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7 Questions Every Business Owner Needs to Know When Looking for Investment

Most successful businesspeople have to start at the beginning – securing investment to make their passion or vision a reality. Without the necessary finances, no business can truly establish itself. But just what are investors looking for? Simple, they need 7 key questions answered. If you as a business owner can answer them effectively, there is every chance you will secure the investment you need and achieve great things with your company.

So, what are these 7 questions? Read on to find out.

What Do You Want to Achieve with Your Company?

This should be the easiest question to answer, but it can be the most difficult to get just right.
Investors rarely looks at financial figures and product ideas only, they are often investing in a safe pair of hands. If you can impress them with a strong vision for your company, this will create a more professional atmosphere for negotiations to take place, and persuade investors that you are someone they can trust with their capital.

Do You Have a Financial Forecast?

You must have a financial forecast in place before seeking investment. For the most part this should incorporate three aspects:

  • Projected Income
  • Projected Expenses
  • Estimated Growth

This will show a potential investor you mean business (excuse the pun). You have to be able to show a good level of business acumen, so make sure you are familiar with important business terms such as gross and net profit. If you are a startup, financial forecasts can be difficult. They are merely estimations of what your company needs to reach certain goals and how profitable you anticipate your products/services to be. Try to use comparables (similar businesses) and the current health of the marketplace(s) you will be trading in to estimate your figures.

What is Your USP?

You might have a great idea for a product or service, but unless you have something completely unique, there are probably similar products/services available on the market, or in development by other companies. For an investor to give you their money, they need to know what your unique selling point is (USP). What sets your product/service apart from the competition? This could be a specific feature, level of quality, or even the price point, but whatever it is, you need to sell this to potential investors as the main reason to invest.

How Did You Calculate the Value of Your Company?

Investment is all about negotiation. You are effectively offering a percentage of your company for a concrete monetary amount. It is a huge mistake to just “magic” up a value for your business.
Investors will want to know how you came to your asking price for investment. This should include your financial forecast, but it should also include market research showing how profitable your business will potentially be for investors.

Why Do You Need the Investor?

This is an important question. You may be asked it, and this may also be a little bit about ego, but it is still a serious point which needs covered. Investors will often ask why a businessperson needs them specifically. Answers to this vary widely, it could be their track record, or it could be experience in a related industry. Alternatively, it might be because the investor has a strong network of connections or a foothold in an important marketplace. To give an appropriate answer, it’s important that you do a bit of research and find out all you can about their best attributes.

How Will Investment be Used?

Another key question. If an investor is going to provide capital for your business, they will want to know exactly what the investment will be used for. Of course your financial forecast will come in handy, but they will require an in-depth breakdown of:

  • How the money will be spent.
  • What this will achieve.
  • Any subsequent investment needed.

Do You Have an Exit Strategy?

As stated above, investors aren’t just investing in an idea, they are investing in you. It’s you who pitches your idea, and so it should be you who sees it through. Investors will want to know if you have an exit strategy, and if so, when in the company’s development will that be. It’s important that investors know how long you will be shepherding the company; so much so, in fact, that many investment agreements are given with stipulations that management or company founders stay in place for a specific amount of time.

Can You Answer All 7?

That’s it! If you can answer these questions effectively and confidently, then you’re in a great position to secure the investment you need to take your business to the next level.

Did we miss anything out? If you think there are other important questions which investors will need answered, we’d love to hear them in the comments section below.

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