In order to pitch your business successfully to an private investor, it is important to ensure the financial accounts are correctly recorded and presented.
Total Revenue is the key when you need to pitch your business
The total revenue is extremely important when it comes to a business pitch, especially for start-up business. Profitable or not, the total revenue gives a good idea of whether the product or service your company offers is widely accepted by the market. A business pitch may have innovative ideas, revolutionary products and fashionable concepts, but will only be a successful business if it is accepted by the market.
Cost / Profit Margin
Most small businesses operate with high profit margin, typically with a net margin of 30% or above. If you have a product that is too costly to produce, think first of ways to either bring down the cost, or raise the targeted retail price before presenting your business to a venture capitalist. Another common mistake that many small business, especially owner operated ones have is that the owner/operator’s salary is not counted in the cost. When calculating the profit margin, always remember to substract the salary or labour cost of the owners (suppose the owner take part in the daily operation).
Operating cost vs. fixed cost
Many small business do not distinguish fixed cost and operating cost explicitly on their balance sheets. The problem with that is it is hard for the incumbent investor to realize the actual operating profit margin, even if the margin is considerably large. Fixed costs, such as real estate purchase, renovation, purchase of durable equipment and machinary, etc should be separated from operating cost, so that the potential future profits is presented on the balance sheet.
Do not rely heavily on small business accountants
In our past experience running SME’s and working with clients, we surprisingly found out that many individual accountants are not as reliable as the business owners think. When it comes to some specific problems, many accountants may konw just as much as you are. Therefore, as a small business owner, you should always go through your own transaction reports on each account, and check the balance sheet for mistakes. Always remember that no one knows your business better than you. So make sure there is no surprises on your financial reports before pitching your business to investors.
At Winflow Financial Group, our consultants help entrepreneurs with our experience. Tell us about your business or investment today and find out how we can help your business save money and grow.