2.0 Mkt. Need & Solution
HOW TO PRESENT A BUSINESS PLAN >> Each section contains key Action Items located within the downloadable Action Guide >> Click to Download Action Guide.
In the first segment of this Action Guide, I described to you the four parts of both your investor presentation as well as your elevator speech. In this segment, we’ll discuss the first part of your presentation: the market’s need and your solution. Before getting to this, however, I want to talk about several general aspects of your investor presentation that are applicable to all four parts. These are things you need to keep in mind overall.
First, as you prepare your presentation, it’s very important to put yourself into the shoes of your audience – your potential investor. After all, it’s not what you think is important, it’s what the potential investor thinks is important that really counts. The first thing to keep in mind is that your audience probably will see as many as 100 to 200 business plans each year or even each month. Let me tell you, reading business plans can become very tiring. If you read one right after another, things start to blur together. If you read five business plans, one right after the other, then someone asks you questions about each one, do you think you might have trouble distinguishing one plan from another? Absolutely, you will! Now, imagine that one of those five business plans is your plan. You certainly don’t want your plan to be confused with the other four! But that is exactly what is likely to happen unless you take care to make your plan stand out. Beyond the four-part presentation structure I’ve already outlined to you, let’s talk about specific ways to make your plan stand out and be memorable.
A good starting point is to keep in mind what’s called the 10/20/30 rule. This was developed by well-known angel investor Guy Kawasaki. Kawasaki reads hundreds, if not thousands, of business plans each year and subjects himself to many, many presentations. His preferred presentation follows the 10/20/30 rule: have no more than 10 slides in your Powerpoint deck; keep the presentation to no more than 20 minutes; and use no type font less than 30 points in your presentation. Let’s begin with the 30 point type. You want at least 30 point type so your audience can easily read what’s on the slide. Of course, the larger the font, the fewer the words you can place on the slide. If you filled up your slide with nothing more than 30 point type words, you can put no more than 77 four letter words on the page. That wouldn’t look very attractive! Other experts recommend no more than 10 to 15 words on a slide. So I agree with Kawasaki that you should have no less than 30 point type on each slide and you really shouldn’t have much more than 10 or 15 words per slide.
So let’s look at the challenge this will pose. Kawasaki also said you should have no more than ten slides and I’m saying you shouldn’t have much more than 10 or 15 words on each slide. I wouldn’t be surprised if you’re scratching your head right now, saying to yourself, how in the world can I possibly make my case with so little? Well, go back to what Mark Twain said: I would have written a shorter letter, but I didn’t have the time. Ask yourself, is your investor presentation important enough for you to make the time to prepare it the right way? Of course! So that’s what you need to be prepared to do. Now I didn’t say you could only speak 10 or 15 words about each slide. No limitation on your words, but what you do put on each slide is important.
At the same time, think back to different times you’ve listened to presentations by others. What sorts of things did you remember about the presentation? Did you remember the facts and figures presented to you? Did you remember the text written on the slides? Most likely, you’re shaking your head “no.” Let me suggest two things you likely did remember. First, you remembered interesting pictures. Most of us are very visual and we remember pictures, certainly better than we remember a bunch of figures. But beyond that, there’s something that we tend to remember even better than good pictures. The thing we as humans tend to remember best are stories. Why that is, I can’t tell you, but I’m absolutely confident it’s true. Here are some possible reasons: 1) stories tend to be about other people, and we tend to recall things about people better than things; 2) we may have had similar experiences so we can relate to the story; and 3) a well told story is simply much more interesting than a column of numbers, even to an accountant like me. The point is, to make your presentation more memorable, tell stories. Your audience is much more likely to remember a good story than to remember any of the facts, figures, or other information that’s in your presentation.
Now I’m sure your thinking: I’ve only got a short amount of time for my presentation. How can I tell stories without using up too much time. It’s a good question. The answer is that your story can and should be short. How short? Well, let me tell you a story. Ernest Hemingway, the famous author, once was sitting in one of his favorite bars in Venice. He was having a drink with some other writers of the day. Someone suggested a bet to see which of the writers could compose the shortest story while still sitting at the bar. Apparently, Hemingway won. While enjoying his drink, he composed a six-word story: For sale. Baby shoes. Never worn. That was the story! While it’s brief, it still contains all of the elements of a good story. Do you think if someone told you the story, you’d remember it? I bet you’re more likely to remember this than a column of numbers, facts or figures. By the way, I should also mention that Hemingway and I went to the same high school. He was a better student than I was and he managed to graduate ahead of me – 53 years ahead of me in fact! And this little anecdote will introduce two other good things to do as part of your presentation: 1) using humor, if you can; and 2) talking a little about yourself. With that in mind, think of some possible stories you could tell as part of your presentation. Here are some ideas:
Tell a story about what made you come up with the product or service that’s the heart of your new venture. Perhaps you realized that current products can’t do what you need them to do. Write a brief paragraph RIGHT NOW about how your business idea came to life.
Tell a story about a customer’s experience using your new product or service. This is a great way to convey, for example, the customer’s frustration with using the competitor’s product. Alternatively, tell a story about how the customer can do things previously unimaginable but now possible given your product. List three customer story ideas to develop.
ACTION ITEMS: Complete the Action Items in your Action Guide.
Write a story about what made you come up with the product or service that’s the heart of your new venture. Write it now:
List three customer story ideas to develop.
1)
2)
3)
Your story doesn’t have to match Hemingway’s brevity, but it also can’t be a chapter from Tolstoy’s War and Peace either. Try to come up with at least three different stories related to the first part of your presentation. At the same time, you might also consider some potential humor you might want to include. In the case of humor, however, be very careful! It needs to be in good taste and it must somehow relate to the presentation.
ACTION ITEMS: Complete the Action Items in your Action Guide.
List three humor ideas that you could add to your stories.
1)
2)
3)
Let’s now talk about the specific content of part one of the presentation. You want this segment to answer the following three questions:
- Question 1: what is the marketplace problem that needs to be solved?
- Question 2: how does your product or service solve the problem better than any alternative
- Question 3: why does this really matter?
Those three questions are the core of the first part of your presentation. Every new business, if it hopes to be successful, needs to have good answers to these three questions. Not surprisingly, the third question is actually the most important because it will give the potential investor an idea of the potential marketplace impact. Your new product or service has got to solve a marketplace problem, otherwise no one will buy it. It’s got to do it better than the competition, otherwise buyers either won’t try out your product or won’t change from the incumbent. These questions may seem somewhat obvious, but you’d be amazed how many times this is “glossed over” in a presentation. I believe the reason is because the entrepreneur is too close to his or her baby. You, the entrepreneur, understand your marketplace. You also understand how there is a marketplace problem that needs to be solved, and you also understand how your product does it better than the competition. What is so often overlooked, however, is that your audience, the prospective investor, doesn’t have your perspective. He or she may not even know anything about your marketplace. As such, part of your job is to provide the potential a short education on the marketplace, being careful to explain the issues involved. Of course, on the other hand, you need to keep Kawasaki’s dictum of 10/20/30 in mind. You need to explain things clearly but you must be succinct. This is where stories can be particularly helpful.
I believe the third question is actually the most important. Again, the third question is: why does this really matter? The potential investor is looking for deals that can make him or her a lot of money. Before making an investment, the potential investor will take time and money to evaluate your company. The evaluation time and cost is pretty much the same for each deal. Some will be a little more involved or cost a little more than others, but the time and money investment is pretty much the same. With that in mind, consider the following two investment opportunities, both requiring an investment of $ 500,000, both of which seem to have more or less equal appeal to the potential investor:
- Deal A: potential market size of $ 10,000,000
- Deal B: potential market size of $ 100,000,000
I’m confident that the potential investor will pick deal B, the hundred million dollar opportunity, every time. If the amount invested is the same, and the time to evaluate the investment is the same, investors will pick deals with bigger potential. That’s why question three is so important. Therefore, you need to be able to show that your solution has a significant marketplace.
If you follow Kawasaki’s dictum to have no more than ten slides, you’ll probably only be able to devote two or three of your slides to part one. Think about what you might want to say on these. Given what I’ve said before, you’ll probably want to focus as much as possible on three things: A) telling stories; B) using pictures; and C) simple graphs. At the same time, focus on what you want your audience to remember. Here are the key things:
- The marketplace problem is X
- The company’s product or service solves this problem better than anyone else because of Y
- The potential market is Z.
I’ve seen lots of investor presentations before, and lots of especially bad investor presentations. My hope is that you’ll do everything possible to avoid making the mistakes others have made. Let’s talk about some of those mistakes.
The first big mistake I’ve seen has to do with product demonstrations. Entrepreneurs feel it is important, if possible, to demonstrate their product. This is especially true if the product is software. They go through elaborate demonstrations of what the software can do and, as much as possible, try to “wow” the audience. This has two key problems: A) the demonstration uses up valuable time, leaving far too little time to address other critical matters; and B) they don’t effectively answer the three key questions I outlined before. If the product involves science, it can be an even worse outcome than the software demonstration. Scientist entrepreneurs feel compelled to explain the science behind their product. This works well for those in the audience with knowledge and understanding of the subject, but otherwise leaves the audience very confused or vexed.
Let me suggest an alternative strategy. If at all possible, find a way to answer the three questions I’ve posed above without doing either a product demonstration or a technical explanation of the background of the product. Pretty much any product or service can be explained in these terms by providing answers to the three questions. Now, you do need to be prepared to give a more technical explanation of your product or service, if asked. You might bring along extra Powerpoint slides to do that, but hold those slides in reserve until your audience specifically asks you during a question and answer session. Remember, the purpose of your presentation is to explain the business side of the proposition, not the technical side. If you need to answer technical questions, wait until the question and answer session after your presentation.
The other very common mistake I see is to pack too many figures, charts, graphs, and even flowcharts into the presentation. Entrepreneurs often think that loads of impressive statistics will actually impress the audience. More likely, they will confuse the audience. More important, the audience will tend to forget the facts and figures you provide. Now you don’t have to go to the extreme and eliminate all facts and figures from your presentation, but be very careful. As mentioned before, focus on stories, graphs, and pictures. And keep in mind that the purpose of this section is to answer the three key questions. Let me repeat them for you:
- Question 1: what is the marketplace problem that needs to be solved?
- Question 2: how does your product or service solve the problem better than any alternative
- Question 3: why does this really matter?
In our next section, we’ll focus attention on the second part of your presentation: marketing, sales and distribution. Before you proceed on to the next section, however, prepare the first draft of your part one PowerPoint slides and text:
- Create two or three simple PowerPoint slides that describe the marketplace’s need and how your company will fulfill that need. Your PowerPoint slides don’t need to be anything more than simple text. You can create a presentation quality slide later.
- Either prepare a detailed outline of what you want to say about this section. Alternatively, write out the text of what you’ll want to say. Use 8 ½ X 11 paper and write or type in doublespace. This will make editing easier. Since this section of your talk will be about 3 or 4 minutes, you’ll want about 3 pages of text. Don’t worry about the other parts of your talk at this point. All of the pieces will be put together later.
Begin composing!
1) Describe your marketplace’s need and how your company will fulfill that need.
2) Prepare a detailed outline or write out the text of what you’ll want to say.
3) Clearly describe “why all of this really matters.” (Market size, etc.)
ACTION ITEMS: Complete the Action Items in your Action Guide.
FIRST, finish each of these sentences using information from your business plan. You can add one or two supporting sentences to each one, but the point is to convey these statements as concisely as possible.
1) The marketplace problem is…
2) The company’s product or service solves this problem better than anyone else because of…
3) The potential market is…
SECOND, create two or three simple slides using a slide presentation program (i.e. MS PowerPoint). Use these slides to describe the marketplace’s need and how your company will fulfill that need. Only worry about entering text and using the 30 font size and 10-15 words per slide rules.
THIRD, prepare an outline or type or write what you intend to say during PART 1 of your presentation. Incorporate your story, humor, and the three questions that investors want you to answer in your presentation. Go ahead and type it now.
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