What margins do investors want to see?
Founders stated a median 50% gross and 26% net margin. Net margins from 20% to 40% closed 74%; under 20%, 53%.
Margins founders stated on air (median gross 50%, net 26%)
Deal rate by net margin
Correlation, not cause.
A gross margin is what you keep from a sale after the cost of making it; a net margin is what is left after every cost, including salaries. In 93 pitches founders stated a gross margin: the median, the middle value, was 50%. In 134 they stated a net margin, with a median of 26%. Projections are left out.
Net margin goes with the outcome. Pitches with a net margin from 20% to 40% closed a deal 74% of the time, and from 40% to 60%, 92%. Under 20%, only 53% closed. This is a correlation, not a cause.
Investors check the number. Several told founders that their net margin left out salaries. Work it out with your own salary in it before you say it on air.
What was said
Dina Ghabbour
ConcernThe first problem is that you're telling me your net profit is 32%, when it's not actually 32% because you haven't included salaries.
Kick (كيك) · S5 E9 · 10:33 · Paraphrased
Mohamed Farouk
ConcernWhen an investor comes on board, you need to have a salary so you can keep going, so we must calculate the net profit after salaries.
Kainona (كينونة) · S5 E5 · 11:48 · Paraphrased
Mohamed Ismail Mansour
QuestionYou currently sell 6 million EGP and make 100,000 EGP, which is about 1.5%. Will that figure improve as sales grow or not?
chefmai.com (شيف مي دوت كوم) · S1 E7 · 11:50 · Paraphrased