11 Questions you must be able to answer about your businessDec 21, 2022
I’ve previously written about the seven most common questions asked by investors < there's the link if you want a refresh.
The theme of this article is a little different. There’s certainly some overlap with my previous piece, but the key difference here is these are questions you really need to be able to answer whether or not you’re looking for investors. While still of interest to those folks, any number of other parties could be likewise. For example potential employees, supply chain partners, and customers among others.
The most important person who needs to know the answers is, however, you. (I am not making this up.) So if you don’t know the answers to any of the following questions, I suggest you find out PDQ.
1. How does the business make money?
You’d be surprised how many people struggle to answer this most basic of questions about their business. When someone asks about your business model, most of the time they just want to understand how it works from a cost/revenue/profit perspective. If it’s too complicated to understand, it’s probably too complicated to make money from.
2. What do you do/offer/sell?
Explain your business in just 2 sentences. Can you quickly, clearly and succinctly explain to someone what you do? Without waffling, without hyperbole, without taking up 5 mins talking around what you do without getting to the crux of it. Without talking too much about the features of the product rather than the benefits. No one wants to know about how many lines of code you've used to build it; well, perhaps except for that geeky person.
3. Who and where are your customers?
Very few businesses don’t have a specific target market. The more you know who your potential customer is, the better your chance of selling something to them.
4. What’s the size of your market, and how do you reach your customers?
This is all about the numbers of people who could be potential customers. And no it isn’t everybody. You need to describe your customer profiles in reasonable detail.
And how are you actually going to get your product/service in front of them? This is often put as ‘what’s your route to market?’. And, if you don’t know what TAM SAM SOM means, best you Google that as soon as you’ve finished reading this.
5. Why would someone buy your product/service instead of someone else’s?
This is the good ole USP question. In other words, what makes your business/products/services more attractive than others on the market.
6. Who are your competitors? How do you address your competition?
If your answer is, ‘we don’t have any competitors’, my response is ‘yeh right’. Every business/product/service has competition. It may however not be obvious or direct. You need to look. Sometimes the main competitor is internal, even the potential customer i.e. something they can or already do themselves. Another example, especially in the luxury sectors, if people have to make spending choices - which most of us do - then why should they buy from you rather than something else from someone else?
7. What are your major internal risks, and what are your mitigation plans?
From an internal perspective, what could go pear-shaped that would affect your ability to make the business work? An example might be a key-person dependency i.e. someone who plays such a critical role that if they were no longer there, you’d be in serious trouble. A not uncommon problem is a top-notch developer/software engineer where because of their knowledge, contribution to the business etc. their departure could be life-threatening for the business. Another example might be a key partner in your supply chain. What would happen if they suddenly disappeared? You need to be able to identify, plan for, and mitigate these sorts of risks.
8. What are your major external risks, and what are your mitigation plans?
The same as above, but more from the external perspective. Examples might be legislative risk e.g. law changes. Or political risk. Or energy risk? etc.. Again the key thing here is to at least realise that such risks do exist, identify them, and then come up with a plan just in case the worst-case scenario happens.
9. Where do you see your business in 2 years from now, 5 years, even 10 years?
This is about showing that you have an eye on the future, a plan, ambition, as opposed to just winging it day by day. Of course these plans can, and invariably will, change. But if you don’t set a destination, how will you know where to steer, and how will you know when you’ve arrived?
10. Do you know your numbers?
If you're trading, then you need to know your trading figures to date, whether your business is profitable or how long it'll take before you are. If you're thinking about raising investment, then you'll need 3-5 year financial projections too. Go back to Q 9 above, do your projected numbers align with your goals for the business?
11. Can you remember all your key achievements to date?
Everyone got progress to shout about, even if you're pre-revenue. Chances are you've built a product, have a couple of staff, maybe tested a BETA version or got some market feedback from first users. Perhaps some press or PR to talk about too. Make a list, check it twice, be proud of your achievements!
P.S. Saying "I've registered the company on CH and built a website" isn't good enough, that's a given!
At ISQ we help our clients prepare for the myriad of questions they’re likely to face when seeking to raise equity investment. If you’re considering raising equity investment for your business, why not take this quick and easy Readiness Quiz. If that shows crowdfunding might be suitable, you’ll have the opportunity to book a call with us to discuss your ambitions.
Author: Richard Mojel, Commercial Director, ISQ Crowdfunding.