How to communicate the value of you company to investors
The first thing to understand is that when meeting with investors, its important to tell a story. In addition to projections and valuations, investors want to hear about sustained success, and exactly what you and your people have done to achieve it. The people involved, and the impact they have on the company, are vital. Fleshing them out helps investors get a grasp on who they would be relying on, just how reliable they are, and what exactly they can do for future owners.
The next thing is to understand the particular kind of story an investor might want to hear. Like any type of customer, they’re going to be self-interested. With any investor, revenue is going to be a foundational part of it — specifically, the revenue they can expect to have if they invest in your company. Your task, though, will involve more than just sharing projections.
Here is what we recommend you share:
- The people who make your business a success
- The specific ways in which your business is a success
- Anything that explains why your company has succeeded in those ways
- Why it will continue to succeed in those ways
- What that projected success means for the investor
- How you came up with the number you’re providing
You have a few challenges to overcome. First of all, investors may not understand the finer points of your business. What this means for you is that technical talk needs to be translated to language that piques their self interest. If you think its important to talk about the technical features of your company’s product or service, make sure you connect it to a tangible benefit for them.
Second, said investors are going assess the value of your business differently than you. They may have trouble visualizing the aspects of your company that mean a lot to you, outside of the profit stream it represents. Telling the story of your company’s history illustrates the more intangible aspects, like the unique strengths you have over competitors and the resilience the company has in overcoming challenges.
They may also doubt your ability to see it their way, which means your numbers will be up for some intense scrutiny. They might doubt your ability to be objective, and they could even doubt your ability to calculate the numbers accurately. By being ready with a clear explanation for how you got to those numbers, you can give your investors exactly what they want — reassurance that the value they’re looking at is real, and the person sharing it with them is honest and savvy.
You may find you have some holes in your case. We recommend taking measures to provide reassurance when you’re facing any uncertainty. One small mistake in your presentation can blow up the whole deal or weaken your position, restoring doubt in an instant and raising questions about everything else you’ve said.
If you lack expertise in deducing or talking about an important aspect of your company, bringing in an expert to solidify your case is a move that both you and your investors will benefit from. This not only protects the negotiating leverage you have, it demonstrates to investors that you’re taking everything very seriously. Investors will appreciate you understanding the risks they face and respect you for protecting your own interests.
Whether you’re selling tomorrow or not, today is always the best day to start planning your exit strategy. Free Vector specializes in legal and business counsel for selling, buying and growing businesses. In the interest of working with businesses of all sizes, FVA offers flexible payment agreements for both long term and immediate exit strategies. Business leaders who are preparing to sell their company can get in contact with our seasoned advisors, by filling out this simple 5-step contact form.