It is conventionally accepted that startups need to draft a business plan to explain what the business vision is, how the key challenges are planned to be overcome, and how they can pitch to potential investors. However, many experts are of the opinion that by and large business plans are a complete waste of time and effort. The reason for such a drastic view is that a business plan generally becomes obsolete very quickly as the operating environment changes very fast and nobody, least of all a potential investor, really has the time to read such a detailed document. To attract the attention of investors who receive hundreds of business proposals every week, you have to say something that is startlingly refreshing and shorter, yet effective. Some tips regarding what you can do instead of wasting your time getting ready a startup business plan that no one cares about:
1. Develop a Pitch Deck for Engaging Potential Investors
A pitch deck is a new convention that is fast replacing the traditional business plan presented to potential investors. It is usually a set of 15-20 presentation slides that showcase different aspects of the startup; products, team, and technology being primary. Since raising funds is not only time-consuming but difficult, it is important to get the pitch deck absolutely right so that it is able to communicate an interesting and compelling story in the few minutes you have for the pitch. Start with an overview of the company and its vision and go on to enunciate the problem you are trying to address. Offer details of the solution including why it is better than any alternatives in the market. Give the product specifics and an idea of the market potential taking care to define the target customers. Devote a slide to the technology and why it is superior and then proceed to the analyzing the competition, and how you will attempt to get the early traction. Present the business model and the marketing plan along with the financial projections. Devote a couple of slides to the key members of the team and how their experience is relevant to the project. The last slide should be on how much investment you want.
2. Pitch Deck Dos and Don’ts
Don’t take confidentiality for granted but take care to specifically mention that the ownership rights of the information belong to you. Make the slides smart and presentable but don’t include unnecessary graphics that detract from the importance of the contents. Send the presentation in advance in a mail and not force potential investors to download from a link. Tell a story that is compelling, interesting, and memorable in a way that reflects the passion you have for the project. Show that you have a gem of an idea that has already found early acceptance by customers or partners. Don’t make the slides too many or stuff in too much information in every slide. Stay clear of industry jargon during the presentation and take care not to belittle the competition. Take extra effort to make the slides attractive and give them a look and feel that is truly professional. Treat the pitch deck as an aide memoir and not try to read them aloud when making the physical presentation.
3. Prepare Comprehensive Financial Projections
You can expect potential investors to be very interested in the financial projections as that will tell them immediately whether the business has the potential for being profitable. The projections will also reveal the amount of cash required before achieving profitability and also the overall cost structure of the company like expenses on product development, marketing, employees, rentals and overheads, gross margins, etc. so that they can be validated. When making a pitch, you should be armed with projections for the mid and long terms, the profit and loss statements, cash flow statements, balance sheets, as well as all the underlying assumptions. Getting easily out of debt can be a reality with accurately-prepared cash flow statements.
4. Build a Prototype of the Product That Can Serve to Impress
It can help matters if you have a working prototype at hand that you can actually demonstrate to potential investors instead of just an idea begging to be funded. With a prototype, you can also gain traction with potential partners and customers and get feedback on the potential of the idea. While version 1 of the product will definitely be improved on in due course of time, it has to be really good if not great for it to impress potential investors. It has to demonstrate why it is distinctively different from anything that the competition has to offer. Use the prototype to get invaluable feedback from potential customers and the trade so that when you do launch your product, you can be sure of a better reception.
5. Research the Market Potential and the Competitive Environment Thoroughly
It may be surprising to know that the lack of adequate market potential is the number 1 reason for startups to fail. According to a study conducted by CB Insights quoted by forbes, as many as 42% of startups fail simply because there is not enough need for the product or service delivered by the startup.It is very important that you research the size of the market as well as the products or services that are already present in that space. It is critical that you keep on top of news regarding your competitors because you really don’t want to be taken by surprise just when you are entering the market. You can expect to be grilled regarding the market opportunity and the competition so you should be ready with answers regarding the size of the market and how much of it the startup can realistically hope to grab. Identify the main competitors and the extent of the market they have captured. Also, be very clear about your competitive advantage; breaking it down by feature, performance, availability, and price. Analyze the entry barriers to the market and how you can convert them to your advantage.
To be able to make a successful pitch for funding, it is important that you analyze the principal reasons why most startups don’t get the desired funding. Typically, these could range from lack of market potential to a poorly presented pitch deck, not enough attention paid to the probable questions asked by investors, lack of the right management team, too many well-entrenched competitors, unrealistic financial projections, poor marketing plans, and a seeming lack of passion.
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Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long-term wealth plans. She has previously covered an extensive range of topics in her posts, including Money Saving, Budgeting, Cryptocurrency, Business debt consolidation, Business, and Start-ups.