Every new business has risks, but these red flags for Investors could send them running for the hillsEdit date and time
When it comes to investing, I’ve been on both sides of the table. I’ve spent years in businesses at all stages of raising capital, and I’ve also invested in other people’s companies. As a result, I’ve learned firsthand what to do—and what not to do—when presenting to an investor including red flags for investors.
While every investor is different and, yes, each has his or her own risk tolerance, there are a few red flags that will likely convince even the biggest risk takers to pass on the opportunity.
High Failure Rate
Some industries have significantly higher failure rates than others. Restaurants and retail stores are two good examples. While that certainly does not mean you will not succeed, you will need to have a very clear plan. If among the sea of people pitching a restaurant or retail store, your plan will need to reveal how your company will be different than the thousands of others. Show an investor you’ve done your research and have a plan A, B, and C.
Dependence on Legal or Government Regulation
Industries that tend to be more litigious than others or subject to heavy legal regulation may make investors hesitate. If your product requires long government approvals or a bidding process, there could be additional cause for concern because of the potential drain on cash.
Investing in such businesses is not for everyone. Try to identify investors with experience working in such an industry, as investors specializing in fast-launching businesses will likely be turned off by such a long process.
Key Operations in Different Places
If your company is based in one place, such as the United States, but your key operations are in a different country, that can be a cause for concern. Separation can make managing a fast-moving business even more complex. It’s much easier to become disorganized and for tasks to fall through the cracks when you operate from multiple locations separated by time zones.
Small Returns for Investors
Your potential investors may believe in the product, the market, that you have the right team to execute, and that everything is in place. But your business still may not meet their investment criteria if the anticipated returns are too low. Or, if they view it as a lifestyle business and think you will want to stay with it forever, leaving them with no chance at a big exit. Chances are, though, what you’re offering will be perfect for someone else. Keep trying.
Investors come in many shapes and sizes. When one investor turns you down, look for another that may be a better fit for your business. Keep in mind that every new business has its risks. It’s not about eliminating the risks; it’s about finding someone that believes the potential for large returns outweighs your potential red flags for investors.
Heavily Regulated Industries
Industries subject to heavy regulatory scrutiny may give investors cause for concern. If your product requires long government approvals or a bidding process, investors might worry about a potential drain on cash. Investing in heavily regulated industries is not for everyone. Try to identify investors with experience working in these industries, as investors used to little-to-no regulation will likely be turned off by these industries.
Investors come in many shapes and sizes. When one says no, look for another that will be a better fit. Every new business has its risks, but it’s not about eliminating those risks – that’s impossible. It’s about finding an investor that sees past any potential red flags, and believes in the potential for large returns.
High Failure Rate
Some industries have higher failure rates than others – restaurants and retailers, to name a few. While entering into an industry with high failure rates certainly does not guarantee failure, you will present a very clear plan for success. Your plan will need to detail exactly how your company plans to succeed, and differentiate itself from the thousands of others in your chosen industry. Show an investor you’ve done your homework, and you’re more likely to close on the deal.
You’ve put in the hard work and bootstrapped your business. Now what? Next comes the big task of raising outside capital. Meeting with investors and persuading them to see your shared vision in your business is a critical step and the question many young entrepreneurs ask me is, “what do I need to make it happen?” It all starts with three essential documents for the Investor Presentation.
An Executive Summary
First, you can’t meet with investors without an executive summary. This is a one-page document that addresses the most important elements of your business. In your executive summary, you should answer these eight questions:
More often than not, people tell me that they need more than a page to answer all these questions. But you don’t. Regardless of what your business is, if you can’t explain it in one page or less, then you don’t understand it and, as a result, neither will anyone else. Keep your executive summary succinct and confident. No potential investor is going to read something that is several pages long. They want the meat of your business and your proposal. Take the time to trim away the fat.
In the end, no matter how convincing your executive summary is, every investor needs to understand the financials of a business. Create a basic set of financial projections and, like your executive summary, keep it to a single page. Your projections should show investors that you have a good understanding of how income expenses will work in your business, as well as how you intend to generate cash.
Finally, you need a PowerPoint presentation. This is the presentation that you will give to an investor when you finally sit down in front of them or share online via email. Like your executive summary, this is your opportunity to share the most important details of your business within a limited time frame. From experience, I’ve learned that the best presentations reflect the executive summary. Share the same aspects because, in the end, that’s what an investor wants to know about your business. Try to keep the presentation short.
If you’re wondering how long exactly, I always recommend following 10/20 rule. For every half an hour that you believe you’re going to have with an investor, spend 10 minutes talking about your business and sharing your presentation, and the following 20 minutes getting feedback and answering questions. By doing so, you can respond immediately and tailor your pitch based on the way the investor sees what you presented. Every investor is different and one may be more concerned or interested in one element than another. Use their questions and feedback to your advantage.
With your executive summary, financial projections, and presentation in hand, you are ready to meet with investors and continue onto the next step of your business journey.
For many businesses, generate capital may be the difference between success and failure. Most entrepreneurs overlook how much time raising money can take. Here are three things to keep in mind when developing your plan to raise money.
A common misconception is that raising capital will happen fast. Since you know your business the best, and you feel that you’re sitting on the next big idea, most entrepreneurs believe that investors will quickly jump on to work with you and make the business a reality. Take a break right there. Even if your idea is fixing a problem that many people face and would greatly impact the lives of many, it takes at least six months to close the first big round of financing.
Realistically, it could even take over a year. A suggestion for helping to speed up this process is to focus on raising small increments of capital. With this small increment, use it to build a prototype and get it to market. Conduct user testing, get feedback and make adjustments. When your idea has market validation, you can ask for a bigger investment.
Roll up your sleeves and dive in. Raising money can be a full-time job in itself. What I mean by that is put your idea in front of as many people as possible. I have found that it can take 30 qualified investor pitches to close one good deal.
Potential investors are busy people. You’ll do a ton of legwork just to get an appointment. Then you’ll have meetings canceled. Or you’ll arrive for a pitch, and find the investor is “no longer available”. Or you give the perfect pitch to your dream investor, and the answer is still no. Stay focused and keep your emotions in check. Even when things don’t go to plan, learn from the failure so you can do better next time.
Finding funding for your new business can quickly turn enthusiasm into frustration, confusion, and intimidation. After all, asking strangers for money isn’t always a great time; however, if you are patient, persistent, and willing to make mistakes, you will succeed in finding the funding you.
Here are three tips to help you on your way:
For most entrepreneurs, patience doesn’t come naturally. Be realistic, determine exactly how much capital your venture requires, and then take your time in raising it. It takes time for ideas to become capitalized – even the best of the best. Expect this process to last, at the very least, six months. In some cases, however, it may take as long as a year.
In a similar vain, raising capital isn’t easy. In fact, it’s a full-time job. For every 25 investors you meet with, don’t expect to “close” on more than one. That being said, don’t walk into every investor meeting expecting failure. Always walk into a presentation prepared for success. Eventually, you will find the right match.
Keep moving forward.
Again, raising capital takes time. In the meantime, it’s important that you keep moving forward. Be resourceful, and find ways to achieve amidst unideal circumstances. Both your business and your future pitches will be stronger for it. Investors reward resourcefulness – not just resources. They want to see that you are not afraid to move forward at all costs.
Simply put, persistence pays. You’ll hear “no” a lot more times than “yes”. Learn from those rejections, evaluate what went wrong, work to fix it, and then ask again. Investors reward determination.
Whether it’s a motivational quote or an office exercise, “team” is the power word in business. Having a high impact team is essential for any business and isn’t easy to build. Curious myself about what the key is to building a high impact team, I went and asked a friend, Steve Austin. Steve is the founder of NFL Combines, which is arguably the top evaluator of sports talent in the world.
His systems are so effective, in fact, that they are used today by most major professional sports teams as well as the Navy Seals to recruit new members. When I met with Steve, I asked him what the difference was between Tom Brady – one of the top players in his craft – and everyone else. His answer? Three simple plays.
Steve shared with me that there are three things players like Tom Brady do in each and every game that the other players don’t make. For example, it could be taking a knee instead of getting sacked; it could be throwing the ball away instead of risking an interception; or, it could be calling a timeout instead of taking a penalty. These seemingly small things make Tom Brady one of the best quarterbacks in NFL history.
The question is, how do you apply this knowledge to your business? What I realized from my conversation with Steve was that there are three key elements to building a great – not average – team, and it all starts with the hiring process. Before we dive into these three keys, remember how important hiring your team is.
Hiring people is the only area in business where you have the ideal information. If you do your homework properly, you know everything that the person has done in their career that they can apply to your business. In no other part of the business will you have so much information before you. When you are ready to build your team, remember these three key elements.
#1: Get Clarity
Before you put out a job listing or interview anyone, you need to be clear on what it is you need. It’s not enough to say you need a marketing expert. You need to be more specific. What type of marketing? Do you need someone experienced in brand marketing? Or is your focus direct marketing? Understand and clarify what it is you really need.
#2: Don’t Talk to Everybody
As an entrepreneur, I know you’re busy. You are building your business and juggling a dozen tasks at once so don’t interview everyone who sends in a resume. Be picky and only meet with people that fit your very specific needs. This starts with the job posting. Be specific about what you need from the individual and only meet with those who check off all the boxes.
#3: Test Drive
Finally, once you think you’ve found your ideal team member, test them as much as you can before bringing them on full time. If you can, bring them in as a consultant or contractor. Make sure that they are truly up to the task, that they fit your company’s culture, and that they are the kind of person with whom you want your business associated for the long-term. What happens if you follow these three steps but the person doesn’t turn out to be your Tom Brady?
Don’t hesitate to fire them and move on to the next person. In order for your business to be successful, you can’t settle. When you start hiring your team, invest the time upfront, clarify what it is you want and need, only meet with those who meet your specific criteria, test as much as you can, and don’t settle. By taking the time to thoroughly vet and bring on your key employees, you can build a solid foundation for future team success.
Content is the single-most important weapon of every entrepreneur. The process of developing content should be done in conjunction with establishing a brand’s voice and identity. The content strategy is a process that encapsulates the plan, creation, organization and delivery of that content.
Using content management tools and a simple, clear content management system ensures the creators access to a unique, sustainable method that will produce unique content to engage readers with meaningful and cohesive ideas.
Aside from the services and products a business offers, content is the livewire of ANY business in the 21st century.
When I say content, I’m not referring to blog content alone. Multimedia content is equally as important. To strategize your content more effectively, it’s important to take note of what is currently in the marketplace and what is demanded. Keeping your audiences’ needs foremost in your mind will help guide you along the process of deciding what to create.
In order to produce compelling, user-sustaining content, you also need a basic understanding of content’s lifespan. The lifespan can be broken down into the following action steps:
1) Take an audit of the content that’s needed, pair it with your objectives and evaluate the content environments.
2) Strategize by determining ownership of topic areas and the process and workflow of content creation.
3) After creation comes maintenance. Plan a regular audit into your strategy, and gauge content success off of key metrics.
Content creation is just one piece of the puzzle. Actually sharing your created content and systematizing the process to post to your different platforms is a crucial next piece. People often get so caught up in the content creation side that they neglect the strategy needed to actually promote and share their content.
Here are some content management tools I find particularly helpful in automating and organizing workflows and content strategies to boost your company’s content ROI.
I use Trello to organize all of my topic ideas, show the pieces of content that are in progress and keep track of what has been posted online. It’s a great workflow management tool.
Google Docs functions a lot like Trello. It allows you to share and create content easily with everyone on the team. The biggest value is being able to collaborate together in real-time.
This project management tool helps you manage workflow and all outsourced work. You can assign tasks, use the scheduler, and brainstorm directly on the platform through discussions.
This tool will help you schedule Facebook posts in advance, and share them with a team.
Used properly, Pinterest can provide a gem of leads, so BoardBooster is key for automating your Pinterest board. The looping feature makes your pins show up continuously in the feeds of your followers. Brilliant!
Buffer is still one of my favorite scheduling tools. Buffer allows a user to sync social media accounts and schedule posts. It then posts on your behalf at the most optimal times, enhancing maximum visibility for your posts.
Content is still king. By figuring out the right process for you and your team, you can use content to create a competitive advantage over your greatest business foe. Happy creating!