If you’re looking for people to invest in your business, be prepared to answer some important questions. Investors look for smart investment opportunities—that means they want to find out as much as they can about you and your business before they make a decision about whether or not to invest with you.
It’s vital to have well thought-out answers to investors’ questions. Give them evidence you’ve thoroughly examined your business to make them feel comfortable investing with you.
Here are four questions to be prepared for when you pitch your idea to investors.
1. Why does your business need to exist?
Businesses exist to solve a problem. Show investors there is an issue people need solved, and you have the solution.
You’ll have to prove there’s a big enough need for your business to warrant an investment. Identify your target market and why you’re helping them. If it’s not a large group, maybe it’s an exclusive one that you can sell your product or service to at a higher price point.
Show investors the pain point you’ve identified, how your solution addresses that pain point, and how your solution ultimately helps customers, by saving them time or money, for example. Data helps you. Find hard facts and examples to back up why your business is necessary.
2. Why are you uniquely qualified to run this business?
It’s not enough that you’ve identified a problem and a solution, you need to show why you are the person to run this business. Investors want to see how your knowledge or experience gives you an advantage over the competition.
Most investors wouldn’t put their money behind a restaurant that wasn’t owned or managed by someone with restaurant experience, for example. When you pitch to investors, show them what gives you the qualifications to run the business and beat the competition. Maybe you have education that enables you to manage a business, or maybe you have in-depth experience with the issue you’re solving.
Whatever case you make, investors should come away knowing you are the exact right person to run the business.
3. How will you use the funds?
Highlight for investors your plan for using their money, otherwise they won’t want to give it to you. They also won’t want to hear that their money will go to pay for your big salary or a fancy car. It has to go to costs directly linked to making your business successful.
Have a solid and strategic plan for how their investment will be used. The money can be used for customer acquisition, to fund research and development, or to pay suppliers for start-up costs, for example.
Don’t just say that the money will be used for marketing—show a marketing plan with goals and milestones in place so they know you have a strategy.
4. Who are your competitors?
Contrary to what you may think, it’s not good to tell investors there are no competitors, because this suggests there’s no market for your business. Even if there aren’t direct competitors, show investors other businesses that are similar to yours, then focus on what makes you different.
If you want to pitch successfully to investors, you’ll need to be prepared to answer hard questions. By doing some research, setting out strategies and anticipating the investors’ concerns, you can give them the answers they need to feel comfortable investing in your business.