A great idea doesn't cost a thing, but parlaying it into a successful business doesn't come cheap. Whether they need $5,000 or $500,000 to build their business, entrepreneurs more often than not must pitch their idea to investors to procure funding. The process can be daunting, but The Biz Fix is here to help with inside advice from both those who write the checks and those who cash them.
As the founders of Bespoke Post -- a lifestyle subscription service for men -- Rishi Prabhu and Steve Szaronos raised $800,000 over five months last year. Every month, subscribers get mailed a box of goodies, ranging from shaving essentials to wine-tasting paraphernalia.
The company's investors include The STAR Angel Network, made up primarily of professional athlete investors. The network's executive director is Erica Minnihan, a business expert featured on CNBC Prime reality programming. Former NFL linebacker Keith Bulluck is a member investor who has witnessed many pitch meetings.
"What has attracted me most is a clean presentation," Bulluck said. "When the people come in and they're on point, they know what they're talking about."
It's also important that entrepreneurs demonstrate likability and flexibility, he said, because nobody wants to work with a difficult partner, no matter how great their model might be.
"When you're starting a business, you have to be humble, because it's never going to be what your vision is initially," Bulluck said. "You might have to work to adjust that vision."
But everyone agreed that before they even consider pitching, entrepreneurs need to do more work than just writing down a concept.
See also: Business Survival Skills
"When Bespoke pitched to us they were in a great position," Minnihan said. "They had a really great business model."
Build a Solid Business, Then Seek Investor Dollars
Bespoke Post is an online subscription service catered toward men. Members receive a monthly package -- the "box of awesome" -- containing items based on a theme, such as cocktails, shaving or footwear.
Before seeking funding, Prabhu and Szaronos operated Bespoke (extremely lean) for about six months, doing most everything themselves, including packing the boxes.
"The process mainly at first was not thinking about investment and thinking about building a business [and] understanding the market opportunity," Prabhu said. "Money comes afterwards."
Once they had gained a solid customer base, they felt ready to prove the company's viability.
"Traction is important because anyone can have an idea," Prabhu said. "But to execute on it -- that is what really shows that idea will work."
See also: Outrageous Publicity Stunts
According to the Small Business Administration, only about half of all businesses last beyond five years, but Minnihan feels confident that Bespoke Post will stay in the "win" column.
"I think that they were only at probably a few thousand paying members when we invested," Minnihan said. "Now they're in the five figures of paying members, so you can't ask for a better scenario."
10 Secrets to a Successful Pitch and Securing Investor Money
Beyond the No. 1 tip for first building a business before seeking investor dollars, Bulluck, Minnihan and Prabhu said budding entrepreneurs must understand all aspects of their business and be prepared to get grilled.
Here are their top 10 tips for presenting a winning pitch:
1. Fully understand the market and where your company fits in it.
2. Have a sound strategy for acquiring customers, and know how much it will cost.
3. Have a good idea of the customer retention rate.
4. Articulate why you need investor dollars.
5. Present a solid plan for how you will spend the money.
6. Assemble a reliable, knowledgeable team with defined roles.
7. Have a solid focus for the business: Less is more.
8. Approach the meeting as a conversation.
9. Attitude matters: Be likable, while exhibiting a strong work ethic.
10. Demonstrate flexibility to change; building a start-up is a fluid process.
See also: The Profit: A Modest Empire