Do you agree with these probabilities for landing an investor?

Question

I've been building my investor database, and within that, I've created an Investor Pipeline that associates each investor into a stage of our communication, in addition to an assigned probability for landing that investor. NOW, I know that probability depends on an individual's skill and experience which can have significant discrepancies so feel free to lend your assessment and I'll pull an aggregate of your answers. Here are the stages and assigned probabilities:

Needs Assessment = 5% - Essentially acknowledged this person has over the minimum threshold of investment for my firm. They have expressed interest in investment or have previously invested in a similar property type or market.

Intro Call = 10% - I've completed an intro call and done some general "picking" on their needs. We've only established or discussed a small portion of the qualifiers needed to begin to send them deals.

Criteria Established = 15% - All holes have been filled from previous conversations, and I have a good gauge of their criteria for investment.

Investor Pitch, Commitment = 25% - I've pitched them either on a deal or our company. We connect, and they've agreed to start receiving deals from me.

Deal Flow Sent = 30% - Investors are actively receiving my deals, and I'm coordinating follow-ups and feedback on deals sent to them.

Financial Verification = 50% - We've agreed to come to move forward on a deal and are working on all necessary documentation to confirm their financial viability to get their committed amount. We've discussed the timeframe in which pledged amount would be needed.

Thank you in advance.

Breaking out some of the BP forum juggernauts:

@Brian Burke @Jay Hinrichs @Brandon Turner @Curtis Waters Account Closed

Jay Hinrichs · Answer

@Matthew Ryan not really my area of expertise.. I would defer to @Brian Burke on this one.

although one thing Brian said that I 100% agree on is that people in general have a very hard time saying no to your face :) they want to be polite so they say..

So as it relates at least to how I did business when I actually dealt at the street level.. is I had an opening line as Korny as it sounds.. I would say.

" I only have one rule " this would kind of stop them in their tracks... then I would say " No is OK if you don't like for one minute what I am saying or have no interest NO is OK just say NO.. " I would then say so many folks are so polite they don't want to hurt your feelings right ????

The client would say your right .. and I would say.. well I know you would not be that way and if you don't like it you would just tell me straight out so you don't waste your time with me>>> Stock answer

" for sure we would we are that kind of person" when in fact virtually no one out side of NYC is that kind of person :)... you would be surprised once you do this that you just cut your time wasting down to next to nothing.. and then I would say.. but if you like it I to want you to say so .. so we can dig into this and I can answer all your questions and then if I do that to your satisfaction I EXPECT TO DO business.

how does that sound.. Everyone said you bet sounds great.. so do your first pitch they will say no 90% of the time then concentrate on your 10% ers if you want to put it in %..

I was taught that pitch by some pretty sharp land salesmen in the day.. but it works.

Curtis Waters · Answer

I feel that the probabilities are more fluid than what you have stated.

Most investors want at least a few face-to-face meetings before they will part with their funds. There is a HUGE trust factor you must consider - not only in getting an investor to work with you, but in their evaluation of your integrity and ability to perform. Your estimate of probability requires an honest evaluation on your part regarding the investor's evaluation of you. You have to constantly ask questions during the process to do the evaluation on your part. Once an investor is satisfied with the return and risk - they bet on you and your team's ability to perform.

Don't discount the issues with passive investors. Not only are they time intensive once they have provided funds - you may face some issues with the SEC. One way to potentially avoid this issue is to have a passive investor provide their funds via a mortgage on the property.

This business is not just about the financials - it is also people skills, building knowledge, and ability to act - not science but an art. Make sure that your people and sales skills meet the needs of investors.

Matthew Ryan · Answer

@Brian Burke @Jay Hinrichs - Fair enough gentlemen. Thank you for the feedback. The logic behind this is establishing some "science" behind how many prospects we need while simultaneously being objective about there ability to commit. We would certainly modify over time but using this as a baseline to try and balance "how many" and "how much". What I mean by that is balancing how many investors to go after while not ignoring the relationship building it takes to qualify investors who are further along in the pipeline. Striking balance between the 80/20 rule and being volume based. All good feedback which certainly helps so thank you. We multiply the probability by the estimated investment dollars to give us a pipeline of capital for all deals. My goal is to maintain a certain amount (2-4x the size of the equity required alongside debt )as we pursue deals. The thing I like about this is it forces you to more closely qualify the higher probability candidates before you have the deal and work your way down. Helping alleviate some of the crowd pleasers that Jay mentioned. I'll let you know how this works as we execute this.

Brian Burke · Answer

@Matthew Ryan I can't poke any significant holes in your logic. That said, I do it a bit differently (which doesn't mean I'm right). Rather than assigning probabilities from the beginning, prospects are categorized more simply.

Leads--these are people who have signed up for updates on our blog or requested our whitepaper on our website. Essentially we've just captured their email address but don't have any relationship with them (yet).

Contacts--these are people with whom we've had an actual conversation. This could be as simple as having a brief discussion about what we do and they've expressed interest, all the way up to current investors.

Once we have an offering on the table and an investor has been invited to see the offering we start setting probabilities. It starts out at 0% and we can increase this as people express interest, request materials, start asking detailed questions, or verbally commit to subscribe. We don't have a specific criteria for this scale, it's more subjective.

We could set probabilities before the offering stage, but I'm not sure how useful it is because people's circumstances change, their money gets committed elsewhere, or whatever. And during initial conversations you'll get a lot of "interest" that is more just people being nice, not wanting to say no so instead they say "that sounds great, let me know when you have an offering" but really mean "this isn't my cup of tea."

So I'd say keep doing what you're doing, but be cautious when making tactical decisions based off of the data. Your percentages could be about right, but there will never be a way to know for sure until it's too late.

Do you agree with these probabilities for landing an investor?

Do you agree with these probabilities for landing an investor?

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