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Questions an Investor Will Ask


Questions an Investor Will Ask

Many businesses do not get the funding or get partial funding because of the promoters inability to answer key questions – any serious investor would ideally ask. The rules are applicable both ways. If your investor does not ask you for these questions you might want to rethink about seeking financial assistance from such an investor. On the other hand if you do not have a strong pitch and appropriate answers to the questions posed by an Investor, you stand a risk of losing your funding. So in this article, we cover some of the possible questions an investor will ask prior to an investment in the business.

  1. Does your business idea have trademark and is it patented or has copyrights?
  2. Who are your competitors and how do you intend to establish yourself amidst existing players?
    • What type of advantage do you have with your business over your competitors?
  3. What are the probable risks your business faces?
  4. How is your management team different from other business setups?
    • Does your team have the right skill set and experience to deliver?
  5. What makes you so confident about your business idea?
    • How did you gauge- the returns from your business will be very high?
  6. Why will customers buy your product or use your service?
    • Does it cater to specific needs or is it a general idea with a makeover?
  7. What is the problem your business solves?
  8. How is your business different from others?
  9. How did you arrive at the market potential?
    • How will the future sales take place?
    • How will you calculate the growth rate of the future sales?
  10. What are the prospects of your company’s product or service?
    • What are the prospects of revenue generation from your product/ service?
    • What is the probable growth rate of your business or service?
  11. When will the business recover the invested money?
    • When will the business generate profitable income
  12. How do you plan on getting customers to use your products or service?
    • What types of marketing or business development skills are you planning to use?
    • What is your customer retention plan?
  13. Who will be the end user of your product- other businesses, customers, etc.?
    • What are the possible challenges you would face in promoting the product or service to end users?
  14. How would you know if your customers are happy with your product?
    • What means are you planning to use to find out about customer satisfaction?
  15. What type of legal entity is the business setup as? (Company or LLP or Others)
    • What type of business alliance will you enter selling or distribution?
    • What type of licenses and registration formalities will be required?
  16. What is the shelf life of your product or service?
    • Will there be continual requirement for the service the business intends to offer?
    • What are your plans on research and development if the business is service related?
    • With increase in revenue and growth how do you plan to expand and manage work force?
    • How do you plan to maintain expenses and pay for labor force if the business sees potential growth as per the plan?
  17. What are the risks involved in the business?
    • Will there be possible risks with legal, regulatory or product liability?

The rain of questions will multiply if you have a strong pitch and appropriate answers for all of the above questions. If you can sell your business plan in a compelling fashion to the investor you can be rest assured to get started with your dream plan of starting your own business.

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