How to Handle It When Your Investors Question Your Business Vision
There might come a time when a small business needs to take on investors to grow. But when your vision for the future of your company does not coincide with your investors’ visions for the company, this can spell disaster.
When your investors don’t believe in your vision, you have three options: whine, complain or acquiesce; fire the investors and get new ones; get out of the business,” notes entrepreneur Aaron Norri of real estate investing company The Norris Group. “If you’ve truly done your due diligence on the market and your product and you know, for certain, that your vision is solid and the only way forward for a profitable venture, whining and acquiescing to investors should come off the table because that makes firing them and going after new investors the only other option. Either that, or your business model is no longer working and it’s time to move on.”
But before you do, ask yourself some important questions. “One of the best pieces of advice I ever read regarding getting the approval of an idea is to move away from the ‘Why?’ and move towards ‘Why Not?’. A lot of the time your ideas might seem like a no-brainer, but to investors they appear as risky, ambitious or like they involve a lot of effort,” offers Luke Jordan, owner of Rank Zero Ltd.. “These people would often like to see you doing more of the same, no risks with small and consistent yields on their investments. You need to ensure your ideas appear like a no-brainer to people who don’t understand your business in the same way you do — you see everything every day and understand all of the intricate details of your industry, most don’t.”
And, there are ways to try and protect your vision while not alienating your investors.
“The entrepreneur needs to do/take into account the following: seek to understand first, then explain; what are the specific areas of disagreement and can they be separated out for addressing piece by piece,” advises Rai Chowdhary, CEO/founder of The KPI System and author of the new book new book 101 Questions and Answers from Experts. “What is the best alternative (for the entrepreneur) if negotiations stall/get into a logjam; what are reasons for holding the particular view/position; and how does that fit with the overall priorities for the business.”
You may have to leave your company, and this does happen. “The best piece of advice I would give is to have an exit strategy lined up before ever agreeing a deal. You need to know exactly what happens if you no longer see eye-to-eye (although working out your problems should always be the first, second, and third options),” says Jordan.
So before calling it a wrap, think about what your investors are suggesting. Do they want to go in a new direction? If you’ve got investors with some insight and knowledge in your business and they suggest tangible ways to improve what you’ve created, you have to take that into consideration. What you want and what the business needs isn’t always the same thing. But, at the end of the day, you only stay in business if you’re profitable,” suggests Norris.
You may also try to get your investors to come around to your way of thinking. “Hopefully you’ve surrounded yourself with investors that know you and the business. They’re investing in you just as much as the business. They should see you as somewhat of a market or product expert. If that level of respect isn’t there, it’s very difficult to get on the same page and have a mutually respectful relationship. You’re simply a money maker and they may or not be at all interested in your longevity,” says Norris, who adds there are to shape that relationship.
Examine motives and attitudes going in. “If you sense investors that are difficult, high maintenance, or have even rude, stop there. Your poor investor selection will take up your time and energy at some point. Cut it off on the front end so you don’t have to deal with it later,” advises Norris.
Make sure your vision is inspiring and motivating. It is well communicated? Is it relatable? Your vision should be concise and easy to understand. “Be the expert and communicate. Continue to be the market expert and communicate to your investors what happening in the industry, how you’re shaping the business, and be transparent about success and failures. When they trust you and you communicate transparently, intent is almost never an issue,” Norris points out.
Follow that age-old advice and never put your eggs in one basket. “If you’re surrounding yourself with only a handful of investors and one of them decides they no longer believe in your vision, you may be stuck. Cultivating other investors and relationship gives you the power to say, ‘I’m the expert, I’ve proved it, and I know where we need to go. I appreciate your support, let’s give your investment back so you can move on to something you believe in,’” says Norris.
By: Ann Brown, The Network Journal