Let me paint a picture for you .?.?.
You’ve been practising your business pitch for days – to family, friends and even your dog. You’re confident everyone will love your idea as you’ve been told you’re onto a winner. As you wait for the signal, you rehearse your pitch over and over again. This is the moment you have been waiting for.
The music starts as you begin the long walk through the Shark Tank. The doors swing open and you find yourself in front of five people who could change your life forever .?.?. if you nail your pitch.
We saw more than 100 business pitches during the filming of TEN’s new program Shark Tank, and during that time I became really clear on what makes a successful pitch and what will see you crash and burn. Don’t be fooled into thinking these lessons just apply to business pitches – unfortunately, these are some of the most common mistakes happening in boardrooms and business meetings across the country.
These are the seven things I wish everyone had considered before pitching to us on Shark Tank.
1. Research who you’re pitching to
Each of the five sharks has a different reason for potentially investing. What do they believe in? What is their background? What is their area of expertise? Do the work and find out as much as you can about the people behind the “investor” label. People do business with people, and investors invest in people.
2. Understand your customers
An idea is only an idea until someone is prepared to pay money for it, and then it could potentially end up as a commercial product. Asking your friends and family if they like your business idea is not research – they are only going to tell you what you want to hear. In the tech world, we have what is called minimum viable product – we ship “beta” product to get customer feedback.
3. Discover everything possible about the industry
It is unlikely the investor will know as much as you about the industry and market you’re in (putting a Facebook page together to “test” the industry is not what I mean here). How big is the industry? How many competitors are there? Is it a new market or existing? There is plenty of industry data available to start this inquiry. Know your market and know its potential.
4. Deeply understand your numbers and cash flow
You should know every critical number in the business and please don’t fudge them! If you are not a numbers person, practise and work out how you can remember them. Key numbers to know are the cost of acquisition of a customer, the cost to serve a customer (this is more than your cost of goods sold), the number of unique customers, conversion rates, and of course the obvious ones – cash burn and time to profit at current run rates pre and post investment.
5. Deal with the details
If necessary, get trademarks, patents, registrations, licences and approvals. Ensure you comply with regulations and have paid your taxes – no investor will be interested in taking on a business that has any potential litigation, so tie up every loose end before your pitch. You want to build trust with the investor, and one way to do this is to make sure you have taken care of the detail.
6. Understand different valuation models
Some people just want to get the money back that they have already invested in their idea, but this really doesn’t make sense for an investor. If you are pitching an equity deal based on future potential sales, then you need to be clear on why this is so and have a demonstrable track record (eg. recurring income). If you’re valuing your business based on current top-line revenue, know and show similar valuations in your industry. Too many times we saw people pitch with a valuation that was all about “hope” – investors don’t buy hope as a sustainable strategy.
7. Tell the story
Share your vision and entice us with the dream of how you are making the world a better place. A great pitch is an emotional journey for both the person seeking investment and the investor. I’ve been known to say, “It’s just business” but what I’m really saying is, “It’s not just my money: it is my time, my reputation and commitment that you are asking for.”
Make sure your pitch takes the investors on a journey filled with facts and numbers. More than anything, you should be someone they can believe in.
Shark Tank on TEN Sunday nights at 8.00
This article first appeared as a column in BRW on 12 February 2015
Churchill once said: “A good speech should be like a woman’s skirt: long enough to cover the subject and short enough to create interest.”