Ventureweek

 From: topsalesmanagement.com

By Colleen Francis, Sales Expert, is Founder and President of Engage Selling Solutions (www.EngageSelling.com). Armed with skills developed from years of experience, Colleen helps clients realize immediate results, achieve lasting success, and permanently raise their bottom line. 

As salespeople, we generally have between 4 and 30 seconds to make a first impression on our prospects that will compel them to want to engage with us.

Unfortunately, by the end of these all-important first few seconds, the vast majority of salespeople leave their prospects feeling more like “oh darn, it’s a sales person, how do I get them off the phone,” and less like “oh, this is interesting, I think I should stay and listen!”

Why? Because most of us tend to open our calls – cold calls, prospecting calls and follow-up calls alike – with statements that create resistance, instead of creating a relationship.

How do we create resistance?
Generally speaking, resistance is created by openers that start with a clichė, such as:

• How are you today?
• Is this a good time to talk?
• Could I have a few minutes of your time?
• Are you the person in charge of…?
• I was wondering if maybe you would be interested in…”

Then continue with “I”-focused statements like:

• I’ll only take a minute of your time.
• I’m calling because…
• I’ve been told that…
• I was speaking with…
• I’d like to talk to you about…

And, finally, finish with bold or assumptive claims, such as:

• Are you looking for ways to become more profitable?
• Who are you using today for your sales training?
• I have a product that can save you money on your travel budgets.
• We’re in the business of making our clients more successful.
• We create partnerships with our clients to help them save money on…
• We can improve your…
• I want to show you how we would help you…
• I know we can save you time and money.
• We can eliminate your problems.

Cut the clichės!

How can you use your first few moments to cut through the resistance, and begin building a relationship?

First – get rid of the clichės!

Cutting clichė statements out of your calling script will instantly increase your success rate by up to 20%. This is especially true for the ubiquitous “how are you?” Every customer on the planet has heard that exact phrase at the beginning of a sales call they didn’t want to take, or which was interrupting their dinner.

Believe me; you don’t want to get lumped into that category. What you do want is to sound different, more interesting, more professional – and more relevant.

According to a study conducted by the American Association of Professional Organizers, the average executive has 52 hours of unfinished work on their desk at all times. Why should you care? Because this is proof that they’re not sitting around with nothing to do, just waiting for you to call!

At the exact moment you call them, your prospects are 99.9% likely to be busy doing other work – which means that, when you call, you’re 99.9% sure to be interrupting them. Instead of ignoring this fact, I recommend that you use it to your advantage, by trying something like: “Mary? This is Colleen Francis. Have I caught you at a bad moment?” Or “Did I catch you at a bad time?”

Be careful with these statements, and be sure to use them with precisely the wording given above. My own experiments have shown that “is this a good time?” and “is this a bad time?” are far less effective.

Why does this work? When it comes to receiving a sales call, it’s always a bad time, so having the person who’s making the call recognize this upfront is a refreshing change. 95% of the time that we use this statement at the beginning of a cold call, we’re met with the same answer – a laugh or chuckle, followed by either: “It’s always a bad time, but what’s up?” or “Sure it’s a bad time, why are you calling?”

The magic in this answer is that now it is the prospect’s choice that you’re on the phone with them – not yours. When a prospect feels like they’re being held hostage in a conversation, they tune out, stop listening and start planning their escape. When it’s their idea that the two of you are talking, however, they’re far more likely to listen to what you have to say, and to participate in the discussion.

Remove the “I” focus
Next, remove the “I” focus from your opener.

Remember: the call should be about them, not you! If the prospect hears the word “I” first, it causes them to retreat and start thinking, who cares what you want, what about me? Like everyone, your clients are focused on what’s in it for them. I suggest you give them what they want right up front.

Instead of using the “I” word (or any of its variants), try some of the following ideas:

1. If you’re calling because of a referral, use the reference’s name first, as in: “Colleen Francis suggested I call.“
2. If it’s a follow-up call, remind them what they wanted you to do: “The last time we spoke, you asked me to call today with pricing information.“
3. If this is a cold call with no reference, build a third party story focused on people like your prospect, such as: “CIO’s like yourself have been pleased with the security our product offers from email viruses. They’ve told me that…. Is that important to you?“
4. If you don’t know who you should be talking to, try a question, like: “Maybe you can help me?” People usually have a difficult time refusing help when they’re asked for it, so make sure that you use that word!
5. If you reach a gatekeeper for a client you’re having a hard time reaching, try: “Maybe you can help me? I’ve been trying to reach Ms. Francis for a week now with no luck. Do you know if there’s a best time to find her in her office?“
6. Lastly, stay away from statements that save the client “time and money.” While they may be true, virtually every company, product and salesperson out there is making the exact same claim – including your competitors. Instead, try to create an opening that differentiates your product or service – not one that makes you blend in with the rest of the pack.

Never assume!
Finally, as with all things in life, remember what your parents told you: When you assume, you make an A** (you guess the rest) out of U and ME!

If you call someone who doesn’t know you and the first thing they hear is how you can do something for them, it causes an instinctive resistance to kick in. The first natural reaction is to doubt that you can do what you claim. The second is to actively fight you on it, and to react with something like: You don’t even know me. How do you know you can do that? You have no idea what you’re talking about, so I’m going to argue with you, and then get rid of you.

To be fair, maybe you CAN do something for them. That’s not the point. What’s critical at this early stage of the call is to realize that your client hasn’t yet bought into that idea. The problem with the phrases listed at the top of this article is that they all assume your client has a problem that they want to fix. You might be right, but you also might be wrong. Either way, hearing about it from a salesperson they don’t yet know, trust or respect naturally builds resistance.

What should you say instead? Replace the assumptive language with softer words such as “depend,” “might” or “possible.” For example:

“Mary, business owners like you tell me that we’ve been able to save them money on their printing costs. Depending on your printing requirements, it might be possible that we can do the same for you. Can we discuss your printing requirements now?”

A few last words of advice – to build a relationship and avoid creating resistance, make sure that your mindset going into the call is focused on two key things:

1. On the customer (not on you); and
2. On starting a conversation (not on trying to sell them something).

Focusing your mind in these two areas will help you relax on the call, and project a warm and friendly demeanor that your customer will respond to more positively.

Also, be prepared for every call! An unpracticed call sounds contrived, and nothing’s worse than a salesperson who comes off sounding like a salesperson. So practice, practice and practice again until you own the language.

Lastly, have fun! Make your prospects smile, and try smiling yourself. After all, this isn’t rocket science; it’s a sales call. Once you’ve done it a few times, your cold call reluctance will soon be replaced by a string of successes – and commissions

From the Heavy Hitter Sales Blog:

Written By: Steve W. Martin

What are the top sales trends for 2012? Here’s my list based upon my experience of studying and working with some of the world’s greatest sales organizations last year.

1. Sales Linguistics – For 2012, it’s not only what you say, but equally important, how you say it. “Sales linguistics” is the revolutionary new field of study about how customers and salespeople use and interpret language during the decision making process. If you are in sales, you make your living by talking. If you were a pilot, you would attend years of flight training school before you were allowed in the cockpit of a jumbo jet. If you were a lawyer, you would intensely study law for several years and have to pass your state’s bar exam to ensure your proficiency. If you are in sales, you need to study language and perfect your use of words because your most important competitive weapon is your mouth.  

2. Sales Force Verticalization – A “specialist” beats a “generalist” every time. Closely related to Sales Linguistics, is the accelerated trend of sales force language specialization based upon the following strategies:

     A) Industry verticalization (finance, government, retail, etc.) to promote domain expertise.

     B) Technical application segmented by different solutions to promote extremely deep technical knowledge.

     C) Business process improvement focus as opposed to the recitation of standard “generic” product features and functions to customers. 

3. Sales Force Behavior “Modeling” – Models are verbal descriptions and visual representations of how systems work and processes flow. Models enable repeatable and predictable experiences. More top salespeople will be studied in 2012 to understand how they formulate their winning account strategies based upon customer politics, evaluator psychology, and the human nature of decision makers that are unique to every account.  

4. Sales Process Ineffectiveness– Many companies have realized that their sales effectiveness didn’t improve even after spending a great deal of money and effort implementing a sales process methodology. The reason for this is because the “black hole” of the sales process is what happens during sales calls. Today, it’s the personal interactions with prospective customers that determines winners from losers, not the internal processes of the sales organization. In 2012 more companies will be studying and categorizing these customer interactions so they can improve sales force effectiveness.

5. Organizational Buying Psychology – If you are involved in selling enterprise solutions, you already know the importance of understanding the inner workings of the various departments within the prospective customer’s company. Your solution might be purchased by the information technology department and used by accounting and human resources. Therefore, it’s critical to map out the interrelationships of the departments within an organization. The essence of successful enterprise sales is understanding not only who to sell to, but how to craft a message that appeals to various departmental constituents. Understanding organizational buying psychology becomes an even more critical topic in 2012.

6. No Decision as the Main Competitor – For sales forces involved with large capital expenditure sales cycles, never before has the mantra “Call High or Die” been so true. You must reach C-level executive decision makers early in the sales process because the default for organizations today is to do nothing and delay every major purchase.

7. Win-Loss Analysis Studies – Most companies are well versed on the logical arguments for selecting their product. However, the decision to make a major purchase is primarily based upon individual needs and desires, how the decision-makers receive information, and internal politics. Unfortunately many companies don’t do any type of win-loss analysis so they don’t understand their customers in these regards. Because of the economy and relentless competition, 2012 will be the year that many companies have to re-discover the lost art of win-loss analysis.

One final trend that bears mentioning is the accelerated move from field-based sales to phone-based internet sales. Many companies have quickly transitioned the majority of their field reps to be almost exclusively phone based. Therefore, these reps must now be able to create winning relationships with their voices as opposed how they sold in the past with their physical presence. Never before, has understanding and mastering the art of persuasion been so important.

From Success Magazine

By Stedman Graham

The journey to entrepreneur has an impact on entire communities.

At no other time in history have we the need—or better opportunity—for people to create or retain ownership of their lives. It is time for each of us to be the leaders of our lives, to claim our rights as human beings. History will show this time as a transitional age—an age of human reform. As bad as things have been in the economy, this time of great turmoil and change presents a huge opportunity to retool and rebuild—from within. While some view the world as crumbling around them, others see a chance for a new beginning.

Our nation and its communities need more entrepreneurs. Entrepreneurialism is not only a pathway to autonomy and financial independence, but also has a macro-level impact on community development and economic growth, providing sources of employment and higher living standards. Entrepreneurship is also a force for community health and well-being—and self-sufficient people.

In many senses, we are freer than ever to imagine our possibilities. In this setting, we have a unique chance to identify ourselves based on our talents and dreams. More than ever, we need fresh talent, innovative thinking and the spirit of the entrepreneur to enrich our communities and begin this journey of human reform.

The transformation to entrepreneur includes finding the freedom that comes from having a strong identity—a strong sense of self. If we fail to define ourselves, we risk letting others define us and may never realize our greatest potential. Unrealized potential impacts our families, children, workplaces, communities and the future of America itself. In difficult times, we need to know who we really are—individually and collectively.

5 Tips for Transformation

1. Engage your operating platform.
You must be flexible, durable and adaptable. Create new and better habits, and remove obstacles to success.

2. Find the courage to change.
To keep from becoming stagnant, you need to extricate yourself from your cozy confines.

3. Tailor your talents.
As the landscape changes, so must you. That also applies to your willingness to re-educate yourself inside and outside of the classroom.

4. Be nimble; be quick.
It will take sweat equity, time and constant research to fine-tune your talent to the market.

5. Learn from failure.
The real test is whether you choose to lift yourself up and persevere in the face of adversity as you continue your rightful pursuit of your dreams.

As the world undergoes this seismic shift, what better time is there to become your own leader or a business owner—and to aspire to the excellence that may have eluded you in your professional and personal life? What better time is there to learn how to focus on your own strengths, learn your greater purpose and start assembling your passport to freedom?

Change is not always easy because many of us have been programmed to stay in a box. With the changing global playing field, the growing influence of minority populations and the election of Barack Obama as U.S. president, it’s apparent we are growing out of our long tradition of cultural stereotyping. However, most of us at some point in our lives have been programmed by parents, friends, schoolmates, educators and the media about what our identity and potential are based on class, color, creed and culture. But the world can’t wait for you to bust out of your box or linger in the past.

With a sense of identity and the ability to address your past programming, you begin to develop your potential. Beyond fundamental academic skills, you need to learn how to identify your strengths and combine them with your passions in ways that empower you to establish and achieve a vision for your life. Once you have that core—your identity—you will be able to sort through the onslaught of information faced daily and use it to enhance and actualize your potential.

Self-identification and defining the business you wish to be in or to start is an organic process. The first step is the most critical: identifying what you naturally love and care about. Identify your dreams and your strengths and strive to find a common ground to unite the two. Creating our own futures is the ultimate freedom. In fact, it is your right. Identity and freedom—you can’t have one without the other. People who enjoy an abundance of personal and economic freedom in their lives almost always have a clearly defined identity.

America’s free enterprise system allows anyone with the fortitude to take a risk to become a business owner or independent contractor. This transformation tale is yours. You own the tools and perspective to change how you view yourself and your possibilities. You will always be a work in progress. Your continued success will be contingent on how adaptable you are and how hard you are willing to work at it—and for it—every day.

Housebites a UK foodie startup that was launched in September 2011 has 10,000 registered users. The company offers a  restaurant-quality meals prepared by experienced local cooks delivered right to your door.
Housebites has created a new model which could change the whole restaurant industry, not just in Europe but in North America as well. 

Here’s How it Works:

A chef registers on the site. Each chef is then checked out by a Housebites in-house chef for food standards, and quality of produce. The approval process is quite fast and efficient. Once approved, the chef registered on the site what slots they are available for: say, 6.00pm to 9.00pm Thursday to Sunday. A user enters a code, sees what chefs are nearby and what menus are available.  You book what you want and the chef – or his delivery person – brings  to your front door.

Feedback through social media is a key part of the business with users to rating their food, tweeting local cooks, adding comments to the Facebook page and interacting in forums. The review of the service have been very positive and this concept looks like its going to grow quite quickly.

By Julie Knudson at QSR Magazine

As the economy slowly strengthens, founders of successful eateries may be considering franchising as a growth model, but experts say CEOs must approach it with caution and do their due diligence to make sure it’s appropriate for their brand.

The first step, experts say, is to explore the viability of their brand on a bigger scale.

“A business has to have great legs [to franchise],” says David Manero, chief concept officer and co-managing member at BurgerFi International, a Florida-based fast casual. “It has to be scalable and it has to have wide appeal to the national market. It’s got to be different, it’s got to have a lifespan, and it’s got to be something that’s not currently offered in that same fashion in the marketplace.”

Scott Gittrich, president and founder of Whitewater, Wisconsin–based Toppers Pizza, says CEOs thinking about franchising should know their concept from the top down to successfully expand it.

“I can’t imagine franchising before we had opened a few stores ourselves and proven that it worked in a few different areas,” he says. “There’s so much to franchising, and it’s one of those things [where] the more you know, the more you realize you don’t know.”

Chief executives must also gather the right expertise around them to achieve franchising success, says Scott Shane, Mixon Professor of Entrepreneurial Studies at Case Western Reserve University and author of From Ice Cream to the Internet: Using Franchising to Drive the Growth and Profits of Your Business.

“Franchising is based on legal agreements, and there are specific laws that govern franchising, both federal laws and then varying state laws,” he says. “You really need legal expertise. That means that you need franchise attorneys. In my opinion, anybody who tries to put together a franchise contract themselves without legal expertise is really asking for trouble.”

Manero says the services of an experienced franchise attorney are imperative but that external resources may be helpful.

“The way a lot of people go is to bring in a franchise consulting company that comes in and sets them up with one of the top franchising attorneys, and also sets up all of their initial … documents and really consults with you on what it means to get into the franchising business,” he says.

Executives also should have a marketing department, real estate department, operations department, and sales department in house when they dive into franchising.

Gittrich says he tells people interested in franchising to study both the restaurant industry and the franchising industry. He says the International Franchise Association is a valuable resource for would-be franchisors, and he recommends CEOs gather as much information as possible before making a decision.

“You [should] certainly go into franchising with your eyes open and understand what’s going to be required financially and systems-wise,” Gittrich says.

Franchise policies should be developed early in the life of a franchise, Shane says. “You don’t want to think about franchising unless you have … thought through what policies you would put in place, and how your business would be run under franchising before you do it,” he says.

Because franchise agreements are difficult to change mid-stream, Shane says, potential franchisors should carefully evaluate how they want franchised stores to operate and what facets of the relationship they want to retain control over. He says executives should identify the core strengths of their brand and keep tight reins on it.

“That key intellectual property, you want to make sure that you control it,” Shane says.

Many warn that the amount of control a franchisor gives to franchisees is a careful balance. When Gittrich’s franchisees were given the option to choose from six pizza ovens, most just turned to the leadership team to find out which one they should pick. He says this shows that most franchisees expect the franchisor to point them in the right direction.

“They don’t want to have to go and figure out every operational procedure,” he says. However, Gittrich says franchisee input can be a valuable tool in making good decisions. He says CEOs should be sure to partner with franchisees whose opinions they trust, and then reinforce that trust by hearing them out.

“We work together with our franchise advisory council to look at issues that affect all of us and to make decisions together,” Gittrich says. “Of course, we have the final decision … but we invite franchisees in to understand all the issues and to hear their feedback before we make those decisions.”

Manero says the initial documents executives file for their franchises are a good opportunity to establish what amount of control they have over franchisees. “Your franchise disclosure documents should be all-encompassing, that you have full creative and proprietary control over every single item of food, every single marketing piece, every piece of the interior design, everything about that franchise that you’re selling,” he says.

Above all CEOs should “want to be in the franchise business,” Manero says, because it’s different from being in the restaurant business.

“You’re not selling food anymore,” Manero says. “Now you’re selling businesses to people who want to get into business.”

 From: under30ceo.com

Article written by and contributed by:

Rishi Anand: Founder and Managing Director of VentureGiant.com. Find Angel Investors at Venture Giant. If you are a Tech Start-up or Small business looking to take your businesses to the next level, Venture Giant connects entrepreneurs & SMEs to Angel investors that are seeking to invest and provide angel investment to start-ups and established businesses.

The Internet is saturated with articles on ‘how to pitch your idea’; ‘how to draft and implement your pitch to perfection’ ad nauseam, but there are simply not enough articles and resources out there on how a relatively inexperienced entrepreneur should deal with hard hitting investors when meeting them to raise external investment for their business.

As an established entrepreneur and angel investor network that has featured thousands of investment proposals to genuine, high caliber angel investors (follow link to view our database of investors) that have included investors from the UK Sunday Times Richlist, one of the former Founders of Skype, and even one of the former directors of Morgan Stanley, we have been in a unique position to see both sides of the funding equation between entrepreneurs seeking investment capital for their business and the angel investors that are looking to invest in these high risk ventures. In fact, entrepreneurs that know how to negotiate in the right way, ensures that:

You will receive better terms – in terms of % equity you will continue to own in your company vs. the investment capital you raise.

You will not lose a potential deal because you have failed to value what a business angel investor can actually bring to your company (know-how, experience, network of contacts), and…

You will be able to walk away from the deal (if need be) as getting the right answers to the right questions from an investor will empower you to walk away if it is not right for you. It is wise to always ‘go with your gut’ in these situations but it is important to remain impartial during negotiations and to ask the right kinds of questions that may well uncover red-flags and most importantly not put-off a potential investor.

So you have a full business plan with financials. You are armed with industry stats and have made your investment pitch to an investor. Now what?

Fact #1: Your Investment Summary is NOT your Executive Summary

Angel investors are highly successful business people that have a lot of money behind them which is why they are able to afford to invest in high risk; high reward non-traditional investment propositions (YOU!). As a result of this, they will get approached daily by pie-in-the-sky entrepreneurs and time wasters that just want to talk about their ideas but not really make any of the sacrifices that are necessary to build a truly profitable business. So when you are invited to deliver your investment pitch to an angel investor it will be important to stand out from the crowd by knowing your business plan inside out (including the financial section), having a great presentation that may include PowerPoint slides with graphics demonstrating your key points of your investment pitch and by having a well-written one page ‘investment summary’ (which is NOT your executive summary) prepared especially for the angel investor you are pitching to, ready to be handed out straight after your initial pitch or preferably handed out after the Q&A session when your meeting has ended which will act as a refresher.

The decision to invest will never be made during your initial pitch BUT the decision NOT to invest could be so it is vital that you articulate yourself and speak in a language that a potential investor finds reassuring and knowing your business plan inside out will help with building your credibility in the meeting.

Handing out a fully bounded business plan after your investment pitch, when an investor has not asked for a copy, will likely cause the investor to just flick through it and archive it somewhere in his office. A half page or one page investment summary on the other hand will formalise and add credibility to your investment pitch and will increase the chances of an investor perusing the key points of your pitch at their own leisure time. In case you would like to find out how to write the perfect investment summary or would like to know the real differences between an executive summary and an investment summary please follow this link.

Fact #2: Angel Investment does NOT happen overnight

Receiving investor interest and pitching to them successfully is hoop #1. The process of actually signing contracts and receiving angel investment will most probably be hoop #4 or #5 and can take many months to complete as experienced angel investors will not draft contracts and send funds over without first seeking out their own legal advice or guidance at key points during negotiations from their own network of advisors. So remaining patient, strategic and prepared to answer all types of questions during this time will be the best strategy moving forward.

Fact #3: Angel Investment is not just about Money

Angel Investment is a value proposition for both sides and the past experience as well as the success rate of the potential investor should be recognised and valued correctly by an entrepreneur.

Recognising the value that an Investor can bring to your business is an important consideration as an angel investment into your business is not just about the money and the potential savings you will make by not paying interest on the capital you have raised. Think: receiving an angel investment from one of the founders of Skype and the value and experience that they could bring to your start-up. It would be fair in this example to say that the value brought to your enterprise could end up being worth 10 times more than the value of the investment capital itself. So in this scenario, you would be more receptive to receiving less investment and potentially giving away more equity in return for having them join your business as the value of their contribution to your business long term would be worth more than the actual investment amount you are seeking to raise. Valuing an Angel Investor’s possible future contribution to your business will rely on your own due diligence in combination with your intuition and we will address this issue further in the Q&A section below.

Things to do & questions to ask Investors during negotiations…

To start with, it is good practice to ask a potential investor to sign a Non-Disclosure Agreement (or NDA) before revealing any sensitive facts about your business, and asking for an NDA to be signed can do no real harm to both parties.

There is a modern school of thought that debates whether or not an NDA is a legally enforceable agreement or not, however, the fact remains that when an entrepreneur insists that a potential investor sign the agreement before entering talks, it sends out some very clear positive signals, namely:

• That you are serious about your idea or business.
• That you have made it clear, and in writing, that you are now entering talks in areas that you feel are confidential and that you (in no uncertain terms) do not want the information that is discussed from this point forward (or documents that you subsequently disclose) passed on without your express written permission.
• And, in the case that a potential investor simply states that they do not wish to sign the NDA (for whatever reason) then this will be a clear indication that you should be on-guard and perhaps less co-operative with the quantity of information you are asked to provide. The usual reason for an angel investor refusing to sign an NDA is that they are already working in areas that conflict with your business; and that would be your first red flag that should seriously make you think twice on the amount of information that you are willing to disclose.

Once the ‘Non-Disclosure Agreement’ is signed (or not signed) this will be a good time to value the contribution that the investor could make to your company by considering questions like:

1) Has the Investor worked in your industry sector and if so what is his/her experience level within it?

2) What resources does the business angel investor already employ that you may be able to leverage? Example: access to office property, access to experienced sales staff, existing know-how in your industry, trade suppliers, or even existing distribution networks to wholesalers and suppliers that your product could piggy bank of? Is there some way to leverage this as part of the angel investment package (example, one or two years free rent on office space)?

3) What companies has the investor invested in to date? What companies does the investor privately own? It may be worth considering carrying out credit checks on these public companies at a later date to provide you with valuable insight on how this investor manages his/her own businesses.

4) From the Investor’s past angel investments, how many of them are similar to your business and industry sector and how well are they doing? Also how many past business angel investment successes has this investor had?

5) From point 4 above, if the investor has had past successes in his angel investments, ask what qualities the entrepreneur had that first attracted the investor to invest in him/her. This can provide you with a candid view on the types of qualities the investor will be looking for in you (!)

6) Has the angel investor exited from any of his/her past business investments? If so, what were the results and how much of it was as a direct result of this investor? Would the Investor be comfortable with you contacting the entrepreneur(s) involved in that business? If not, why not?

7) If you do retrieve the entrepreneur’s contact details from point 6 above, call him/her and ask what level of support the entrepreneur received during their time together and was it valuable? Contacting an entrepreneur that has exited and is no longer involved with the investor will yield far more honest and upfront commentary over someone that is still currently involved with the investor for fear of conflicts of interest.

8 ) How many business investments (NOT traditional investments such as stocks, bonds, property investments etc) has the investor made in the past? This is a revealing question as most experienced business investors will know exactly what they want from you and your business from day 1, whereas, less experienced business investors will be far more hot/cold during your meetings and may tend to make commitments verbally that are later broken when they have consulted with their own network of friends and advisors. This does not happen all of the time, but more often than not, a less experienced investor may seem friendly and agree to a whole host of terms verbally in a meeting and then on the eleventh hour almost schizophrenically change all of the terms they have verbally agreed to. Expecting this may provide you with more leeway and understanding if this happens.

9) Always be on the look-out for the ‘good cop, bad cop’ routine played by an investor and his advisor. Most important of all, if negotiations are later fully delegated to an investor’s advisor it is best where possible and funds allowing, to have your people talk to his/her people, as it can be quite an exhausting experience trying to negotiate key points and terms with an advisor that does not have the final say on key decisions. Even if the investor states that the advisor has full power to negotiate on his/her behalf ultimately they will not as it is not their money at stake.

10) What payback period is the business angel investor realistically looking at for his/her investment in you? What is the investor’s expected timescales for an exit of his investment? Is the investor looking for a short term, medium term or longer-term return on his/her investment?

11) Is the investor willing to be on the board of directors of your company? This can indicate the amount of involvement that the investor is willing to provide over his/her angel investment.

12) Will a Lawyer/Solicitor be drafting the legal documents for the angel investment and deal structure in your company? If so, will you retain your own counsel whilst these documents are drafted? Also, it is not unheard of for an angel investor to take the stance that he will not be using corporate lawyers to draft agreements, as if an investor chose to invest in 8 – 10 companies the total legal bill could turn out to be well over £50,000.00 assuming a lean estimation of £5K per company which is low! Whatever the situation for the investor, an entrepreneur should always pay for legal advice before signing any contract so that all terms are fully understood and you enter into any agreements with your eyes wide open.

13) In terms of deal structure, if an Investor is purchasing equity, what type of shares will the Investor be purchasing (common shares or preferred shares) and have you spoken with your accountant or tax advisor in terms of the potential tax benefits and downfalls to the different types of structures an investor may propose? Always do check if there are any warrants or share options attached, or would the investor instead wish to assume responsibility for some kind of debt in your company? If so, do ask your lawyer to check whether the debt will be classed as subordinate debt or convertible debt.

14) And finally, Net Worth of the investor – though you may never reasonably know what the exact net worth of your potential investor is, it is important to understand that an investor should have at least 7 – 10 times more in liquidity over the amount that they are going to be investing in you. So if you are seeking an Investment of £50,000, the angel investor should have around £500,000 of liquid assets (shares, positions in gold, cash etc) that are easily convertible to cash over the short term whilst also being able to service their own debts.

The reason why the question of net worth is important is because an investor that you choose to partner with must always provide strength to your business relationship, and this strength cannot come from someone who is constant fear of losing their investment if the venture fails or does not make money in the first quarter. This is not a question of wealth but affordability and as a result, it is important that as much due diligence is carried out beforehand to ensure that the investor can actually afford to invest in your company and potentially be a good bedfellow with you.

The following points above are only considerations and by no means exhaustive but should set out a good foundation to the types of questions you should consider finding out over the course of your ensuing negotiations with an investor.

Entrepreneurs must always remember that even though it appears difficult to raise angel investment now, making a wrong choice with the wrong investor today will almost certainly be impossible to separate from tomorrow so you owe it to your ‘future-self’ to ask as many questions as you can today.

UPDATE TO ARTICLE: We have received emails from entrepreneurs that are looking for a list of questions that angel investors will ask and a good list of questions can be seen here: Angel investor Due Diligence. Ensure that you have answers to these questions before meeting an Investor. Again, the above link is not exhaustive, but it is a good start when preparing to meet an Investor for the first time.

Standard Disclaimer

The opinions expressed here are entirely of the author’s and as a result the author cannot take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented in this guide. Whether you are successful in raising investment from an angel investor or not, it is always important to seek independent advice from professionals before consummating any type of angel investment deal.