Financial literacy is not an everyday skill. It’s not something we’re taught at school or college, and (to be proud and British) money isn’t something we talk about at the dinner table.
It’s no wonder we see entrepreneurs fail when they are interrogated on the BBC TV show Dragon’s Den.
The good news is if you prepare for it Pitch for investorsYou don’t have to be a math expert to know your numbers. You just need to prepare for what you will be asked.
1. Know where your numbers come from
You can be spectacularly good at what you do and have a fantastic product or service. But if you don’t know your numbers and can’t answer the dragons’ questions, then they are will not invest.
Investors want low risk with high return, meaning they want a business owner who knows how to manage their money, a business that has a proven track record of not wasting money, and has the potential for growth and healthy profits.
If you want to show them you’re a good investment, you need to know your numbers. You can do this not only by memorizing and repeating the numbers, but also by understanding why you achieved those numbers.
Before your pitch, take time to really understand what the numbers mean and why they happened. Look at your earnings, yours Gross profitand your operating profit. Be able to talk about yours Forecasts and how you want to achieve this in detail. Work with a consultant beforehand if you need help making sense of everything.
2. Put yourself in their shoes
An investor’s goal is to make money. So they won’t work with anyone who they don’t believe will pay off the investment. Put yourself in their shoes; Why should they trust you? Essentially, you’re asking them to put massive pressure on you and your company, so you need to look at it from their perspective.
With so much at risk, investors are known for asking tough questions. You must be able to defend all of your business decisions, both good and bad, and demonstrate that you can run your business responsibly.
As you dig into your numbers, think about what you notice. You need to prepare for any anomalies that may raise questions, and also know how much sales and profit you have made.
3. Be confident, not arrogant
No founder will know their numbers exactly, and investors are aware of this, but if you approach them with confidence, you’re more likely to win them over.
You don’t expect a perfect story with no hiccups or bumps in the road, that’s not realistic. What they expect is confidence in the decisions you make and the ability to defend them without seeming arrogant.
If you’ve made mistakes along the way, own them and explain what steps you’ve taken to ensure they don’t happen again. Dragons don’t expect perfection. If working with you doesn’t add value to your company, investing would be pointless!
If your answers are well prepared and you are confident in your abilities while knowing your limitations, they will understand the story. Ultimately, they will buy as much from you as they do from the company, so don’t scare them off with arrogance.
4. Don’t take a review out of thin air
Dragons know how to value a company So if they get involved with a few absurd characters, they will immediately be put off and enticed to dig even further. Figuring out how much you need and what percentage you’re willing to give away isn’t an estimate, it’s wishful thinking.
If you ask for £500,000 in return for 20% of your business, you value your business at £2.5 million. Whether you rely on current profits, expected profits or the company’s assets, you must be able to substantiate them.
You’re talking to smart business owners, so don’t treat them like market traders haggling over fruit prices. Be honest with them and yourself about the value of the company. You’re asking them to take a risk, so make it worth it.
5. Don’t let the spotlight burn you
All investors are human. They know how nerve-wracking it is to be in your shoes, and they’ve all built businesses and made mistakes along the way. They are there because they want to find companies worth investing in; so as not to make fun of you or trip you up.
They ask you questions to reassure you that you are safe. So keep that in mind and keep a cool head. All you’re trying to do is show them that you are the person you want to invest in and that the time to do it is now. So take a deep breath and show them that you are the one.
Laura Linden is a financial strategist, fractional CFO, and founder of Feisty FD with a mission to take the fear out of finance and empower women – and female entrepreneurs. Her debut book, UnF*ck Your Business Finances: Unlearn the Shame, Reclaim the Power and Change the Game, is out December 2nd.
