By Guest Blogger
Over 50% of start-ups fail within the first four years, and for the most part it’s due to incompetence. Usually this is not because the leadership is incompetent (although that does happen), but rather a group of competent people are trying to do too much with their product or service, over-complicating a solution that is simple at its core.
At SAIL Global Advisors and Transformation, LLC we see this all too often — a company comes through to door with all the bells and whistles but no bottom line. The business plan is over-complicated, confusing, and leaves the audience with more questions than answers. This is a non-starter for many firms, so it’s wise for founders to ensure that their business is easy to understand before trying to pitch to investors or customers. The best way to do this is in the following steps:
Step 1: Pass the Single Sentence Test.
Can you define what your business is in a single sentence? Try it. This is a test that is much harder to do than most founder’s think. It’s especially hard for founders themselves to do it, because they can’t always see the “big picture” when they’re hyper focused on the minute details of their creation.
If you’re having trouble, try to explain your business to a young child (age 5-10). When you explain an idea to a child, it naturally forces you to dwindle the idea down to its simplest form. Once you have your single sentence down, practice it over and over again so that when people ask “what do you do?” they get it right away.
Step 2: Cut the Fluff of Your Business Model.
Once you’ve passed the single sentence test, now make sure your business model is easy enough for your customers to understand. If it’s not, you’re going to have a hard time selling and retaining customers.
Answer this question: When a customer gives you X amount of dollars, what do they receive from your company? It seems rudimentary, but in reality, this is the first thing your potential customers, investors, and partners really want to know. This is especially important for new software and technology companies whose services may be obscure in nature.
Step 3: Define Your Ask.
When you have an opportunity to pitch in front of an investor or a potential customer base, know ahead of time what you want to get out of the experience. Is it cash? How much? Is it new customers? How many? Is it people signing up for your newsletter? How do they do it?
Anytime a company has a chance to develop a relationship that will further their business goals, it’s imperative they communicate exactly what they need. Otherwise, they may be left with a bad deal, a soured relationship, or nothing at all.