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Stop romancing the pitch
The easiest advice you can give to a ﬁrst-time entrepreneur is to ask him or her to make their pitch better.
Two reasons to start with:
That advice (unintentionally) implies that everything else about the business is quite all right and all it requires is a pitch upgrade.
If you are that entrepreneur, you might take that quite literally and start working on the components of the pitch (narrative, length, structure, sequencing, etc.) and/ or the mechanics of its delivery (tone, style etc.)
Combine reasons #1 and #2 and you have a disaster in the making.
As an entrepreneur, you might start believing in your own (ﬂawed) story and start searching for someone who can “just” ﬁx the pitch and you will be oﬀ to the races.
Upgrade your pitch ONLY after you upgrade your story.
Recently, an entrepreneur wanted help with his pitch upgrade and it was not hard to see that it was not the pitch that was the problem, but the assumptions he was making about the business that was wrong. The way the business was structured, it would fail the moment it started getting traction. I spent some time explaining why the business idea was ﬂawed and how to ﬁx it. The entrepreneur nodded in agreement. A day later, I got an email with the old pitch with a request to make a few minor changes so that he can get through an upcoming review.
A bad business model cannot be salvaged with a great story.
In fact, a solid business model and a great story will at best have 10% chance of succeeding so anything that’s less than a 9 out of 10 on the business model is destined for failure very shortly.
Your pitch is important, but it’s not everything.
Your pitch is super important. It’s like the cover of the book. Without a good pitch, doors are shut for you. But, that does not mean that you will get a carte blanche for moving ahead. It’s a start and at best a door opener. Without getting the underlying elements strong, your attempt to get a strong pitch will be futile.
The genesis of the real problem
As an entrepreneur, it really starts with you. If you ask someone to just help you with the pitch, you might get just that – an upgrade on the structure of the pitch or an upgrade on the mechanics of its delivery. The underlying problems may not go away.
So, stop asking people to help you with your pitch until you are totally convinced about the strength of all the underlying elements.
Where can you start?
I always advise that you *start* with three key elements in the business model. I am emphasizing start here mainly because there are a lot more elements that you need to get right to give your business a head start.
Here they are:
#1. Source of Revenues
Somewhere in your business model, there will be someone who will need to pay you for something (a product or a service) – so you start with your potential target customer. The general ﬂaw in this department is the assumption that when your product or service is ready, the target customer is open and willing to engage with you to transact and acquire the product or service.
Any target customer (you included) will have an unbelievable amount of resistance to change even when he or she knows that the change is good for them.
The beneﬁts of changing from where they are to the new state has to be super signiﬁcant as compared to the “perceived pain” you think they are experiencing in the current state.
Because you want to believe in your service so badly, you might miss on a few things such as:
What percentage of your target customers acknowledge that they are experiencing any level of pain in their current situation. Remember that people get used to some level of pain and assume that it’s part of their life.
What percentage of your target customers are open and willing to consider a change if a viable solution comes their way.
What percentage of target customers will actually follow through on their promises and make the switch to include your product or service as the solution.
What percentage of target customers who made the switch actually continue to use your product or service for a foreseeable future.
The answers you get for the above may not be pretty, but ignoring those answers won’t make the questions go away magically.
#2. Cost of Delivery
If you give something really amazing at a throwaway price, you might ﬁnd a boatload of people standing in a queue to buy that amazing thing.
However, you might go bankrupt fulﬁlling the requests as you will have costs of delivery. When you are green, it is very easy to underestimate the costs of delivery because in your mind, things will happen ﬂawlessly because YOU are in control of the delivery.
A few things that are easy to miss:
It ALWAYS takes more time and more money than your wildest estimate to deliver something awesome. So once you have estimated everything, you can safely double that number so you are not surprised.
Murphy’s law (if anything can go wrong, it will) will spring up as an unwelcome guest every now and then. You need to factor that in.
Needs change and new players will come into the market. You will need to change your best laid plans (fancy term – “pivot”) based on the new ﬁndings along the way. You need to factor in the “change costs” that is involved in the pivots.
When you pivot, you may realize that there needs to be a change in the team composition as the earlier team members may not actuarially be the right ﬁt for the new direction. Any change in personnel comes at an “emotional” cost and there is no simple way to factor that in.
#3. Mode of Distribution
This seems simple, but we all know that it is not. How do you take something you have created to the right target market?
A few things that are easy to miss:
The cost of acquiring a customer (CAC) is always higher than what you estimate. This is because, for you the solution makes perfect sense.
It is easy to overestimate the power of your personal network to bring the deals to the table. While you are important to everyone in your network, they also have a lot of other people in their network to pay attention to. So, talking to everyone in your network may be easy, but transacting with your network takes time, eﬀort and energy.
Any meaningful distribution network that has access to a large enough audience will be approached by many companies to get their products pitched through that network. The result is that you need to “win” the mindshare of these networks to give you the attention. This means you should have spent a LOT of time beforehand to build and nurture relationships with key distribution networks. For your ﬁrst company, “build it and they will come” is something that is more of a dream.
Your story should at least incorporate the elements that will remove the doubts in the three key areas above. Your pitch should be succinct enough to create enough curiosity for people to want to know your story.
PS: One more thing – It is a common ﬂaw to focus on building an ecosystem that will consume when your energy has to be spent on building ecosystems that will contribute.
Let me explain.
In any ecosystem, there will be players that will consume (companies to whom you will pay) and there will be players that will contribute (companies who will pay you). The temptation is to start talking to a lot of people to whom you will pay because it’s just an easier conversation. Most of them will support you completely because in case you succeed, they will win. If you get into this trap, you will lose twice – once because you lost a lot of time that you could have used to build the ecosystem that will contribute and twice, because now in your mind there is a higher sense of progress.
Focus on building an ecosystem that will contribute before you focus on building an ecosystem that will consume.
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