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Tactical Mistakes of First-Time Entrepreneurs

Experienced investors constantly examine the business plan of a number of entrepreneurs
in order to gain a better understanding of their
business ideas
and objectives. Often times, investors can notice certain
tactical mistakes that many first-time entrepreneurs tend to make. These tactical
mistakes often blur the message of the business pitch and, at times, even confuse
prospective investors. First-time entrepreneurs, unlike serial entrepreneurs, are
often naïve in their approach and thus, lack considerable business experience. Although
first-time entrepreneurs put their utmost efforts in understanding the dynamics
of raising money and heading companies, their lack of real world entrepreneurial
experience undermines the effectiveness of their business plan presentations.

Entrepreneurs should treat their business pitch similar to a sales process and clearly
understand that the goal of the first meeting with an investor IS NOT to
get a funding
commitment but to win them over in order to establish a solid
relationship, and possibly, to secure future meetings. It is essential that entrepreneurs
do not commit the following tactical mistakes:

Business proposition should be clear
First-time entrepreneurs often make the mistake of not clearly stating WHO their
customers are, WHAT problem is being addressed, and HOW the company can solve the
problem. Although experienced entrepreneurs rarely commit this mistake, it is the
first-time entrepreneurs who pitch their ideas in such a way that investors have
difficulty in understanding the business proposition even 30-minutes into the meeting.
Although there is some benefit in explaining the context before putting forth the
value proposition, an entrepreneur should take time into consideration and get to
the point in a timely manner. This is very important since most investors expect
a crisp and precise value proposition.

The time and pace of the pitch is important
The time at which an entrepreneur can clearly communicate his/her idea in order
to raise capital for their venture is during their business plan presentation. Therefore,
it is vital that the entrepreneur spend a considerable amount of time on each aspect
of their business plan. Spending too much time on introductions and providing unnecessary
talk during the presentation greatly distracts from the opportunity to convey the
primary business idea. Likewise,
mid-stream questions are helpful in allowing an investor develop a better understanding
of the business proposal, but the entrepreneur should spend less time on irrelevant
topics and communicate only the important ones in his/her full agenda. An investor’s
mind may drift during boring and confusing presentations, and the entrepreneur should
refocus the conversation into more important aspects.

Demonstrations or presentations that do not work
Most entrepreneurs will present their ideas and demonstrate their prototypes/services
during their business presentation. It is quite essential that entrepreneurs use
their time as efficiently as possible during the presentation, especially when switching
between their verbal presentation and prototype demonstration. Since time is of
the essence, entrepreneurs should set up their equipment, connect their laptop to
a projector, and setup the prototype demonstration, even before the meeting begins.
Providing hand-outs to the audience members will not only allow the spectators to
follow the presentation in an orderly manner but will also serve as a back-up hard
copy of the business presentation. Entrepreneurs are encouraged to resume their
business plan presentation should technical difficulties occur, such as equipment
and prototype failure. Remember: An entrepreneur who appears worried about technical
mishaps may present the wrong message to the investors.

Entrepreneurs should research the audience

It is important for the entrepreneurs to be familiar with the audience before they
present their pitch. Every entrepreneur should diligently research the particulars
of each audience member, especially if they happen to be investors. If the entrepreneur
pitches to a venture capitalist firm, s/he should research the individual partners
of the organization as well as the specifics of the VC firm and how knowledgeable
the firm is of the entrepreneur’s target market. Likewise, the entrepreneur who
is “pitching” their idea to angel investors
should know previous and existing investments of the investor and then tailor what
s/he presents based on this information. When a meeting is confirmed, entrepreneurs
should ask the investor about the particulars of the audience who will be attending
the meeting. Although the individuals that attend the meeting may change, the initial
answer will serve as a guidepost.

Follow-up
Regardless if a presentation went well or not, it is very important that entrepreneurs
follow-up with the primary investor a few days after the business presentation.
Entrepreneurs are encouraged to write a letter to each investor, via direct mail
or by e-mail, or even make a follow-up telephone call thanking the investor for
taking the time out to attend and listen to their business proposal. It usually
takes investors (angels and venture capitalists) a few days to
research the idea
that the entrepreneur presented. By following-up with
investors in this manner, the entrepreneur will gain credibility for personalizing
their notes and phone calls. It also shows investors they are truly serious in taking
their business ideas forward.

Ethics and professionalism
A major requirement for the survival of an entrepreneur and his/her business is
not the ability to successfully raise startup capital but to present his/her ideas
in an ethical manner. Any attempts to embellish the facts about their
business idea(s)
or their own individual backgrounds will be either immediately
recognized or discovered later in the due diligence process. Investors are very
particular about the entrepreneur’s ethical and professional conduct and do not
want to fund an entrepreneur who is untruthful in their approach. An entrepreneur
should present his/her business ideas in the best possible way but should never
be inclined to grossly exaggerate.

Source

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