please and can be easily molded into the productive and efficient workforce that you will need. You get cheap labor and they get to build their resume. It’s a win-win situation.

16. Hire Who You Need, Not Who You Hope You Will Need: If you are expecting to need 20 people in the next six months but only need 10 right now, only hire 10 people. If you hire 20 people then you be paying 10 people to work and 10 people to wonder what they are supposed to be doing. And you may never need the other 10 people. Keep your team small enough to get by and if you need more people in the future you can always hire more people.

17. Limit Yourself to the Bare Essentials: If you have five people working for you then you don’t need ten computers. The same thing goes for licensing. If you have five people working for you but only three of them will be using Adobe Photoshop, then you only need to have licensing for three Photoshop programs, not five.

18. Keep Your Day Job: To minimize the risk of losing everything, continue working and build your business on evenings and weekends. This way, if your business doesn’t work out, you will have something to fall back on. If it does take off, you can quit your day job as soon as you are able to sustain yourself through the business alone.

19. Start With Basic Services: Let’s say that you are wanting to start a landscaping business. Start by mowing peoples lawns. After you’ve established a source of revenue, start offering to plant flowers around people’s trees. You can move up gradually by planting bushes and trees and eventually you’ll be able to afford to offer complete landscaping services.

20. Get Your Product Out the Door: If it’s not ready at all then disregard this advice. But, if you are just tweaking and adding bells and whistles then stop and ship. You won’t make any money until you sell your product and you can use the opportunity to collect feedback from the customers. Find out what they like and what they don’t and adjust accordingly.

21. Be a Frugal Spender: Buy only the essentials and look for deals. Do you really need brand new, top of the line computer equipment? Look for older or used equipment that will do everything you need for a lot less money. Cut corners wherever you can.

22. Negotiate: Whether you’re trying to get more money from your customer or pay less money for goods or services that you require, always try to get a better deal. Offer an extra service to your customer in exchange for more money or trade your services for someone else’s services. If you’re making headway in your landscaping service, maybe you could offer to put a sign advertising the garden store in your customer’s yard in exchange for some free flowers or a free bush.

23. Operate from Home: Working out of your home can eliminate the cost of renting a space and you won’t have to waste gas commuting. Plus, all of the supplies, equipment and commuting costs related to your business are tax deductible.

24. Eliminate the Middle Man: Deal directly with your customers. You will be able to offer better service, cheaper prices and develop a great relationship with your customers. Keeping your customers happy will create a buzz about your company and as demand for your product grows you can eventually expand into stores to fill that demand.

25. Do Something Different: Any lawn care service will come to your house, mow the lawn, trim the weeds and edge the driveway. Include watering in your service. If you’ve become a full-blown landscaping service, some plants require more care than others do. Include detailed instructions on how to care for everything, tell them to call with any questions and maybe even schedule a return visit to ensure that everything is going well. Go the extra mile.

26. Get the Word Out: Buy some paper and business card stock and make your own fliers and business cards on the computer. Take your cards and fliers door to door. Introduce yourself to everyone and tell them what you do. Add a second phone line under the name of your business and get listed in the phone book. Get out there and build a customer base.

27. Create a Joint Venture: Find a similar business in its infancy with identical needs as your business and join forces. You can share office space, supplies, equipment, cost, employees and profits. Once you are both ready you can split and go your separate ways.

REFERENCES

1. How to Change the World – The Art of Bootstrapping

2. BusinessFinance.com – Bootstrap Financing

3. Entrepreneur.com – 6 Sources of Bootstrap Financing, Bootstrapping Your Startup, Secrets of Bootstrapping 4. trizle – Why Bootstrap Financing 5. morebusiness.com – Factoring – Bootstrap Financing, Bootstrap Financing Your Way To Business Success

Staff :: Jun.03.2007 :: Features :: Comments Off

It’s been a long and winding road up to this point and you’ve still only made it to the starting line. You’ve come up with a great idea, assembled a team to help you implement that idea, secured clients and customers, researched the market, crunched the numbers and put together a business plan. There’s just one teensie weensie little detail that needs to be sorted out before you can get your company across that starting line and into the competition – money. It’s not easy to convince people to part with their money but there are investors out there who make a living doing just that. You just need to find the right ones and persuade them that your company is worth their while.

Once you’ve tracked down the right angel or venture capitalist and secured a meeting it’s time to take on the role of salesman. You can’t show up and expect your business to sell itself. You need to take command of the opportunity and prove to your audience that you are the next best investment for them. Here are a few ideas to help you prepare a perfect pitch that will assure the investors it is a good idea to pull the trigger on that starting pistol.

Excite, Don’t Explain

Heading into a presentation bogged down with statistics and numbers isn’t going to turn any heads. You need to stand apart from every other mundane proposal that is going to parade through their office. I’m not saying that you should enter the room through a puff of smoke with pyrotechnic sparks falling from the ceiling to theme music and open with a magic trick. But don’t subject them to 100 word-filled slides in a darkened room with a 45-minute lecture detailing your company’s quarterly financial plan for the next five years.

Venture capitalists and angel investors have to sit through these presentations all the time. They may have just heard a proposal before yours and chances are that they will be listening to another pitch by the time you are starting your car in the parking lot. Your job is to make sure that they are talking about your company over lunch. Be cordial and introduce yourself to everyone in the room. Learn about their past investments, use anecdotes that they will relate to and connect them to your company. Express passion about your company and your product because if you’re not excited then they won’t be excited. You need to create a buzz and stir up their emotions if they are going to remember you.

Keep Your Presentation Short

You can kill your chances of finding investors with too much information. Stick to the basics. Don’t overwhelm them with information. The ideal pitch length is 10 to 15 minutes. This will leave time for questions and further discussion about what they want to know as opposed to what you think they want to know.

Limit your accompanying slides to 10. You may be able to get away with 11 or 12 but any more than that and you might as well be showing them pictures of your trip to the Grand Canyon because they will lose interest. However, it is a good idea to have extra slides available to expound on any specific questions that you think may come up after you have made your pitch.

Engage The Audience

Encourage questions and answer them in a prompt and confident manner. Provoke discussion by asking your own questions about the investors, their interests and past ventures that relate to your company. By getting them involved in the pitch you decrease the chances that they will zone out, play with their blackberries or fall asleep. They are more likely to take an interest and you will stand out from all of the other companies that are vying for their money.

Avoid Templates

Articles and programs that outline the dos and don’ts of pitching can be helpful and should not, by any means, be discounted. However, do not take them as gospel. Every situation is different and should be treated accordingly. These types of aids do a good job of addressing the topics and are a good jumping off point to preparing your pitch. What they fail to cover is the details and spirit of your pitch so if you need to stray from the template then start wandering. You know your company, you know what it needs, you know what you need and you better know what your investors are looking for. Tailor your pitch to fit the needs of your company and the investors.

Tell The Truth

A good relationship cannot function without trust. If you cheat on your spouse then the next time you want to go out with your friends or need to work late you can count on you’re better half making sure that you are doing what you say you are doing – if they are still around at all. If you promised to pay your friend back that hundred bucks that he lent you and you never did then you will likely never see any money from him ever again.

The same goes for investors. Don’t fudge your numbers. Don’t guarantee customers or partners that you can’t follow up with. Don’t exaggerate the ability of you, your company or your staff. Don’t try to be more than you are or can be just to try and impress the investors. Likely, the opposite will happen and you will turn them off. If they find you sincere and trustworthy they are more likely to do business with you.

Be Clear, Detailed And Concise

We’ve already talked about how important it is to keep your presentation short but you also need to make sure that it is coherent. Your slides (limited to 10 or 12, of course) should be free of clutter. Limit the amount of words so that they can scan over them in a few seconds. They don’t want to read about your company they want you to tell them about it. If they are relevant and can help illustrate your point throw in a graph or a picture to break up the monotony of the text. Use large text so that it is easy to read and larger text to drive home the things that you really want them to remember like your company’s name and a tagline that summarizes your business. Make sure that you keep the language simple and resist the urge to use jargon.

Talk about how your company is unique, what kind of service you will provide, who your customers will be, what market void you are going to fill and how you are going to fill it. Introduce the key players in your company including the relevant qualifications of each member and the role that they will play. Outline your business model and map out your financial projections (up to five years), requirements and milestones. Don’t waste any words and do all of this in 15 to 20 minutes. If you’re looking for some help, “I Will Fix My Pitch” offers some great ideas about what to include in each of your slides and a few tips on how to make your pitch more effective.

Your Ambition Must Be Realistic

Investors are looking for ambitious businesses to put their money into so don’t downplay your company’s potential. Just don’t get carried away. If you waltz in claiming that your company will put Starbucks out of business in the next year, you will likely end up serving the investors a Grande, skim-milk, vanilla latte from behind the counter of the Starbucks in their lobby instead of going into business with them. Starbucks didn’t get to where they are today because there was no competition. They beat the competition because they know what they are doing. The investors need to know that you understand that.

You have to show them that you have a grip on the market and reality. Prove to the investors that you understand how to compete successfully. Tell them how you plan to draw customers and clients, how many, where they will come from and why they need your service.

On the other hand, contrary to being overambitious is trying to sell them on only needing a small percentage of the market to succeed. Even one percent of the market can be difficult to achieve and investors aren’t interested in what you need to get by. They want you to do more than get by. If they are going to buy into your company then they are looking for a good chance of resounding success.

You’re Not Alone

No matter what kind of service or product your business is going to provide chances are somebody else is already doing it. If nobody is doing it then somebody has likely tried and failed. If this is the case you need to explain what you are going to do different to make it work. If your service or product will be creating a new market then don’t try to convince the investors that nobody else is able to do it. This comes across as cocky. Basically, you need to recognize that you are going to have competition and understand how you are going to meet it successfully.

Control The Flow of The Meeting

Take note of body language and the questions that are being asked and steer the pitch in the right direction. If your audience is shifting in their seats, looking around the room or watching the clock then it is time to move on to the next point. If they look confused then ask if they have any questions. You need to address all of their queries in a clear and concise manner without dwelling. If the investors don’t understand what you are talking about then they won’t hear another word you say but if you hover around a single point too long then they will simply lose interest.

Be Prepared For Follow-up

If you have some real brand names or big name people involved in your company don’t leave them out. In a casual manner work them into your pitch as early and often as you can. Too little, too late won’t stick and too much will overshadow the core of your business and make them seem like a heavy crutch. However, make sure that these brands or people are aware that they are involved and be ready for the investors to contact every one of the names that you drop. If any of the deals or agreements are tentative then leave them out completely. You don’t want to commit with the investors when there is any possibility of a big deal falling through.

You also need to be prepared for a thorough investigation of your projections and the team. Provide contact information for yourself and all of the key players within your company. Make sure that all of your associates are reliable, informed and qualified. When it comes to projections be able to back up your numbers with research and make sure that the investors will find the same thing when they are digging around. It is likely that they are already familiar with the market so they will know exactly what they are looking for and where to find it. This may all seem elementary but it is easy to get caught up with impressing the investors and lose focus your objective to obtain funding for a realistic, viable company that will benefit everybody and build strong business relationships.

REFERENCES

1. Guy Kawasaki’s How To Change The World (Blog) – The Top Ten Lies of Entrepreneurs, The Entrepreneur’s New Year’s Resolution: “I Will Fix My Pitch”

2. eHow – How to Prepare a Pitch to a Venture Capitalist

3. Fast Company – Perfecting Your Pitch, Part One: Assume Short Buildings

4. VCA Online – Venture Capital Presentation/Pitch

Staff :: May.16.2007 :: Features :: Comments Off