So, you have your business. You have a proven track-record. You have customers. But you also have the iconic entrepreneurship growth problem: working capital.
You could make money but you’d need more capital. You would have more capital but first you need to make more money.
So you decide to find an investor and pitch him to inject capital into your business.
Here are 3 Golden Rules:
1. Be Yourself
Most people think they have to “put on” a face and be something they are not to be taken seriously. As someone who runs a business that invests in entrepreneurs, I am driven first by the person then the business. If the entrepreneur is cordial, polite, honest and willing to learn, the inherent and residual risk of the transaction drastically drops.
2. Have a clear exit strategy
Most investors don’t want to be in your business forever. They generally have an exit period in their mind. Whilst you’re pitching, the investors is probably looking at the ease of entry and exit, as well as the ability of the business to generate the cash to repay the investment with a healthy return without strangling its cash flows.
It really the investor if you can paint the picture: what will their funds be used on, when will they be return & at what margin.
3. Know your numbers
Men lie. Women lie. Numbers don’t. The single most ubiquitous lie entrepreneurs tell themselves is that they are not accountants. You don’t have to be. But you are a business person which means what is “coming in” vs. what is “going out” is critical.
So know your revenues, Net margins, gross margin, EBITDA, Net profit pre and post tax, are all critical numbers. Know them backwards.
Equally important to know margin per unit, product mix and fixed costs. Having knowledge of this information may sway the conversation with an investor and get you the much-needed investment.
Good luck growing your business.
Speaker. Private Equity Partner. Dragon