With high stake first impressions determining an entrepreneur’s ability to secure investment, we are often asked by business leaders how to best present to investors and effectively respond to their questions. The most common concern is creating fear and rattling even the most confident entrepreneurs- getting a question they don’t have the answer to. They want to know how to manage through the event of being unprepared in the moment and having to answer “on- the- fly”.
Will the inability to answer kill a potential deal?
If you’re reading this as a first initial step in your preparation for your presentation, our first piece of advice is to not find yourself in this situation altogether. If you take efforts to prepare and fully comprehend your business by extensively researching to understand your business model, plan your strategy, forecast your numbers, understand your industry and the metrics that people care about in your industry, you should be able to answer even the most complex questions.
This is where involving yourself in putting together a business plan will provide you the greatest advantage- it prepares you ahead of time. While reading a detailed form written business plan remains unlikely in current days, the research in the process of and work it takes to put a business plan together positions yourself to better answer any question coming your way. If you get assistance in preparing your business plan, ensure that you’re heavily involved to understand its contents.
With all of this being said, if you pitch to investors on a regular basis, you can ensure the event of an unpredicted question.
Here are 5 do’s and don’ts for when an investor asks you a question that you don’t know the answer to.
Naturally, when blind sighted with an unexpected question, you may feel the strong desire to hit the eject button and run out of the room.
Resist this urge. While you may feel your heart begin to race, focus on maintaining a calm disposition-especially on the outside. Take deep breaths and avoid looking flustered!
Be prepared for an unexpected question; while you may not know the answer, avoid freezing up by initially acknowledging they will ask unusual questions. Be ready for every investor to throw you a curveball or two.
Sometimes, the question is asked out of direct interest, whereas other times they just want to see how you react under pressure, so try to keep your cool and react professionally.
Don’t make things up.
Typically, you will feel the urge to answer every investor question with a flawless answer in an attempt to create appeal for your business. While proper preparation and knowledge of your business idea should give you an upper hand to respond to most questions, you will face some you don’t have the answer to.
In this case, you can not just make up the answer. The investor-backed with years of experience in this process-won’t buy it, and is asking the question in the first place because they have knowledge about your business idea or industry. They can spot a “BS” response and you will only dig yourself into a hole if you make up an answer.
Do ask a question.
If you think it will help, ask for clarifying information about their question. Ensure that you precisely understand what the investor is asking, and if possible, ask questions that will help you understand why they are asking it.
Sometimes, entrepreneurs panic because they think they don’t have the answer, but in reality, the question was just posed differently than they anticipated-or some used vocabulary word or acronym is familiar to the investor but not the entrepreneur.
Do provide relevant, related information.
If you don’t know the answer to their question, but you have some information that you think is relevant, provide it. If you have thoughts surrounding the question, but no real answers, voice those thoughts.
If you have also wondered about the answer to the question, but can’t figure out how to find out the answer, share that with the investor and ask for their help in finding the answer. An investor wants an entrepreneur that is coachable, and is willing to listen and work together.
Do admit you do not know.
Come clean, and do it quickly. In reality, no one expects you to know everything about every single business aspect. If you can understand their question, ask a few clarifying questions, and if you still don’t have an answer, avoid rubbishing your way through it.
Tell the investors something to the effect of: “Great questions. I would love to know the answer to that as well, and I will be researching and investigating that as soon as I leave the meeting.”
By remaining honest and demonstrating that you understand the importance of a question by promising to later investigate, you present yourself as a true leader- willing to work with the investor, and find his or her opinions and questions valuable.
Pitching investors is not easy. The more often you do it, the better you will get, and the more calm you will feel when they ask you something you don’t expect.
As you pitch more investors (it is not uncommon for someone to have to pitch hundreds of investors before getting all the money they need) create additional slides for your pitch deck that contain the information asked by previous investors.
Leave those slides in the appendix of your business plan, ready and available for the next time the question gets asked. If there are offshoots of information that you gather from a pitch that make the answer to a question even better, include it in your context so you remember it for next time.
It’s vital to continuously improve and refine your pitch and approach. The more you understand your business, the growth levers, the cash levers, and the expenses, the more effective your conversation with investors will be.
Do you want to practice your pitch and have your business plan reviewed? Contact us today to find out how we can help you prepare to secure the funding that your business needs. We have helped a growing number of entrepreneurs and business leaders strengthen their position in front of investors while providing powerful answers to gain the funding they need.
Gain the upper hand ahead of time, contact us today!