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The Inc. Network

Reader-to-reader advice.

Show-and-Tell for Investors
We've completed a business plan for a new product, and several investors we've targeted have expressed great interest. We'll be making a presentation to offer them equity, so we need advice on how to pull it off as smoothly as possible. Any ideas?

Linda Kapala

Owner

Kapala Enterprises

Oak View, Calif.

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First, be sure you don't pitch your idea to investors who have a history of not following through on the type of early-stage investment opportunity you're offering. "Know your audience," says John Freyhof, director of venture development at the Enterprise Corp. of Pittsburgh. "Due diligence prevents you and investors from doing the same dance when you shouldn't even be in the same ballroom." Ask potential attendees for three references from the companies they've previously backed, and call those companies to compare notes on investors' integrity, stick-to-itiveness, and optimal level of return.

Professional investors need to know where their money is going and how they're going to get it back, says Dennis Stemp, founder of Pittsburgh's Dennis Stemp Publishing, which puts out a motorcycle magazine. To that end, you should present the investment opportunity in bite-size, easily digestible pieces. Investors need to know that you understand how all those pieces will fit together to generate high returns relative to the financial gamble they'll be taking.

Even the best story can come across muddled if it isn't presented professionally and logically . Greg Stemm, cofounder of Tampa-based Seahawk Deep Ocean Technology, a company that recovers shipwrecks, suggests you begin with a brief overview that gives investors a sense of what you want them to take away from the meeting. Next, reveal your company's money-making track record by walking the investors through the basics: what your company does, how and when it makes money, and how much it costs to make that money. Then you'll need to annotate the market opportunity, and demonstrate the product and explain its unique position in the market.

To help crystallize the investment opportunity in the minds of attendees, you'll need 35-millimeter slides of realistic financial statements of profit and loss, cash flow, income, and cash projections. You needn't spotlight your worst-case scenario. But you do need to paint an accurate, profit-making middle-of-the-road scenario with all its peaks and valleys.

The question-and-answer period will either make you or break you. To win points for sincerity, enthusiasm, professionalism, and the ability to listen -- traits that investors expect -- begin each response with a supportive "Good question." If you can't answer a question, defer to the company principal who can. "You'll leave potential investors with the impression that you have an effective team," explains Tom Weldon, president of Novoste, a medical-devices company in Norcross, Ga.

Practice makes perfect. Weldon urges you to rally a group of mock investors -- including anyone from your neighborhood banker to your public-relations person -- for a dress rehearsal to help you work on your delivery and your responses to thorny questions.

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Surveying Suppliers
I head a group that negotiates purchasing and supply contracts for several electrical wholesalers. We'd like to start a program for evaluating suppliers. Can you provide a list of issues to consider?

Arne Ramstad

Principal

Elgros A/S

Sarpsborg, Norway

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Your first goal is to develop a formal evaluation survey that singles out the suppliers, existing or new, that can offer you the most competitive advantages in your market. To do that, you'll have to determine which supply lines and which supplier characteristics are most important to you. Does it matter much if a supplier often delivers a day late? If we're talking about a roll of electrical tape, that's probably not crucial. But if it's a big-ticket transformer, you may not have enough inventory to cope. And how about innovation? The supplier's responsiveness? Its flexibility? "Since we're replacing 85% of our product line, we focus on a supplier's ability to support us in a changing environment," says Ruth Stolk, senior buyer at Carver, an audio-equipment maker in Lynnwood, Wash. "We want suppliers to grow with us and change as we change."

Now take those optimum characteristics and, using a 100-point performance scale, weight them accordingly. For example, if component quality is paramount, your survey should be loaded with questions such as, "What steps are you taking to become ISO 9000 certified?" and "How well do you manage your own supply base?"

Once the scores are in, you'll be able to spot the winners quickly. If, say, a current supplier scores 70 points -- your passing grade -- you might agree that its status is conditional on an improvement in its score. Conversely, vendors that consistently get high marks deserve to be certified, which may mean their products need no incoming inspection and that they earn privileges such as a larger share of your business.

Read more:

What You're Not Doing to Maximize Profit (But Should Be)

Redbox's Smart Move: What You Can Learn

What Makes a Company Resilient?

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