Setting Angel Snares: Ten Tips For
Appealing To Angel Investors
by Ty Freyvogel
If you are ready to start your own business,
but need additional funding to get it going, an angel
could be the answer. No, I’m not talking about
the kind with shimmering wings and a spark of divinity.
(Though having that kind on your side can’t
hurt, either!) Angels are private investors who finance
start-up businesses and new business explorations
with their own money. Usually, they have been entrepreneurs
themselves and delight in helping start-up or even
established companies grow toward success. There are
countless angels out there just waiting for a worthy
project to fund. Why not yours? You can easily
find your own investors if you know how to approach
them and sell your ideas. Read on to learn ten tips
for appealing to Angel Investors.
1.
Perfect your pitch. The pitch is the product
or business idea that you will present to your potential
angel. It should be well thought out and fully developed.
Remember that the pitch will provide the investor’s
first impression of your project, so it needs to be
powerful and convincing. Your pitch can either impress
him or bore him. Obviously, you want to go for the
former! Preparation is the most important factor in
a powerful pitch, so practice, practice, practice.
2. The big picture is bigger
than the product. When you pitch your idea
to investors, remember that your product or idea is
not as important as the background work you’ve
done. Spend time thinking about not only the selling
points of your product, but also the strengths of
your work team and any marketing information you may
have already collected. Note the accomplishments of
your team’s strongest members and study the
competition that you will be dealing with. Remember,
angels have usually already been entrepreneurs. They
will be impressed by your initiative and by the fact
that you knew to research the above elements.
3. Keep your pitch plainspoken
and dynamic. Strike a fine balance between
being informative and clear and exciting and energetic.
Angels want the facts, but they also want to be inspired.
You want your pitch to briefly explain the product
you will sell or your company idea.. Do not use big
flowery words meant to impress them with your erudition.
(See . . . don’t use a word like “erudition”!)
Most importantly, don’t lie or exaggerate. Investors
will learn the truth and then they won’t support
you. You also need to remain calm. If you are not
a good speaker, bring a member of your future team
who is a people person. Being nervous
and awkward won’t help your cause.
4.
Remember that angels invest in people more than ideas. Improve yourself. It is not uncommon for investors
to become very active in the life of your company.
Therefore, they will be more likely to invest
in energetic, friendly people. So if you are not a
kindhearted, likeable person, become one…now.
Read a classic book like Dale Carnegie’s How
To Win Friends and Influence People or take a
self-improvement course or just research people skills
online. Seriously. Work on becoming a better person
and you will be much better equipped to woo potential
angels.
5. Confidently
approach angels with the assumption that they want to help you. Remember, angels have been
there! Most angels were once entrepreneurs themselves,
starting at the bottom and working their way up. They
take personal satisfaction from helping new business
owners make their own dreams come true. So don’t
worry. You are not imposing on an investor
by asking for money. They really do want to help.
6. Know which angels are
appropriate for your company. Some angels
make it a rule to only fund start-ups, while others
prefer to help companies that are already established
expand and develop new avenues of the existing business.
Associations exist solely for the purpose of helping
entrepreneurs connect with the appropriate angel.
Ask around. Do your homework. And don’t try
to fit a square peg into a round hole.
7.
Pony up the dough. Investors want to
see that you believe in your own product, and nothing
talks louder than money. It is mandatory to put some
of your own cash on the line. Angels understand that
you don’t just have millions lying around, but
they will expect you to put up some of your own net
worth (the going rate is about 20%) toward your business
before they contribute. Dip in to your savings, or
if you have to, put your house on the line. When you
are willing to risk your own assets, angels will know
that you are a worthy candidate.
8.
Stay in your own backyard. Angels often want
to be actively involved in your business so you need
to seek an investor who is relatively close to you,
geographically speaking. If possible, seek out investors
who live within 50 miles of you. Like a nervous parent
who likes to unexpectedly “drop in” on
her child’s daycare center, your angel should
feel free to check on you at any time. If you’re
within driving distance, it will be easier for her.
9. Look for risk takers
and “live it up” types. Angels
are generally quite wealthy and—by their very
nature—enjoy taking risks. The same impulses
that led them to be successful in their own ventures
also shape their leisure pursuits. The combination
of a) plenty of discretionary income and b) a propensity
to adrenaline rushes means you’ll often find
them climbing Mount Everest or participating in some
other extreme sport or adventure. So if you meet someone
who just went on a month-long tour of Nepal or rode
along on an African Safari, keep him in mind as someone
who may be willing to throw a little extravagance
your way.
10. If you
don’t desperately need an investment, you are
more likely to get one. You know the cliché
“It’s easier to find a job when you have
a job”? The same principle holds true here.
Proving that you have the ability to get the business
up and running on your own will be a big encouragement
for potential angel investors. Create a steady customer
base and stay current on all of your bills. Then pitch to an angel that you would like their investment
in order to further develop and grow the company.
Your prospective angel will be impressed by your independent
progress and will want to help your business become
bigger and more profitable.
Remember above all that angels are people
too. While investors do have the money and power to
fund your business endeavors, don’t be intimidated
by them. Just prepare your business plan and your
pitch and approach them with the same enthusiasm that
they approached their own businesses when they were
in your shoes. They will respond very well to an entrepreneur
who is prepared and confident about her future plans.
Most of all, know that they want to help
you. Make sure you’re a worthy candidate, set
your snares well and go catch an angel of your very
own.
Seven Cash Flow Secrets
by Ty Freyvogel
Your
success as an entrepreneur comes down to whether or
not you can pay your bills and still turn a profit.
Seems obvious, right? It is, but achieving a healthy
balance between monetary intake and output is an art
form that confounds many entrepreneurs. I am not exaggerating
when I say that your ability to manage your cash flow
will either make you or break you.
I
have seen otherwise successful entrepreneurs crumble
under the stress of poorly managed cash flow. Likewise,
I have watched colleagues flourish under a well-structured,
well-maintained accounting system.
Fortunately,
it’s quite possible to stay on top of the money
coming into and going out of your company. Read on
for some tips and insights that have led to my own
businesses’ successful cash flow.
Assume
that your estimates are wrong—and save for a
rainy day. No matter how carefully you plan
for all potential cash-related scenarios, you will
not be able to accurately predict the “weather”
of your operating environment. At any moment, a storm
front or even an unexpected sunny day could appear
out of the blue. Don’t get me wrong, it’s
a good idea to make rough estimates for your cash
flow, just be sure to give yourself a healthy margin
for error, because you must always expect the unexpected.
In other words, keep a nice cushion of “extra”
money in your account for those surprise bills. I
know that entrepreneurship is based on taking risks,
but where cash flow is concerned, err on the side
of conservatism. Remember that cash is king. No matter
how much we dislike it, our cash flow determines what
we are able to do with our business.
Don’t
underestimate the value of a good customer. As the owner of your business, you have the choice
to run it as you see fit. But no matter how successful
and powerful you become, remember that your customers
are the reason you exist. So be good to them. Some
of my oldest customers are still my best customers.
One company can spend millions on your services during
the years. If you’re a consumer company, even
one person can be worth thousands of dollars over
the span of your business relationship. For this reason,
you must not let success change your mission to give
every client and customer the royal treatment. They
are, after all, responsible for the incoming cash
you will use to pay your businesses rent, taxes, and
other fees. They are the face of your cash flow.
Keep tabs on your expenses. Don’t rely on your memory alone to know when
to pay your bills, order new supplies, or bill your
clients. Even if you run a very small business, you
will never be able to pay everything on time if you
don’t have some system in place to help you
keep track of it all. For this reason, it is imperative
to appoint some method to help you keep your bills
and their due dates separate. Your system can be as
simple as keeping a notebook documenting when to write
checks and when to deposit them. Or you can utilize
a computerized system like QuickBooks® to help
you keep track of everything. Being well organized
will ensure that you’re supplies are always
in stock, your power never goes out and your employees
get paid. Take my advice on this one. It is a lesson
you definitely do not want to learn the hard way.
When putting your annual projections together, think
carefully about non-recurring bills, those payables
such as insurance premiums, tax estimates, or payments
that have a tendency to sneak up on you and say “Gotcha,”
sometimes when you least expect it.
Don’t
extend credit to just anyone. You will almost
certainly have to offer credit to at least some customers,
if not all of them. (It depends on the type of goods
and services you offer, of course!) But be extremely
careful when determining who gets the benefit of your
credit and who goes on his merry way. Read credit
applications thoroughly and check all references.
Never raise the credit limit of a risky customer,
and don’t hesitate to lower it if you have to.
You might even consider consulting with a good creditors’
rights law firm to help you craft a smart credit policy
that makes sense for your company and increases the
likelihood you’ll get paid—at least most
of the time.
Be firm
but kind with clients. It is important to
run your business in a manner that tolerates a certain
amount of leniency with clients, but don’t let
them walk all over you either! If you establish
yourself as a complete pushover, even clients with
the best intentions will take advantage of you. It
is also important not to run your company with an
iron fist. You want to find a happy medium that will
keep you in business and keep your clients happy.
That being said, don’t be afraid to politely
call a customer who hasn’t paid a bill and remind
him or her that it is overdue. They understand that
you have provided a service and it requires a payment.
You can preserve your client relationship and get your money by treating the client with integrity.
Break even. You
have to at least break even each month in order to
survive. Ideally, an entrepreneur wants to make a
profit, but if you are facing hard times, your biggest
goal will be to just break even—and
then get back on track. If you have done all the preliminary
steps to opening your own business, then you probably
already know the bottom line numbers regarding your
expenses versus the amount you hope to bring in. For
obvious reasons, you want your incoming cash to be
significantly higher than your outgoing. So engrave
your break-even number in your mind or sticky-note
it to the front of your computer, and see that you
surpass that number each month. Simple. Here’s
a quick tip: If you are having problems breaking
even one month tell your vendors, don’t keep
them in the dark. Make a deal with them to make partial
payments until your receivables catch up or that you
can arrange a loan for working capital. They will
appreciate you in the long run. No one likes surprises,
especially your bank.
Be
honest with the man. Do not,
I repeat, do not try to cheat the government.
Some very clever people have filtered out money from
their business that they were able to keep out of
the government’s grasp …for a while.
You may get away with hiding money, under-reporting
income, fudging your write-offs and other methods
of cheating but you probably will not. Uncle Sam has
gone to great lengths to set up systems that keep
this from happening easily. The IRS is going to get
its “fair” share. You may resent paying
it—most entrepreneurs do—but follow the
rules and at least you’ll get to feel resentful
outside of a prison cell. I’ve always paid the
tax man first.
Why taxes are good. (Really!)
Many businesses try to have a very small profit at
the end of the year so they don’t have to pay
huge amounts in taxes on it. This can negatively affect
cash flow if you keep your business account so low
that you don’t have enough of a pad there to
pay an unexpected bill. I suggest that rather than
taking tax avoidance to extremes, you get out there
and try to make more money. If you think about them
in the right way, you won’t view taxes as such
a bad thing. Uncle Sam is going to get his cut one
way or the other so you may as well assume that paying
lots of taxes means that you are doing very well.
Keep away from credit cards
if possible. Credit cards are necessary,
but that doesn’t mean that you should aggressively
run up a mountain of debt. Businesses shut down because
of factors like credit card debt (In my opinion, the
most expensive debt you can incur!), so swipe with
caution if you have to swipe at all. Don’t max
them out, by any means. If you find that you have
to max out a credit card your business may already
be in trouble and it is time to seek alternate funding.
Cut costs somewhere, or (best of all) figure out a
way to boost your profits.
Don’t
worry if managing your cash flow seems very difficult
and even overwhelming at first. Cash flow is very
complicated and can take some getting used to. It
is a lot like learning to pay your own bills after
college graduation––a daunting task at
first, but certainly not an unattainable goal.
After
a few months, you will embrace your monthly monetary
obligations and may even find a sense of comfort in
the ebb and flow of money. Like the tides and the
seasons, cash flow has a natural “rhythm”
that keeps you grounded and helps you make sense of
your place in the business world. Before you know
it, you will be able to use your cash flow as a gauge
of your ability to take risks—and that knowledge
will help you make the kinds of smart decisions that
help your company grow and flourish. Remember, when
your outgoing exceeds your incoming, your upkeep is
your downfall.
Bounce Back From Financial Loss
(And Protect Your Entrepreneurial Spirit)
by Ty Freyvogel
One
of the less desirable aspects of entrepreneurship
is the possibility that your business may experience
great financial loss. In fact, it may fail altogether.
Although this fate probably won’t befall you
if you have done your research, it is always a good
idea to know that it can happen. The old
adage “expect the best but prepare for the worst”
is a good philosophy for businesspeople. Knowing that
failure isn’t out of the realm of possibility
makes it more likely that a setback won’t crush
your entrepreneurial spirit.
Should
financial loss or collapse befall your company, take
heart in the effervescent nature of entrepreneurism.
For men and women who have the entrepreneur bug, new
opportunities are always bubbling up. The business game, much like the game of life itself, offers many
second chances.
If
your business stumbles upon hard times, you may find
it tough to pick yourself up and start over. Some
people never recover from a business loss, but I’ve
had my ups and downs and I can assure you that it
is very possible to bounce back from a failure.
Stay in the Game
Following a business failure, you have two choices:
give up entrepreneurism or find a way to reinvent
yourself. I’ve always found a way to stay in
the game, whether it was continuing my business in
another form or under a different name, or moving
on to an entirely new business. One approach I’ve
used is to look at the parts of my business that were
successful, ditch the parts that were failing, and
re-conceptualize my business. My first venture, telecommunications
consulting, is based in an industry that changes continuously.
I’ve had to adapt constantly and the business
that I own today is vastly different than the one
that I started. But I’m still in the business
and it’s still profitable.
Keep “Failure” in
Perspective
A wise person once said that you have only failed
if you fail to learn the lesson your trials posed.
As a matter of fact, I only use the term “failure”
because it is the standardized word our society uses
to describe unexpected and un-ideal outcomes. Though
losing a great amount of money may make you feel like
a big time…well, loser, you need to
look at the big picture. Your life won’t end
today just because all was lost on a project you believed
in. There will be other opportunities, other investors,
and other ideas when the time is right. It is hard
to look at a bad situation in a positive light, but
it is necessary and healthy.
Remember, the most successful entrepreneurs
are optimists! Join them and view your bump in the
road as nothing more than a temporary setback in your
winding journey through the business world. Look at
entrepreneurship as a process rather than an end in
itself. Most entrepreneurs see themselves doing this
for the rest of their lives. As for “risk,”
the only way to fail is to quit before you succeed.
You may lose money, but you will only be a loser if you quit.
Look Before You Leap
Most entrepreneurs have a powerful drive to succeed
and a strong temptation to dive back in after a big
loss. But, while I think you have to stay in the game,
you also have to be careful to not act so hastily
that you make another mistake. Why? Because the typical
entrepreneur tends to have his self-worth all wrapped
up in the fortunes (or lack thereof) of his company.
Therefore he is eager to “prove himself”
worthy and intelligent once again. Being aware
of this tendency can save you from another failure.
(And I’ve had more than one in my day!) Take
the time to analyze why and how the business failure
happened. I don’t need to tell you that
the reason most companies fail usually involves money.
If your cash flow was unsteady, for example, you probably
ended up a day late and a dollar short on more than
one occasion before you finally had to fold.
Look back and see if hindsight will help you spot
the warning signs that you couldn’t identify
at the time. Learn your lesson well. In
your upcoming projects, you will know to stay on top
of the cash-flow analysis and keep things running
smoothly.
Stay Optimistic and Be Persistent
Don’t ever assume that one, two, or even three
setbacks means that you are destined to fail as an
entrepreneur. Sometimes you have to learn the
wrong way to do something before you can identify
the right way! Think about Thomas Edison’s
famous light bulb quote: “I was glad I found
9000 ways not to invent the light bulb!” Resiliency
is the greatest quality an entrepreneur can possess.
It will redeem you when others walk away, convinced
that they are better suited as an employee in a cubicle.
Unexpected let downs are an unfortunate reality in
the business world, but just because you experience
a run of bad luck or bad planning, you don’t
have to accept defeat and retreat! You can indeed
look failure in the eye and go on to be a success.
Do some honest soul-searching. If you still
have ideas that you believe in, and feel excited and
passionate about your future, you can still make a
new dream come true. You don’t know your limit
unless you fall and splatter. If you see the world
this way, there is no loss of self-esteem when you
fail (only a temporary setback) and you always learn
more by evaluating why you fall.
When
you decide to be an entrepreneur, you are accepting
the fact that there are going to be many ups and downs.
The only way to be successful is to greet the downs
as part of the job. If you are persistent and steadfast,
you will find success. Just remember: Never
give up until you succeed (or at least until you redefine
“victory”)!
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