Defining Your Business For Potential Investors

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defining your business for potential investors

How To Define Your Business For Potential Investors

define business for investorsYou’ve secured a meeting with potential investors and they’re very excited about your product, in fact, they may be feeling eager to invest.  This is great news, but there is still one thing that you must do.  You must be able to define your business to these potential investors.  What does that mean?

Investors want to make sure that there will be a return on their investment.  In other words, investors want to see a viable and stable business return.

This is why when you are explaining your business model it is important to be very clear and transparent.

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Key Pitch Topics

There are a few key areas that need to be addressed and explained in any investor pitch.

define your business for investors1. NUMBERS

The first thing that investors are going to want to know are numbers, projections, and sales. 

  • How much does it cost to purchase the product?
  • How much does it cost to produce the product from beginning to end?
  • What is the profit margin?
  • What are your sales projections for six months, one year, and five years out?
  • How did you get to these numbers?

If you have the time it may be beneficial to give a cost analysis of the items required to operate the business, also known as operating expenses. This can include rent, utilities, and other related incidentals too.

All of these elements factor into the sustainability of the business. This is important for investors to know so that they can feel confident investing in understanding your business and feeling like you are transparent in sharing your numbers. 

At this point, it is imperative that you are honest with the investors.  For instance, if you have some unfavorable numbers, be sure to explain why your numbers have dipped and how this is just a temporary problem.  Be sure you let the investors know you have a plan so that this won’t happen again, or how you plan to troubleshoot it.


2. How You Plan To Use Investors Funds

Make sure you talk about how you plan to use the funds from the investors. Depending on where you are in your business, the funds may be allocated differently.  However, letting the investors know exactly where their funds are going will give them confidence when investing with you.

If you don’t have a specific place for where the funds will be going, be sure to give a high-level idea.  That will be very valuable for investors to know.

The key is to make sure the investors know there is a plan and strategy in place for where their money will go. 

 

3. Equity

You will want to make sure that you talk about what the investors will get out of investing with you.  You can talk about equity share, profit sharing, or other investor compensation.

You will also want to include a projected timeframe of when they will get their money back, including potential exits if it’s relevant. 

Asking investor’s to invest in you and your business is both an exciting yet nerve-wracking time. That is true for both you and the investor. So remember, preparation is key. You will need to clearly explain what your business model is and always be honest about it.


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