Help! I want to start a business! (4)
Congratulations to the Tribune Newspaper on its 70th anniversary. Surviving that long in an economy with a high tabloid attrition is eloquent proof of the strength of its originating vision and the dedication of the people who have piloted its affairs over the years. Yours truly has shared over twelve of those awesome years. May the years ahead be filled with greater strides.
However, unless you intend to replicate an existing template, you can hardly attract serious investors for a business that exists only on paper. Most investors would not consider putting money on a brand new idea unless they can see its revolutionary prospects. My counsel is that you make your initial business mistakes with your own money. It is always cheaper that way. By the time you come up with a bankable business plan, you should have a good idea what works and what does not. When faced with a potential investor, you are pitching an experience, not a document! Accomplished investors can always tell the difference.
People often ask me how they can raise money for their business especially at the initial stage. My answer? Don’t think money first. Think about what problem your idea solves. Then invest yourself –energy, resources etc. – into that idea until you can see it manifesting even before you have put a kobo into it. Then ask yourself what assets you currently have that can translate to seed investment. Is there something you can sell; a car, land, shares, building, jewelry etc.? Do you have any savings? Make a demand on that. Money kept does not appreciate unless kept in a high-interest yielding deposit. As the Yoruba will say, you can only carry a child who willingly raises his arms to welcome or invite your gesture. Next you look around for people who already know and can trust you like family members and friends who will not ask for your kidney as collateral and can be forgiving of your possible failure.
Only after you have exhausted and profitably utilized input from these sources should you consider scaling up by bringing in external funds from investors. But to meaningfully sell the idea of investing in your business to them, you will need to make a pitch which success is largely linked to your selling ability.
The first thing that goes into a pitch is not the document. The first thing to transfer to the investor is your passion. You must be able to convince the investor about the merit of your business and the benefits to him if he is able to put his money in it. Your passion must reflect the level of selfless work you have invested in the business as well as the capacity to build a good team around it. However, passion is not enough. You must be able to convince the investor to buy into the future of the business and his investment. The buying decision is first emotional before it is economic.
It is important to have a structure in the business that engages several skill sets relevant to the business and its desired outcomes. Financial, administrative, sales, ideation and presentation skills are essential to the success of any business. Even if you cannot engage all of these skills on a full time basis, you may outsource the services to people you believe in and who desire to help you achieve your dreams. You will need to factor in the personality of each person you intend to partner with. As the scriptures teach, two cannot walk together unless they are in agreement. Find people to get on your team who share your vision and can read on the same page with you. Roles must be clearly defined and assigned. But don’t try to do things all by yourself. A solo performer is not an incentive to potential investors.
With a good business plan and working structure, you are ready to source for investors, either as equity (share) holders or people who simply want to give you a loan with interest. When you have found them, you will be required to make a pitch to them to convince them to get interested in your venture. When given the opportunity to make a pitch, you should be prepared. Rehearse as if you are the one being pitched to. Anticipate questions and answer them in advance.
Make your pitch short and simple without being simplistic. Three things should be of concern in your pitch; the idea, the potentials in the market and the expertise behind its operations. If you can convince investors on the prospects of the three areas mentioned above, they will find a means of coming up with the money you require. Unless they are first convinced about why they need to invest, even if you asked for five thousand Naira, they would not consider it worth their while. Your pitch must convey why the investor should put his money on this business.
If you have done what I suggested in the first edition of this series about developing a data-driven business model that gives you a strategy architecture for the business, it should be easy to explain the market potentials of the business to the customer and why you believe that the customer will pay for the product you are offering. Furthermore, your pitch should highlight the actual value you are proposing to the market and the specific problems it is designed to solve in a given demographics that makes them want to part with equivalent value in payment. When the potential investor is listening to your pitch, he wants to know whether you really understand your market as well as the competitive issues involved.
Focus is a critical aspect in making a successful pitch. You cannot be in every market at the initial stage of a business. Concentrate your energy and resources on a given market, dig in your heels and grow from there! Armed with critical statistics that justify the projections, you will need to present as part of your pitch expense and income projections over a three to five-year period. This is how you arrive at the required amount required for investment. Don’t just call that amount, lead the investor towards seeing it himself. Never lose sight of the fact that your desire is for the investor to believe in your venture well enough to bring in money to help you scale the business. Once you get them interested, they will consider taking a second look.
To best deliver your pitch, get to know your investors in advance through research, especially to know what areas of investment have attracted their attention and commitment in the past and the success rate of those investments. If you have to pitch to several investors at once, scan the room and be sensitive to which of them seems to be the most influential. Address your pitch to him and try to get a buy-in from him.
After the pitch, don’t neglect to follow up, especially as you have new information in favour of the business.
Be persistent. Investors love persistence. To them, it very often signposts one word, sustainable!
Remember, the sky is not your limit, God is!