When Steve Stowell retires later this year as an Army lieutenant colonel, he wants to build a beer enterprise in Colorado Springs. He wants to educate people about the finer aspects of brewing, pouring and tasting.
Stowell took advantage of the Small Business Technology Incubator’s Pitch Clinic on April 24. There, he learned what to tell people interested in investing in Triple S Brewing when Stowell makes his pitch.
“The timing of that was perfect because I am about ready to pitch my idea to investors,” Stowell said.
What he plans to build is a combination of an American coffee shop with an English brewpub.
Of the brewpub, Stowell said, “There’s one in every neighborhood. Mom, dad and the kids and cats and dogs can go to it.” Of the coffee shop, he plans to offer free wifi, and it will be a place where people will conduct business and just “enjoy life.”
His niche will focus on beer education, because a recent survey revealed to him that half of Americans would try craft beers if they knew more about it, he said.
At the pitch clinic, UCCS business professor Al Davis extolled the virtues of the Incubator, where volunteers help budding entrepreneurs, and the High Altitude Investors, a group of local individuals who invest in new and expanding businesses.
“Unlike Shark Tank … they’re relatively nice people who are interested in helping the entrepreneurs be successful,” Davis said. “They take entrepreneurs under their wings” and invest in startup businesses that the investor believes will give more money on their return.
People seeking investment for new or expanding businesses face an uphill battle; every budding entrepreneur believes his or her idea is the best and worthy of investment. That means potential investors are bombarded with enthusiastic businesspersons and their ideas, Davis said.
Crafting the pitch involves impressing the investor and giving the investor no excuse to say no, Davis said.
Giving a financial pitch involves the item or idea, marketing, sales, research and development and hiring.
“Holding them all together is the financials,” Davis said. “They’re communicating to the investor what kind of return the investor is likely to get.”
If a presentation involves three slides, the slides should include key assumptions, key financials and the CAP table, or a table of company ownership.
The key assumptions “inform the investor that you’re not just wildly coming up with the financials,” Davis said. Of all the numbers in the financials, “you’re digesting them down to 25 numbers. You’re communicating down to your investor your revenues, expenses and net profits.”
The key financial statement needs to include the EBITDA, which refers to a company’s earnings before deductions for expenses for interest, tax, depreciation and amortization, Davis said.
Including the EBITDA “shows my investors I know what my key numbers are,” he said.
“When you give the investors a document, you need to show them more than a table of 15 numbers,” he said, adding that the entrepreneur needs to show five years of income, a cash flow statement and a balance sheet.
“In reality, there are hundreds of assumptions you will make and they’re changing constantly,” Davis said.
To show investors the entrepreneur can change key assumptions easily and quickly, a computer program simple for the entrepreneur to use is online at Offtoa.com, which specifically handles financials for businesspersons.
Owned by Davis, Offtoa.com can be used for $240 for the first year and then $20 per month after the first year.
The program will change all the numbers in the financials when the entrepreneur changes any item. For example, the assumptions, the cost of goods sold or the payroll tax rate.
The web-based software can also be a catalyst for defining the company, Davis said.
“An hour and a half is what it takes me to model a new company,” Davis said. “When I work with a client who has not yet figured out what the company is, that’s days and days.
“The software is a tool that creates a lot of really good discussion. It gets your questions answered before you get in front of an investor.”