Entrepreneurs are always looking for their next move. The next business strategy, the next idea, and often, where the next dollar comes from.
Starting a business from the ground floor isn’t an easy task. The money is always short and the possibility of failure omnipresent.
However, this hasn’t stopped the field from steadily becoming more popular. Investors are always on the lookout for new business ideas and driven individuals looking to turn their pennies into fortunes.
An excellent example of this new entrepreneurship boom is the hit TV show, Shark Tank. Entrepreneurs on the show find tremendous success convincing investors to support their products.
It sounds like a stretch, but any budding entrepreneur could learn from Shark Tank. Let’s take a look at how the television show is laying the groundwork towards strong investor pitches.
Do Your Homework
After a few episodes of Shark Tank, it becomes clear that many entrepreneurs don’t have the slightest idea what the job really entails.
Remember, investors are people with enormous amounts of capital. They’ve seen generic pitches over and over, and have probably given a few themselves.
Not knowing your business plan and pitch forward and back is the easiest way to lose out on funding.
Shark Tank investor Barbara Corcoran, picked the best pitch she has seen on the show based almost solely on preparedness.
The clients, “answered every question and objection like geniuses…They worked on every objection any shark had ever asked an entrepreneur,” Corcoran said per Business Insider.
It’s knowing the little things – even an investor’s favorite questions – that paves the way to success.
Hands On Demonstration
Putting your product in investors’ hands is a technique that can make or break a sales pitch.
People are endeared to products they can physically hold. What better way to increase trust than to put the finished product into someone’s hand?
Letting an investor see and feel a finished product mitigates skepticism of your idea.
It’s no longer about will this idea materialize, but rather how can we move forward with this idea.
Online based services can also benefit from this idea, though they aren’t presentable in tangible form. This works by physically producing the end result of your service.
For example, if your company facilitates online advertising, bring a working model, customer testimony, and real revenue numbers generated by your product.
The investors can’t hold the product in their hand, but they have the components and end result to work with.
Be Open To Negotiating
Entrepreneurs often come into investor negotiations with either high or low expectations. Not many get the valuation numbers right the first time.
Investors that are willing to invest will offer up numbers they think are reasonable. Your job is to run a cost benefit analysis of equity sold vs. funds acquired.
Are you willing to give away 50 percent of your company? Is that wise? Will you have enough wiggle room for more investment capital down the road if need be?
Never oversell your value to one person.
An interesting strategy to consider is setting an anchor price. This price refers to a value assigned to your company by yourself before investors have an opportunity to guess at valuation.
Research has shown that anchor prices influence an outside party’s view of your real value. This can help gather better offers from investors.
But be careful, investors are business savvy and will bow out from high ball offers they think might indicate a person is either untrustworthy or lacks business knowledge.
Keep these things in mind when you’re pitching your business to investors. The Shark Tank sharks make good examples of real world investors, and are worth studying.