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7 Things that every investor looks for in a winning proposal

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Prepping for your big pitch

There’s an unfortunate reality about getting a startup off the ground: having a promising idea simply isn’t enough to get you funded. If you want to gather the capital necessary to get your business operational, you need to have a good idea as well as a solid bank of statistics, plans, outlines, and documentation to support that idea. Though it would seem like many ideas simply “sell themselves,” this is almost never the case.

The prudence of investors

You’re going to be pitching to potential investors, so remember that investors aren’t looking to give money away for free; they need to get something out of this. This is a risky endeavor, and they need to be assured that this isn’t just a good idea, but that it’s also a practical one with a genuine potential return. That’s the entire reason behind the standard formatting of a “pitch deck,” which theoretically tells investors everything they want to know.

So what is it that investors want to see in a successful proposal?

Ingredients for success

These are the things investors want to see in a winning proposal:

  1. A unique value proposition (UVP). First and foremost, your idea needs a unique value proposition; something that explains exactly what the company does and why it’s valuable, not to mention why it’s different than everything else on the market. This is a strong lead-in for any investor, as most prospective investors will only give ideas a cursory glance before dismissing them or probing for more information. Your UVP will also be useful later down the line, when you’re convincing clients instead of investors to do business with you.
  2. A detailed financial model. Ideas are powerful conceptually, but investors are going to be putting real, countable money into your startup. You need to be able to quantify everything in a detailed financial model; explain how you came up with the exact figure you need to get started, and how that money’s going to be used. Figure out and explain your cost basis, your potential for profits, and how you expect to grow over the coming years. The more detailed you are, the better.
  3. Thorough market research. It’s easy to form a hypothesis about how your idea might sell in a specific target audience, but again, investors like to see numbers here. What is it about your demographics that make your business so necessary? What hard evidence do you have to support your hypothesis? Thorough market research shows you’ve done your homework, and adds a layer of validation to your idea.
  4. Acknowledgment of the competition. You aren’t the only business doing this; chances are, even if your specific niche is unfilled, there are related businesses doing something similar already in play. Ignoring these competitors is a glaring flaw investors will see in your pitch deck immediately, so be sure to list at least a handful of your toughest competitors and explain why your business has an advantage over them.
  5. A reputable leader. Companies may be based on ideas, but they’re built and supported by people. All businesses, no matter how good they are in theory, target=”_blank” rel=”nofollow”need strong leadership if they’re going to survive. If you’re the one who’s going to make the decisions, you need to justify your acumen and experience, proving that you have what it takes to lead the business. Otherwise, you’ll need to find partners and employees with niche expertise who can compensate for your weaknesses.
  6. An expectation of return. This should be a part of your financial projections already, but make sure you have a specific callout for how you expect to return on your investors’ contributions. You’re asking them for a hefty sum of money, but what are you going to give back to them when you’re successful?
  7. Challenges and risks. Finally, your pitch deck shouldn’t all be blind optimism and pep talking. Be sure you include a section on the significant risks, challenges, and obstacles your business is going to face. This isn’t pretty, and it may not be fun to think about, but it’s a necessary admission for an all-around strong business plan.

If you can put together a pitch deck that addresses all seven of these items satisfactorily, you’ll be in a good position to convince any investor that your business is worth investing in. These are basic and practical factors that, when presented, show that you’re a competent entrepreneur and that your idea has real merit. The other benefit in including these factors is that they’ll force you to confront the weaknesses of your business early on—when you have time to correct them.

Larry Alton is an independent business consultant specializing in social media trends, business, and entrepreneurship. When he's not consulting, glued to a headset, he's working on one of his many business projects. Follow him on Twitter and LinkedIn.

Business Finance

Ramp: Corporate card launches to push you to spend LESS

(FINANCE) Ramp up your biz with higher credit lines and simple tools for expense monitoring. Ramp wants to take your worries away with their features.

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Ramp card

You launch your startup. You get the business going and need corporate cards for expenses. Standard issuers may decline to serve you because they see your business as a risk. Or, they offer you a low credit limit. But, you need to purchase pens, paper, coffee, and beer (you are a startup).

Before you head down the rabbit hole of “how will we pay for all those breakfast tacos?” there’s a new corporate card company ready to serve your needs. Ramp launched recently with the goal of providing higher limit corporate cards for startups.

Not only does Ramp provide corporate cards, it makes it easier for businesses to control employee spending. Rather than giving everyone a card with unlimited spending amounts, or only giving cards to certain employees, Ramp allows you to create spending rules and set spending limits for employees.

Also, there are no fees for using the cards. Every employee can have their own white card without any fees attached. The company plans to earn income through transaction fees, just like other card companies.

And, according to this story in Tech Crunch, Ramp allows you to integrate with some accounting software and to centralize receipts and attach them to expenses.

The company has launched with $25 million in backing and has several high-profile startups already using its services, including Candid, Truebill, 8 Sleep and Ro.

To make things easier for companies, Ramp offers a flat 1.5% cashback rate across the board on all purchases, whether you take a ride share or purchase computers, you get the cashback regardless. Ramp said startups can expect limits set 10 to 20 percent higher than traditional card companies.

The company may create competition for Brex, which launched in 2017. Unlike Brex, which has a more complicated points systems, Ramp aims to make cashback, monitoring and setting spending limits a simpler process.

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Business Finance

Why product liability insurance is critical for companies

(BUSINESS FINANCE) The best way to protect your company, and more importantly your customers, is product liability insurance. It keeps your standards up, and lawsuits down.

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product liability insurance

If your small business manufactures products, you need to think about product liability insurance. No matter how good your designs are, or how polished your quality assurance strategy is, there’s a chance one of your products could come to harm a customer. And if that happens, your customer could contact a personal injury attorney and bring a case against you. Personal injury cases are somewhat common, and could cost you hundreds of thousands, if not millions of dollars if you’re not protected.

Product liability insurance coverage could protect you in the event of such a case. But what exactly is it, how does it work, and how are you supposed to get it?

The Basics of Product Liability Coverage

Let’s start with a high-level overview of product liability insurance. While different carriers and different policies will afford you different types and levels of protection, most product liability coverage is designed to shield your business from the fallout of a company-produced product that causes injury or harm to third parties.

Product liability insurance typically covers the legal fees associated with any product liability lawsuit, as well as medical costs, compensatory damages, and business damages that arise from the incident.

How Products Can Fail

How does a business become liable for a harmful product?

There are four main ways consumers can be harmed:

• Design flaws. If your product is designed in some flawed way, and the consumer gets hurt because of it, they could have a case against you. For example, if you create a deep fryer product with a locking mechanism to prevent burns, but that locking mechanism is weak or easily overridden, a customer could get burned as a result of using the product.

• Manufacturing flaws. There could also be manufacturing flaws. The design itself might be practically perfect, but if a batch of products are made with an incorrect material, or aren’t made to specifications, they could still fail in a way that harms a consumer; for example, a skateboard with a loose wheel might cause someone to fall.

• Marketing flaws. Your product could also be marketed or advertised in a way that eventually leads to consumer harm. If you falsely advertise the capabilities of your product, and a consumer follows them and hurts themselves in the process, they could hypothetically sue you. The same is true if you claim there are no downsides to a product that has downsides.

• Misuse. Even if a consumer misuses your product, your company may still be held at fault. For example, if you don’t specifically warn a customer that misuse could lead to harm, and caution them against specific forms of misuse, they could ultimately bring a case against you.

As you can see, there are many ways your products could lead to a customer getting hurt—and some of them are hard to see coming. While you can implement safeguards at every stage of the process, there’s always going to be a chance that one of your products fails in some unseen, unpredictable way.

The Extent of Damages

You may wonder if you truly need product liability insurance. After all, in the unlikely event that a product fails, you may be able to cover the costs yourself. However, this is extremely risky. The costs of a single product liability case can be devastating, and if you face a class-action lawsuit, or multiple lawsuits, there may be no chance of recovery. Remember, you could be responsible not only for compensating the customer for their injury and their pain and suffering, but also for covering the legal fees of both sides.

Some cases can cost millions, or even tens of millions of dollars.

Product Liability Insurance Rates

Most product liability insurance policies require you to pay a monthly, or other type of regular premium for your coverage. These rates will vary based on a number of factors, including the size of your business, the type of product you’re manufacturing, the extent of your distribution, and how much coverage you desire. Some insurance companies may also want to conduct inspections, reviewing the design and manufacturing of your product firsthand so they have a better sense of your safety standards.

Still, product liability insurance rates are typically reasonable. Shop around for the right insurance provider, and consider bundling your product liability insurance policy with other policies to lower your rates even further.

Conclusion

If your business designs or manufacturers products, product liability insurance is a practical must. It’s easy to get a policy, and most policies are relatively inexpensive, but this safety net could save you from shelling out millions as a result of an unforeseen product flaw. No matter how safe your operations are, or how many supervisory checks you conduct, there’s always going to be a chance that someone is injured while using your product—and that’s when your policy will kick in.

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Business Finance

Small metros may have cheaper homes, but they might not have the jobs

(BUSINESS NEWS) Study by Indeed finds that small to mid-sized metros offer higher adjusted salaries, but don’t pack your bags just yet because your job may not be there

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small metros cheaper house

When I told my parents how much my partner and I would be paying for rent at our new apartment, they quickly pointed out that I could purchase a home for that kind of money in my hometown.

Indeed recently published a study where they determined which cities have the highest salaries after accounting for the cost of living, an adjusted salary. Every city on the list is a small or mid-sized metro area which is why they dubbed their findings, “the small-city advantage.” No surprise to me, my hometown made the list.

My parents are right, I could literally buy a home for the amount of money I pay in rent every month to live in a large metro area. But the equation that determines where I, and many other workers should live, is more complex than salary minus housing.

Indeed’s study also shows that bigger metros have faster job growth and lower unemployment compared to these small to mid-sized metros. This is why the number one city on their list, Brownsville-Harlingen, TX, also has a higher unemployment rate than the national average. Some of the other cities on the list are Fort Smith, AR-OK, Toledo, OH, Laredo, TX, and Rockford, IL.

These areas are cheaper to live in, in part, because they may not offer the kind of job opportunities, and therefore social mobility, you see in larger metro areas. Sure, I could make my money go further in my hometown, but the chances of me finding a job in my industry there are smaller.

Your field of work does matter when considering whether or not the “small-city advantage” could work for you. If you work in tech or finance, two traditionally high-paying fields, then this advantage doesn’t apply.

“Before adjusting for living costs, typical technology salaries are 27% higher in two-million-plus metros than metros with fewer than 250,000 people. Even after adjusting for those costs, tech salaries are still 5% higher in the largest metros than in the smallest ones,” finds Indeed.

If a huge tech company offering thousands of high-paying jobs moved into a city like Brownsville-Harlingen, TX, over time it would get more expensive to live there. This is why people were freaking out so much when Amazon was trying to decide where to locate HQ2. It’s the hamster wheel that is currently driving income inequality in some of America’s largest major metro areas.

Finding the right place to call home is never going to be a single factor decision. Yes, salary is a huge factor, as is the cost of living, but there are also lifestyle factors to consider. What kind of opportunities would you have in this city? How much will it cost to move there? How will this effect the other members of your household?

It’s nice to play the ‘ditch the corporate world and buy a country house’ fantasy after a long day at work, but the reality is far more complex.

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