As an investor I see many business plans and there are various reasons that they do not get the full attention that they may deserve. How can an entrepreneur avoid these many pitfalls and be more certain of a successful presentation?
Now the audience knows your big vision, the problem space you are working in and the solution you propose it is time to get down to detail. Exactly what is the product or service you are going to sell to customers that will solve the problem?
This section of your pitch needs to be short and punchy. Tell a story of a typical customer (preferably a real one) who has the problem, purchases your solution and has their life transformed. The audience wants to believe that the customer’s life is now more harmonious, happy and stress free because they own your product/service. Satisfy this need. Show that the problem is solved. Tell them what your unique insight is that has allowed you to solve it better than anyone else. Why does the customer think your solution is ten times better than everything they have tried? Why will they keep on using it and tell everyone about it? In the jargon, what is the Viral Rate?
This would be a good time in introduce some basic pricing (assuming you’ve tested it). For example, how much have customers paid and what it costs you to supply the product (the marginal cost). Typical expected margins are x10 for product and possibly x7 for software. In other words, if you sell a box of tricks to solve a problem for $100, that box should cost you $10 to make (in a reasonable quantity). What is the marginal cost? If you have sold to 378 customers, what is the cost to provide the solution to the 379th customer? (for software this is next to zero).
For the finance slide, it’s not just the marginal cost you should consider but also the cost of getting that customer to purchase your product/service. This includes the cost of all your marketing, development, etc. divided by the number of solutions you expect to sell. But we are getting ahead of ourselves!
Did I mention this is a very short, quick section of your pitch?
Where most entrepreneurs go wrong is to spend lots of time talking about the features and benefits of the product and showing the amazing graphics of the service. Sure, your customers will be really happy to know all this. But this is not a pitch to customers, it is a pitch to investors. Investors assume the product “does what is says on the tin” (otherwise why would you be here) and are more interested in the Business Model that surrounds it. Remember that the idea is only 5% of a successful product/service – the other 95% is getting the solution into the paying customers’ hands with enough margin from development and supply to make a profit. Your description of the embodiment of your solution should be over within 5% of your pitch. After all, most customers will walk away if you can’t describe your product/service within 60 seconds.
Now Investors know what the product/service is they want to know who has the experience and drive to deliver. Of course, we already know who has the drive…