In the last installment, we discussed the importance of starting off your initial meeting with a prospective lender or investor by cutting to the chase and quantifying exactly what you’re looking for in terms of financing and what it will be used for.
Once you’ve given the lender or investor enough information to initially qualify their potential interest in the deal, you’re either going to get a quick No, or they’re ready to hear more.
Focusing on the later, you now want to continue your presentation.
The second area the lender or investor wants to understand is your future projected financials (cash flow, income statement, balance sheet) and the related assumptions that drive the numbers.
As an example, virtually everything in the business can be associated with a time frame and cost, so the financial statements become a powerful means to convey the business story you’re trying to tell.
The quantification of market size, competitors, market share, price, margin, operating costs, and so on, all impact the financial statements directly or indirectly.
And lets face it, this whole process is all about money and making more of it, so its important to show your potential source of capital funding how they will get their money back, over what time, and the potential return they can expect.
When you can quickly show how you have quantified all the relevant information into income, balance sheet, and cash flow, it gives the lenders and investors something concrete to wrap their heads around while proactively answering a lot of the questions they will have before they even ask them.
This information can be highly summarized. Its just important that its covered off to maximize the interest level of those involved.
Too often, the business owner or entrepreneur is so completely focused on their sales pitch of what they’re trying to accomplish that the underlying financials are either glossed over, or not really addressed at all.
Remember that the more you can relate what you have to present back to dollars and cents, well quantified and supported assumptions, and realistic time lines, the more seriously you’re likely to be taken.
There is definitely a balance to be had between the marketing side of a presentation and financial projections. Just make sure you know your numbers cold so that where ever the discussion goes, you will have the answer on the tip of your tongue.