How to answer "What Will You Do With the Investment?" when negotiating with investors
Find out how business owners can best explain their plans for using investors' money. This article focuses on the need for careful planning, matching your plans with your business's growth goals, and giving clear details on spending. See real-life examples of how to share plans for spending on product making, advertising, and hiring, to make investors feel more confident.
Understanding the question
It allows investors to gauge the entrepreneur's strategic planning and prioritization skills. Investors are keen to understand how their funds will be utilized to generate growth, sustainability, and profitability.They are looking for a well-thought-out plan that outlines specific areas of investment, such as product development, marketing, staffing, or research and development.
The clarity and precision of the response can significantly influence the investor's decision-making process.
How to answer
To answer this question effectively, entrepreneurs should prepare a detailed and structured response. It's important to demonstrate a clear understanding of the business's needs and how the investment will help meet these needs.The answer should align with the business plan and growth strategy, highlighting how the investment will contribute to achieving short-term and long-term objectives.
Entrepreneurs should provide a breakdown of the costs and expected outcomes, showing they have thoroughly analyzed the potential impact of the investment.
This response not only shows fiscal responsibility but also reassures investors of the entrepreneur's commitment and understanding of their business.
Example Responses
"With your investment, we plan to allocate 40% to product development, enhancing our software's capabilities and user interface. About 30% will go towards marketing and customer acquisition, including digital campaigns and expanding our sales team. The remaining 30% will be invested in talent acquisition and training, ensuring we have the skilled workforce needed to execute our plans effectively.""The investment will primarily be used to scale our manufacturing capabilities, accounting for 50% of the funds. This expansion is crucial to meet the increasing demand for our product. Additionally, 25% will be allocated towards market research and development of new product lines, while the remaining 25% will enhance our distribution and logistics network, ensuring efficiency and customer satisfaction."
"We intend to use 60% of the investment to accelerate our market penetration in international markets, focusing on establishing local partnerships and marketing efforts. Another 20% will be directed towards research and development, specifically in advancing our technology to stay ahead of industry trends. The final 20% will strengthen our operational infrastructure, improving both our online platform and customer service capabilities."