|Why presentation does matter in terms of money.
Typically, a presentation is future-oriented and aims at producing favorable expectations concerning a project. Presentations that are strictly past-oriented can only be of an educational value.
Fundrisers know that market expectations are real money. Anything contributing to their creation in any way is extremely important. And a good presentation is far from the last mean of creating expectations.
To calculate the ROI, we used a simple but universally known method – a "decision tree". Shortly, its principle is that the potential return of an investment is multiplied by the probability of getting it (i.e. the chances of everything happening according to the envisaged scenario) yielding the expected investment return, or the decision price. E.g. the expected income of an investment that can bring $1,000,000 with a 10% probability makes $100,000. Therefore, investing in the project more than $100,000 would be an unjustified risk (In reality, you have to invest less – who needs an investment with a zero expected income?) Roughly, when an investor decides what to invest in (and his resources are not unlimited) he picks up a project with the maximal expected income.
It is all quite simple, and the investor’s life would be unclouded if he could evaluate this probability so easily.
Therefore, anything that can increase this percentage becomes very valuable. For the person who tries to attract funds for the project, this figure defines a very real sum – the amount he can get. Imagine in our example that the probability amounts to 40% rather than 10%: the expected income becomes $400,000, and it makes sense to invest, instead of $100,000! Note that nothing has changed except the investor’s expectations, while the project got quatro more money. (Obviously, the project still remains very risky, but it does not matter for the investor as far as the calculated percentage is precise.)
Let us now quote some facts out of our experience. We know that a real estate agent provided with a good presentation would make 25% more deals than without it. It means that people (investors) take a positive decision 25% as often. We also know that using a good presentation makes a negotiation on sale of a part of a business 20-30% shorter.
Ask yourself: what is the contribution of a good presentation to a project’s success? The average figure I heard when asking this question is 5%. Even if we take 1% we get a $10,000 increase of expected income for the super-risky project we discussed above. It means that you can count on some additional $5,000 or $7,000 in investments. All from a good presentation!
And if the price of the question is 10 or 100 million rather than 1 million? The sum of additional investment becomes $70,000 or $700,000. And what if, after all, a presentation makes a 5% increase (as questioned CEOs and CFOs of our client companies tend to believe) rather than 1%? If it yields a 25% raise, as is the case with real estate? Even if we do not add 25% to the initial figure of 10% but take 25% of 10% (i.e. 2.5%) the difference is impressive.
All we have to do now is to calculate the ROI.
Assume that our project costs $10,000,000 with an 85% probability, which makes the expected project price equal to $8,500,000. A presentation increases favorable expectations by 5% making (85 * 1.05 = 89.25%), so the expected project price becomes $8,925,000, i.e. $425,000 more.
Four hundred twenty-five thousand dollars – all because of a presentation!
Assume that the presentation price was $50,000. Then ROI = 425,000/50,000 = 850%. Not bad even for O. Henry’s characters, to say nothing of present-day investors.
There exist many little studied elements defining expectations. Books and articles on them only start to appear. E.g. the Harvard Business Review named the ability to make projects ‘emotionally attractive’ and ‘beautiful’ one of the best business ideas of 2004. Indeed, if the importance of an attractive yoghurt package as a component of the brand seems unquestionable, coming to investors with a presentation made on the back of the envelope the night before is not yet considered anything to be ashamed of. Actually, bifido bacteria and future income figures are essentially similar: both promise some benefits for their consumers.
Competitive advantages comes to those who can provide their projects with an emotional coloring thus increasing the expectations and trust in them. It does not diminish the importance of figures (just as the role of yoghurt content remains important), but more convincing, more beautiful projects generating positive emotions become more viable at the competitive market.
CEO, Mercator group
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