How to build an opportunity that attracts investors. Mini-series Part 2: The investor

In this episode you'll learn:

- The difference between profit and percentages
- Understanding the language you should use when talking to an investor
- How to determine somebody's risk profile
- The importance of having a high level of trust in investors
- Why it's essential to have conversations with investors about their past investments
- How to determine what the investor wants
- How to have easy conversations

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Transcript

Al: 0:01

Welcome to Episode Four. This is the second episode in our mini series on how to build an opportunity. Hey, guys, you're listening to arrays in finance talks with Sam Manal. We're on an absolute mission to help developers raise their first million from investors. So they can go on and do deals with six figure profits.

Sam: 0:21

So if you're not moving forward with your property business, for a lack of cash, then this podcast is for you. We're going to seek dive into all aspects of raising private finance. So thanks for listening, and let's dive in.

Al: 0:38

So we've got the first element we've gone through to deal we understand, you know, how to how to draw out the opportunity of the deal. And the second part, the second part of building an opportunity, is the investor. So we've got the deal. Now we've moved on to the investor. And, you know, obviously, they're a key aspect in building out an opportunity, because they are part of that opportunity. And every person, sort of every person will view an opportunity differently. So you know, you can use profit, you can use percentages, you know, but every single person will have a different way of looking at a deal and saying, this works. This doesn't, I like it, I don't. And it's really, really key to recognise that. So the type of language you use, like I just mentioned, about like profit, and percentages. So like, you know, me and Sam have had this conversation loads of times where, you know, I mean, an example of like, how to make me fall asleep.

Sam: 1:41

If I came to you and start talking to breaking it down into all sorts of different categories, whether it be return on capital employed, literally what's happening to you, I'm feeling asleep, he's

Al: 1:53

falling asleep, my eyes glazed over, I'm not interested. But if you gave me what cash, can I want to just profit I don't like if you just tell me kind of what what needs to be put into something and what is going to come out of it, then for me that that works, I get that better understanding. That's what creates interest for me. You know, everyone's different. And I get that, and I'm sure there's people listening that are thinking, what why would you not want to know the return on investment? Why would you not want to know all the ins and outs of the details? Well, because I'm not a numbers person. I just know what I've got. And I want to know what I'm going to get out. And that's sort of, you know, really the short of it. So having that understanding is really the key to that lots of people do things different ways.

Sam: 2:42

Yeah, exactly. So that, that leads into really just what, when you're presenting to an investor, you need to understand the language you're using for that impact potential investor, and how you position it. Because if you position it and you go into a meeting, or you're talking to them, and you're talking about all the different kinds of whether it's profit on GDP, return on capital employed, or you're, you know, you've got your spreadsheet out, and you're looking at all sorts of different sort of multipliers, and you're looking at, this is what we get as 10% increase in build costs and 5% down on GDP, and you're giving them all this stuff, it can just be a bit too much for some people, some people will absolutely love it, and they need all of that. But other people, you'll put them off in under a minute.

Al: 3:28

Yeah. And you know what, the funny thing about it, because I'm thinking about people who might be listening, saying, Okay, hang on a moment, I understand this, I get what you're saying everyone's different. But how the hell do I know? So the answer is ask them. Yeah. So it sounds crazy. But like, just ask them. How do you like how do you look at a deal? Do you look at it more from a profit perspective? Do you look at it more from percentages, like return on investment, all of that different stuff? How do you communicate with a deal, and they'll tell you, and that then allows you to whip out whichever tool you've got, you know, whether that'd be a spreadsheet, or whether that just be very simple. This is what you've got to put in. This is what you've got to get out. Yeah. So I know it sounds simple, but it's really, really true. So

Sam: 4:21

it's one of those things you just you really need to find out what you know what, how they want to receive that information. So when you do come to them with a deal. Once you you've gained the gain their interest, and they say they want to work with you, and then you do find the deal. When you go back to them with it, then you need to use the language that they understand or they want to receive that.

Al: 4:43

Yeah, yeah, no, that makes total sense for me. And like I said, I think I just think sometimes people are scared to ask someone like that, because they think they should already know. But we're not mind reader's and you know, you don't know someone until you actually start speaking to them. And I think that's really The key. So the other thing as well is like the language you're using, you know, like, like we just discussed. The other part is, you know, everyone has different risk profiles, right? Everyone's different. So, you know, some people just aren't into big risky stuff, and other people are. So you got to understand that right? You've got to really do a bit of digging to find out, okay, who is this person? I'm talking to? You know, what, what sort of risk profile? Do they have? You know, what are their return requirements? Yeah, like, if, you know, some people might just want, like, 10% or 8%, or 6%, you know, because they, they know that they're not gonna lose it. Whereas some people just wouldn't look at anything that is sort of less than 20 or 30%. You know,

Sam: 5:46

yeah, that's it depends on the experience of they've had of previous investments, or what they might know, other people that you know, have invested in property, the returns they get, so there might be based on that. Or they might just go, this is what I want. I'm putting in all the money, I want 50%. And that's what I want. Yeah. So everyone's gonna be different, you have to just build up, have those conversations and ask those kind of questions. So you can find out exactly what they want from a deal.

Al: 6:17

Yeah, I mean, you know, as you know, I've been scorned. So, you know, I have to have a high level of trust in someone, and belief that they can deliver, you know, since my bad experiences of having an investment. So I think it's really, really important that people, yeah, the whole risk profile stuff, the return requirements, all of that, that thing is really, really key. Because without having those conversations with a person about what they have done in the past, you're never going to know that information. And that information has a huge impact later down the line, when you're getting to the point where, you know, you've done the sort of interacting, if you've got them involved with you that they're interested, and then you're kind of moving towards, okay, we're committing to this, those things can come up later. And if you haven't sort of done enough due diligence on an investor to know what they might have been through in the past, then that will 100% come up at a point when you really, really do not want it to come up where it might be we, you know, we found a deal now. And I'm going to disinvested, I thought I was completely interested. And suddenly these, these things start coming out of the closet that you weren't aware of because you didn't have that conversation. So it's really, really key to understand those things. And I kind of wanted to cover that off. Because that would certainly be the case for anyone who has had a bad experience with investing however big or small investment might have been Yes.

Sam: 7:51

So it's so so key, you have to have those conversations right at the start. So you get to find out exactly what's gone on in someone's past with investments. And what they're looking to do in the future is psyche.

Al: 8:02

Yeah, no, it is massive. So I kind of wanted to stay on that for a bit longer. But

Sam: 8:07

it's the kind of thing if you don't do it, then like you say, it will show up somewhere, you know, you might get the deal over the line, but then it might show up. Yeah, if they've been scorned in the past with, you know, when it came to selling or when when it came to issues with builders, maybe the project they invested in had issues, something that will come up, and that might show up in could be kind of irrational or strange behaviour you haven't seen in in them before. But if if you kind of know that's coming, or it could come because you've had these conversations, the very start before, before you've sort of entered the deal together, then you know, they're probably going to note just for example, if they've if they've had an issue with a builder, before the project that I invested in had an issue with a builder, like a lot of them do them really then you know, they're probably going to need a little bit more attention than maybe someone who hasn't been through that before, you know, they need to be sort of almost babysat a little bit. Absolutely, you're just kind of doubling down on your communications throughout the build and letting letting them know exactly what's happening, good or bad, and what you're doing to sort it out really.

Al: 9:23

And so in terms of you know, building opportunity, there is a sort of process, but regardless of sort of any processes, it's really key, as we've said is just to find out what that investor wants. It's the absolute key to, you know, this section of building an opportunity is really, really looking into and spending a lot of time and your time trying to find out what that investor wants because it's not about you at this stage. It's about them. You know, they're building they're creating this part of the opportunity with what they want and you being able to deliver Right, right. So yeah, you know, if you haven't done that sort of due diligence on an investor, like you would do on the deal, then you know, you're really going to be in a position where you're kind of giving them a deal that you have absolutely no idea that they might be interested in. Whereas, if you know exactly what they want, you know, that deal can be tailored to them, that deal might be not good for them, and therefore goes to another investor, and you are looking specifically for a certain deal for them. So it's really, really key. So in terms of like, you know, the the nuts and bolts of how we might get that info out of an investor, how we might do that due diligence on an investor. What, what's your thoughts there?

Sam: 10:42

Yeah, so it's really just about having good conversations, you know, like we like we just covered really, it's about having multiple conversations, where you're really getting to know them, and building the relationship with them. And when you're doing that, having lots of conversations around really just finding about what they want. So open questions is key, really, you know, that's key for any kind of relationship, building a business is when you're getting to know someone is finding out what they want. Yeah. And why. So lots of open questions that could be where, what, why when, you know, these are the kinds of questions that are going to open up lots of different conversations, and you'll go down long avenues with long answers, essentially, a lot of the time you right, if you ask those kinds of questions, and they're quite simple questions, so just, you're always gonna get some quality answers back

Al: 11:34

conversations within conversations.

Sam: 11:36

Yeah. And obviously, yeah, the old adage of, you know, two ears, one mouth, use them in that ratio. Yeah, actually, listen, actually listening, actively listening to what they're saying. And yeah, it's a bit of a fact finding mission in a way, isn't it? Really? Yeah. You know, find out what someone wants, and then offer it to them?

Al: 11:58

Yeah, no, definitely, you know, the whole listening thing as well. I think a lot of people don't know how to listen, because they're looking for the next thing they want to say. They're constantly wanting to say something from a place of almost getting a needing, as opposed to not understanding directly what it is they're trying to achieve in this conversation right here right now. And that is to find out facts and information about the person that's in front of you. So you can understand whether or not a they're an investor, and not just a random person with no money and be just some, you know, some information that allows you to know whether or not your deal is an opportunity to them, and how you then match those two things together. I think it's it's key. Because, you know, a lot, a lot of people have conversations from a place of, I want to get some money for this deal. Yeah. And it just doesn't work like that. Because then you're not able to listen,

Sam: 12:58

that's a whole different kind of conversation. On another podcast, probably.

Al: 13:03

But yeah, it's really, really important. So we always talk about with with the clients in raising finance club is, just think about it in a sense of a blank canvas. So every conversation or every person you meet is just a blank canvas. And through the conversations, within conversations, within conversations, you're starting to paint a picture of them, what they want, what they need, sort of what they've sort of drivers are, what what it is they really, really really want and how that might impact their lives. So it's really, really key to paint that picture before you start sort of going anywhere else really. So we're going to wrap up part two there before we move on to part three. I hope you enjoyed our episode around interacting with an investor and we look forward to seeing you on the next episode.

Sam: 13:55

If you want to attract investors without asking for money, check out raising finance club.com for our free resources, and you can also follow us on Instagram and Facebook at raising finance club