3 lessons from a 30 minute meeting with an investor

I sat with an investor last week that was looking for some input on a deal that was presented to him through a friend who was seeking short term financing for his company.  On occasion this individual will fund opportunities for clients of mine and we have gotten to know each other pretty well so he asked for my help.  Prior to our meeting the CFO of the company seeking his investment completed our Business Health Check (www.businessmoney.ca) and we used the results to speak about the opportunities and challenges involved with making a decision to fund this request.  Reviewing the Business Health Check results not only provided some insight into this company but also highlighted several other items that immediately came forward which most businesses tend to forget or miss the mark on when looking for money – specifically debt:

1.  Nobody cares about your business as much as you do

This is always the hardest concept for a passionate business owner to hear.  In their minds their business is rock solid with nothing but upside and profit at every corner – they just need to get there.  When presenting your request for money keep in mind that the person on the other side of the table does not have the same point of reference as you do for what makes your business great.  While they may be interested to know how great your company is they also need you to walk them through how they can contribute to the result instead of being placed in the position of being the result.  Money is rarely the problem – it’s usually the actions leading up to the result that are the problem.  Be honest and explain how you arrived at the point you are at and why your business needs money.

2.  If complicated details are the only way to explain an opportunity – it probably isn’t one

It happens all the time and most times it happens innocently.  When listening to a business explain why they need money the level of detail that can be articulated is overwhelming and unnecessary.  Keeping it simple would mean explaining what you are looking for, why you need it and what your plan is to repay it.  Along the way weave in details about the history of your business as it relates to the future which should correlate to why you are asking for money and how your business will repay it.  Sometimes the illusion of details can make you believe there is something worthy to present when in reality too much detail can be hard to understand for someone that does not know your business as well as you do.  If they want to know more they will ask.

3.  Failing to plan means you have a plan for failing

This one is so cliche that many businesses simply ignore it.  We all know that not having some sort of a plan is a recipe for failure however the ebb and flow of daily activity can make it tough for a business to create a plan much less update it to include real results.  In the case of my meeting, the business was clearly experiencing an increase in volume and opportunity but still couldn’t get a handle on some basic working capital problems.  As a result, adding more volume to the business did not fix their problem but rather increased it.  They did not have a plan for the next 12, 24 and 36 months other than to continue to do what they had done historically – take orders and work hard.  Now they were asking an investor to participate with them making him part of the problem and not the solution.  Having a simple plan for the future which included how they were going to eventually fix their working capital problems would have created a real opportunity for an investor to take a measured risk and be rewarded for it.

After meeting with the investor he made the decision that for the amount of money being sought and the amount of detail required to know about the status of his investment that there probably wasn’t a fit.  My guess is that the investor will ultimately help this company because of his belief in what they are doing and his relationship with the principals.  I also believe that the company will re-present the opportunity after having addressed the three (3) points above and many others.

It usually takes me more than three weeks to prepare a good impromptu speech – Mark Twain

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