How do I prepare for an investor?
As a (starting) entrepreneur it often happens that you need money. A new company needs start-up capital and investments are needed to (continue to) grow. You can turn to your bank for a business loan , but there are also other financing options . Whichever form of financing you choose, you can always expect a number of critical questions. It is important that you are well prepared for this and ensure a clear pitch.
What questions are being asked?
Sitting around the table with an investor is something you probably don't do every day. That is why this can be quite exciting. Many investors are experienced entrepreneurs who know exactly what critical questions to ask to determine what it takes to make your business a success. Good preparation is therefore essential. Have your answer ready to make a good impression. Important: always be honest ! Investors quickly cut through (too) nice talk and this only works to your own disadvantage. In this article, we will discuss a number of questions that you can certainly expect from an investor:
What exactly does your company entail?
First, you will always be asked what exactly your company or project entails. What are your business activities? How will you make your plans come true? And why will your product or service appeal to your target group? It is important to keep this pitch short and sweet and not to elaborate on the technical details just yet. The investor wants to know quickly who he is dealing with and what you are doing. The details will come later.
How much capital do you need? And what are you going to spend this amount on?
This is of course the reason why you turn to an investor. You need money to start or grow your business. It is important to state a realistic amount . Do not sit too high or too low, but show your potential investor that you have thought carefully about this financing application. It is important for an investor to see that an entrepreneur can estimate his or her opportunities realistically . You do this by stating exactly what you intend to do with the capital. What will you spend the money on? Where you give a short and powerful answer in the first question, it is important to go into the details with this question.
When do you expect to break even?
The break-even point is the moment when the total costs are equal to the total turnover. The profit is then exactly 0. This is also called the turning point . Often a new company is at a loss in the beginning; it takes time to boot up. From the break-even point all costs are covered and profit can be made. An important moment for investors, of course. They do not invest for charity, but want to know when they themselves earn money from their investment. Do you expect your business to be an immediate success? Or can it take years to make a profit?
Why is your product or service an addition to the market?
As soon as you start a new business, you market a product or service. It is important for investors that you are aware of the latest developments in this market and whether your product or service has a chance of success. Investors would like to see that you have thought about the impact your business can have on this market. Why should your target group purchase your product or service? How can your product or service improve the working or living situation of your customers? The focus of this question is mainly on the importance for your potential customers .
In addition to this, investors will ask why your product or service has added value compared to the competition . Investors would like to see that you have thoroughly studied the market and sector. There are always competitors. That is why it is important to have a strategy ready to ensure that customers come to you from now on instead of to the competitor.
How do you ensure the visibility of your product or service?
Before a customer can buy from you, he or she must of course know you exist. How you will promote your business therefore plays an important role in whether or not it is successful. This is an important question for investors because they want to know how important you place a good marketing strategy . How will you promote your product or service? How much money do you think you will spend on marketing? Especially if you yourself are not (yet) familiar with marketing strategies, investors can often make valuable suggestions. Be open to this, because you may be estimating your costs way too high or low.