Financial Planning: How Do I Prepare to Present to Investors?

by Mike Baer

Funding for your new business is obviously crucial – no cash, no business. So let’s think about this from an investor’s perspective. What is it that interests him or her? What does he or she want to see? What questions answered?

Here’s what I’d be asking:

• What exactly is the product or service that you intend to sell? Don’t assume that I understand it. Make it simple for me.
• What is the market demand for this? Is it a cool idea, a “me too,” or is there a real demand? In other words, do people really need/want your product or service?
• Who will your competitors be? How is your idea better than and different from theirs?

This first set of questions is about your viability in the market place. Is this a real business? This second set of questions is about you. Can I count on you?

• What is your background? Why are you particularly qualified to launch a business like this one? Do you have a specific knowledge base or experience that would give me confidence that you can actually pull this off?
• Who do you have around you? Hopefully not your frat brothers or just “good believers”. Who is your management team? Who are your advisors?
• What is your track record? Have you ever done anything like this before? Where have you been successful?
• Who will vouch for your character? Your commitment to Christ?

Next we come to return on investment – ROI. After all, that’s why I’m interested.

• What kind of return can I expect? Specifically, what multiple of my investment should I count on? Remember, I can get 8% annually pretty much anywhere.
• What is the timeline that you have in mind before I can expect a return? 3 years? 5 years?
• What are the risks? How “safe” is my money? Can you present these to me or do I need to dig them out of you?
• Are you asking for a loan or an equity investment?
• What does your basic business pro forma say? What are projected sales, costs of sales, operating expenses, net operating profit for the next 3-5 years? What are others in your space doing?

I’m not just a financial investor. I am a kingdom investor and I want to see Kingdom Impact related to God’s unchanging purpose in the world.

• Where are you going to do this and how does it relate to God’s kingdom? What kingdom impact do you anticipate?
• How connected to the unreached is this? Closely? Not at all?
• Will your business be domestic? International? In easy places or the 10/40 Window?

So, in preparing to approach me or any other investor, these are the questions you need to have answered in advance. The format in which you present may range from a highly polished business plan to a napkin in a coffee shop; that depends entirely on who you are contacting. The more you think on these things and the deeper and more thorough and compelling your answers, the better chance you have of obtaining funding.

Now, you did mention mistakes and pitfalls. Here are a few to avoid:

• Failure to address the questions above – if you are unprepared and have not asked yourself the hard questions that is a major turnoff.
• “Magical thinking.” Christians, especially visionaries, are prone to an unrealistic approach to endeavors for God. Being His child doesn’t guarantee success in business anymore than it does in any other realm. Show me you are willing to do the hard work.
• Defensiveness. Any investor worth his salt will ask you hard questions and may imply or clearly state that “your baby is ugly”. Listen to what we say. We aren’t trying to hurt you. We are trying to help you.
• Offering too little in return. Most venture capitalists anticipate a significant (majority) of ownership. Sometimes as high as 80 or 90%. An angel investor will probably ask for less but will still want a significant stake and a level of control to protect their investment.

Hopefully this is helpful. May God bless your ideas and enterprise for His glory!

This post first appeared on The BAM Review in Feb 2015 as part of a Mentors Panel on Financing BAM Companies. Read all Mentors responses on this topic.

Read more from Mike on Funding Models for Your Kingdom Startup

Mike Baer was one of the early leaders in the modern Business as Mission movement. He started his career as a pastor and church planter. After 15 years in the pastorate Mike was led into business where he gradually began to discover the potential for believers in business to bless their communities, evangelize the lost and spread the Kingdom of God, especially among the unreached. Today, Mike is the Chief People Officer of EmployBridge, a $3.2 billion employment company based in the US. He has written 3 books on BAM: Business as Mission, Kingdom Worker, and Gospel Entrepreneur. Mike is a regular contributor to the Third Path Blog. Today Mike and his wife reside in the mountains of North Carolina where they enjoy their 5 grandchildren.

Mike also serves as a mentor on our ‘Ask a BAM Mentor‘ panel of mentors.

 

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