Top 7 Questions of Private Equity

What are the top 7 Questions Investors want to know about your business? Once you read this, cover them in Your Business Plan!
By Jacoline Loewen.
Most business plans are dull and, frankly, too crafted and full of motherhood statements such as market leader. Well what does it all mean and will it honestly set your potential investor on fire? Most probably not. Here are the top seven questions an investor will be wanting you to answer. So get your story written up in a dynamic business plan:
1. What's the opportunity?
It's not enough to say you've spotted a problem and a way to fix it. Investors despise those marketing studies that say "this market is expected to grow 250% a year for the next 10 years, and if we can capture just 1.7% of the market, we'll all be multi-billionaires." Instead, you need to show how your approach will work better than any previous attempts to exploit the opportunity, and how you'll make money doing so.
2. What’s your competitive advantage?
Don’t get put off by the jargon – it simply means what does your business do well. As Woody Allen said, you only have to be five minutes ahead of the competition. Maybe you have management team with a distinct skill set that a rival company couldn't easily match. Investors probably won't be impressed if you claim your advantage is having a head start on the competition — not unless you have a barrier to entry, such as a patentable product or process that would make it hard for new rivals to imitate your offering.
3. What’s your big vision?
If you are planning to be the big boy in all of Mississauga, don’t count on getting funding. If you are wanting to go international, there are consulting firms who will help your set up channels to access markets elsewhere. Show this big thinking capacity.
4. What is the secret of your future sales success?
Investors know that selling is a special talent, and one that many young companies don't have on board. They'd love to hear that you have a rainmaker on your team, or a proven sales technique that can easily be taught to others. Or perhaps you have signed on with a top sales firm who will represent your product to the USA market.
5. What have you learned from the competition?
The more specific your answer, the better. For instance, "competitor X impresses us by being so systematic in asking new customers what they like and dislike about its service. We plan to take that idea a step further by responding immediately to customer dislikes." Also, consider what is the worst thing your competition could do to your business and address this.
6. How will you use the funds you raise?
Buy a Porsche? I don’t think so! Investors are more concerned than ever that their money be spent in ways that most directly generate revenue and profits. They'd rather hear you itemize how you'll use it to hire three more salespeople and develop sales support literature than on product innovation research.
7. What are the risk factors?
Your realism in this area will reassure investors. If it's likely that competition in your industry will intensify over the next six months, then tell them you expect this to happen and explain how you plan to respond.
Jacoline B. Loewen is a managing director at Loewen & Partners, a private equity and venture capital firm based in Toronto, Ontario. Loewen & Partners works with the owners of growing, privately held companies to access capital. Jacoline can be reached at 416 961 0862 or Jacoline at loewenpartners.com.