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I want to tell you a short love story. You may be wondering, “Why would a lawyer discuss a love story?” The reason I want to share this with you is because investors, people who will give money and/or resources, love to understand your company’s financial history, so love story.
Learning to speak an investor’s love language gives you access to a world of unlimited resources to help you and your business grow. The ability to explain how a dollar flows from the investor through your company and leads to profitability and/or increased shareholder value creates an enticing story for an investor to consider. However, if you can’t explain this, your company’s chances of successfully raising funds decrease significantly.
Practically, the love story is an Excel document with formulas that takes the numbers and converts them into a financial projection/proforma that can be checked as part of the due diligence of your idea or business.
People love a great story, but what they really love is a great ending. So how do you create a financial story with an amazing ending? How will you show an investor the end they are looking for – a tremendous return on their investment?
When creating your story, it’s important to understand the different aspects of your business and whether they involve expenses or income. Clearly articulating how much something costs or how much profit something will bring is an essential part of explaining your business model and financial history. It becomes easier to persuade an investor to invest when you can describe how the various debits and credits come together to create a trajectory and profitability for the success of your business.
Remember, being investable is the ability to demonstrate the qualities in a way that someone else will provide you with the resources you need to be successful. Your ability to show that you understand your finances is an important attribute. Your ability to understand how to increase profitability and shareholder value is invaluable. Your ability to clearly articulate how your business is doing and how much it costs you or how much it brings you is an integral part of your success and that of your team.
Another key to speaking investor’s love language is to capture your financial history in an easy-to-understand pro forma projection that explains the numbers behind the company. Your ability to put this together is key and a very important aspect of the presentation. If you are having trouble taking the story and translating it into Excel, you should seek expert advice as your chances of fundraising will increase dramatically if you can provide this document.
Ultimately, anyone can put together a pro forma, and there are great resources online to help you with that. However, these are just numbers on a piece of paper, a bunch of data that can be manipulated and is based on assumptions. When you can peel off the layers of the onion and explain how, where, and why you use numbers, then you’re starting to tell a financial story, and then you’re speaking an investor’s love language.
The content of this article is intended to provide a general guide to the topic. In relation to your specific circumstances, you should seek advice from a specialist.
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