Some people think that investors can just throw away their money on anyone who has a business plan – that risks are simply the name of the game.
And while being an investor does involve a certain level of risk, being a successful investor means calculating every single one you are willing to make. You have to be smart in deciding who deserves your money; you have to study the options and attend different investment pitches and learn how to say ‘no’ when you wish you didn’t have to.
Here are some tips for deciding between the ideas that you like, and the ideas that are truly going to make money.
Attitude is Important
Before you delve into the business plan’s details, you should consider the attitude of the entrepreneur first. You don’t want or work with someone who will only cause a headache. Even if this person had great ideas, you shouldn’t throw your support in their favour right away; watch how their attitude changes as they grow more confident in your presence, and observe how they treat their team members.
Respect should be ingrained, not available on demand.
Analyse the Distinctiveness of the Idea
Another way to determine if you’re going to invest in an entrepreneur is by looking at the unique aspects of their idea. Some people have excellent speaking skills and will take you for a ride during the presentation. However, they don’t necessarily have the best ideas once you dive into the details. If you think these ideas already exist and people will most likely stick with the existing options, you shouldn’t take it.
Preparedness is a Good Sign
Apart from the content, you can also consider how prepared the entrepreneur was during the presentation. Was the speech backed by strong, up-to-date statistics? Were the slides used good enough? If the preparation that went into their pitch is palpable, then you can feel more confident in their attitude toward their own business.
You may also observe the meeting room and evaluate how well it has been prepared for your meeting. Rather than giving their presentation through a desktop, for instance, they should have prepared with a projector ceiling mount and plenty of good sound equipment.
Look at previous business ventures
There are plenty of business plans out there that look amazing on paper, but fail in the execution. If this is not the person’s first venture into business, you can evaluate previous ventures for red flags.
An unsuccessful venture doesn’t always mean that they are unviable for success; if they are capable of understanding their errors, and avoiding them in the future, then this can be a great sign. You can’t work with someone who doesn’t care about their own losses, however. If failure is a recurring problem, then you have a clear sign that it’s time to say no.
Have an Honest Conversation
If you think the idea is good, but still have some reservations, then you should give yourself plenty of time to ask more questions, and investigate further. An honest conversation will clear your mind and boost your confidence in the investment.
An honest conversation will also give you an opportunity to get to know the entrepreneur outside of the pitch. Keep it formal, but use this additional contact to find out more about their personality, and their viability as a business partner.
Sure, there’s no guarantee that the transaction will end the way you hoped. However, with these tips, you can reduce the risk of a bad investment – or missing out on a fantastic new venture opportunity.
