What do investors want to know before investing?

Feb. 13, 2019

Before committing money to a company, investors have to be convinced that the company that they intend to invest in is legitimate and will have a chance of success that is high enough for them. A company which is interesting or doing something which hits home with the investors is only a part of what is needed for investors to pull the trigger and invest.

The profit margin is an important number to show to the investors. A healthy and huge profit margin will get investors interested. A company which is unable to show a positive profit margin will not be able to attract any investor as they know that they will definitely lose their investments. However, it should be stressed that the numbers to project the profit margin should be based on a reliable and highly probable assumption. Start-ups will likely have ideal profit margins, but investors will likely look at the profit margin several years down the road instead. This is because when the business grows, there will be more operational costs, lowering the profit margin (Parker, 2017).

Next, the business growth and business model are both important aspects of the company that can influence investors to invest. This is linked to the profit margin as investors look at the sustainability of a company when they are looking for companies to invest in. Companies which have clear and concrete plans and strategies of sustainability and growth such as good marketing efforts, sustainable revenue streams and healthy financial projections are good indicators to the investors as it improves the credibility of the company.

Thirdly, the company should have a clear problem statement. A clear problem statement will allow investors to get a clear idea of what problem the company is trying to solve and how they are going to solve it. They should be able to clearly present the impact it will have on their intended target audience. A more convincing problem statement will sway investors in the right direction and increase the chances of them investing in the company. Good problem statements will have a vision (the impact of solving the problem), issue (the problem you are trying to solve) and method (the method to solve the problem) statement (Corvelay, 2017).

Additionally, a Unique Selling Point (USP) is a huge plus for investors. There are plenty of companies in the market, and companies have to find a way to differentiate themselves from the rest. Having a strong USP will make them stand out among the pool of companies that are trying to get investments. As such, investors will be drawn to companies with strong USPs.

A company with a team that is capable of doing what is needed to ensure the success of the company will be favourable. However, the company must be able to showcase their team’s skills. There is no point if they have a team of capable individuals but they are unable to present that asset of theirs to the potential investors. The right kind of advertising of their skills to the investors will be an important factor in the decisions of the investors.

Last but not least, a strong customer base. Loyal fans or advocates for the company’s brand will help to enhance their image to the investors. It is physical proof that the public is behind the company and will support them fully. This places an increased confidence in the investors as they know that there is already a relatively strong and stable customer and fan base.

These are all important aspects of the company that should be presented or demonstrated clearly to potential investors as they are what the investors are looking for when they want to invest in a company.

References

Corvelay, A. 2017. How to Write a Problem Statement for Business. Bizfluent.

https://bizfluent.com/how-6613061-write-problem-statement-business.html

Start to grow. 2016. Ep.-24 Seven things that investors want to know before investing.

https://starttogrow.wordpress.com/2016/08/16/ep-24-7-ep-24-7-สิ่งที่ผู้ลงทุนอยากรู/

Parker, T. 2017. What’s a Good Profit Margin for a New Business? Investopedia.

https://www.investopedia.com/articles/personal-finance/093015/whats-good-profit-margin-new-business.asp