5 Questions Your Investors Want You to Answer

Whether you’re just starting out, growing your business or seeking outside help, a well-thought-out business plan is the vehicle you need to get you there. If you don’t have any business yet, starting and building your own can be overwhelming. And if you are seeking investment to grow an existing business, your potential investors, be they lenders or just interested parties, need to see a business plan before they decide whether or not to invest.

A business plan or proposal is a great exercise to start your business or get your business back on track and to plan for future growth. More specifically, it forces you to map out where you are now, where you need to go and most importantly how you plan to get there.  If you are a first time business owner, or if you have never written a business plan, you may not know where to start and I might not be able to tell you everything about writing a business plan, but one thing you must have in mind as you put your plans together is that questions will be asked by the lender or investor, and your primary job is to answer those questions. The answers you provide to those questions will show the potential investor the roadmap for your business. Here are some of the questions.

1. What problem are you fixing?

Your potential investor wants to know the problem you have noticed and how exactly you plan to solve them. If it’s an old problem and lots of other people have been seen trying to solve it, your investor would want to know what you can do differently from others who have been solving same problem. If it’s a new problem or opportunity, he will invariably wonder why no one has tried to fix this problem before or, if someone has tried, why didn’t it work? Truth is, every business exists because an opportunity has been discovered in the market place; so there must be a clear definition of the need and opportunity, and how your business will satisfy the need directly or indirectly.

2. How sure are you about customers?

Most entrepreneurs typically believe that because there are a lot of people living in this world, whatever product or service they put out will do very well; at least there are people waiting to buy it. I learnt this as very untrue in a hard way when I started my first business. I realized that we most times use external market studies to justify potential business while neglecting concrete customers and real prospects. So, for you to answer this question truthfully, you must have done your own surveys or test marketing initiatives. An investor needs evidence about your customer; he wants to know what you have learnt about him, your methods of selling to him and maintaining long term ties with him. He generally wants to know who your customer is and how you plan to connect and stay connected.

3. What makes you specially qualified to develop this business?

Your investors would also want to know what makes this a business only you can do; why this business is right for you. This is because your potential investors would be extremely skeptical about your ability to succeed. He is skeptical because it is his money and he wouldn’t love it to go down the drain just because of your incompetence. So, it’s best to anticipate, and try to answer this question in your business plan or proposal before you are asked at the meeting.

4. How much money is required to start? When do you start generating revenue and break even? 

All other concerns your investor is having are tied to how much money is leaving his pocket into yours. So, you will need to address this question before he even asks. You need to identify your needed capital requirements by determining where your business stands today, and what is needed in order to move forward. He wants to know if you have done certain things like registering the business, assembling a winning team and maybe even an office space somewhere in the corner. He also wants to know your financial projections or forecast. Is there a way you can determine volume of sales or patronage? Do you have your monthly or even weekly breakdowns for the first one or two years? How soon do you think the business can become profitable and what you would need to do to break even?

5. Do you have a realistic exit strategy?

Your exit strategy is your plan for enabling investor to take his profits from the company within a particular number of years, his way of “cashing out” his investment; and it must be realistic and believable. A business will either grow to become very successful or fail to become successful, so your investor must know whether you are planning on paying his money back, or you are planning on making him a larger part of the business like a shareholder, or you have another totally different plan for him and his money.

Finally, when you write a business plan or proposal, you need to exhibit your knowledge, research, strategy, experience and creativity about the business you are doing or planning to do as to let your potential investor know why investing in you is a good idea.

Source: Connect Nigeria

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