![How to Respond When You Don t Know the Answer to an Investor s Question () How to Respond When You Don t Know the Answer to an Investor s Question](/wp-content/uploads/2024/07/how-to-respond-when-you-don-t-know-the-answer-to_1.jpg)
I often receive inquiries from entrepreneurs on how to effectively present to investors and handle their questions. One major concern that many people have before pitching to investors is the possibility of being asked a question they don’t have the answer to. They want to know how to handle the situation of being unprepared and having to answer on the spot.
Will not knowing the answer diminish an investor’s enthusiasm for a potential deal?
To begin with, my advice is to strive to never find yourself in this situation. If you thoroughly do your homework, understand your business, and put in the effort to research your business model, plan your strategy, forecast your numbers, familiarize yourself with your industry, and grasp the metrics that matter in your field, you should be able to confidently respond to any queries.
This is where having a comprehensive business plan becomes crucial; it prepares you in advance. While it’s unlikely that anyone will read a detailed, written business plan these days, going through the research and diligence required to create one will equip you to answer any question that comes your way.
However, there may come a time when you pitch to investors frequently enough that you encounter a completely unexpected question.
When faced with a question you don’t know the answer to, here are five do’s and don’ts to consider:
1. Don’t panic: Your initial reaction may be to panic and feel the urge to flee. Instead, remain calm and composed on the outside. Although your heart may race involuntarily, avoid appearing flustered. Be prepared for the possibility of unexpected questions and remember that investors sometimes ask unconventional queries to assess your ability to handle pressure.
2. Don’t fabricate answers: While you may feel compelled to provide an answer for every question, making up a response isn’t advisable. Investors can discern when you’re offering an insincere answer, and they likely ask questions because they possess knowledge about your business or industry. Fabricating an answer will only dig you into a deeper hole.
3. Do seek clarification: If you believe it will help, ask for more information about the question. Ensure that you fully understand what the investor is asking and, if possible, ask follow-up questions to gain insight into why they are asking it. Sometimes, entrepreneurs panic because a question seems different from what they anticipated, or because the investor used unfamiliar terminology.
4. Do provide relevant information: If you don’t know the answer, but possess related information, share it. Express your thoughts about the question, even if you don’t have concrete answers. If you’re also curious about the answer but unsure how to find it, communicate this to the investor and ask for their assistance in acquiring the information. Investors appreciate entrepreneurs who are receptive and willing to collaborate.
5. Do admit you don’t know: Be honest and promptly acknowledge that you don’t have all the answers. No one expects you to possess comprehensive knowledge on every aspect. If you understand the question, ask for clarification and still lack an answer, avoid bluffing. Instead, be transparent with the investors and express your interest in researching and investigating the topic as soon as the meeting concludes. This approach demonstrates your leadership qualities and emphasizes your commitment to working with the investors, showing that you value their opinions and questions.
Pitching to investors is no easy task. However, with practice, you’ll improve and feel more composed when faced with unexpected questions. As you pitch to more investors (often requiring hundreds of pitches before securing the necessary funding), consider creating additional slides for your pitch deck that address questions asked by previous investors. Include these slides in the appendix of your business plan, ensuring they’re readily available for future inquiries. If you gather additional relevant information during a pitch that enhances your answer to a particular question, incorporate it into your materials for future reference.
Continually strive to improve and refine your pitch and approach. The better your understanding of your business, its growth and cash levers, and your expenses, the more effective your conversations with investors will be.
Have you ever encountered a question during your pitch that you couldn’t answer? How did you handle it?
Hello!
I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
My career is built on a foundation of helping individuals and businesses thrive financially in an ever-changing economic landscape. At phonenumber247.com, my aim is to demystify the complex world of finance, providing clear, actionable advice that can help you navigate your financial journey with confidence. Whether it’s personal finance management, investment strategies, or understanding the nuances of market dynamics, I’m here to share insights and tools that can propel you towards your financial goals.
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