October 15, 2008
I’ve been judging business plan competitions over a fair bit of time and see people make the same mistakes again and again. These mistakes are fairly unique to India and may not occur as frequently elsewhere. Recently I was a judge at the finals of Ideaz at IIT Bombay and pattern of recurring mistakes came back to me. Hence, this post. Do note that this is not the same as tips for a business plan though most apply there as well.
- Top Down Numbers: This one goes something like this: We’ve estimated the market size at $ xx Million (a few slides are spent on this if the team comprises of MBAs); we conservatively estimate 0.5% market share for us by the end of year 1…. This logic works well if you’re an equity analyst, an investment banker or a consultant (and even there the trend is towards bottoms up projections). However as an entrepreneur, you’re better off with doing a calculation of volumes and price based on your resources (eg sales people, conversion ratio etc), the offering and the competition. This keeps the plan grounded in reality. By all means compare against market size to do a reality check. But do not do a % of market calculation. Look at this way, the global market for several things is in billions which implies through the top down logic that making $ 5 Million is easy – after all its a very conservative 0.5%!
- Generic GTM: This one goes like this: We will participate in the relevant conferences and advertise in magazines that the users read…. Two problems here: First, GTM is first about positioning of the product and then only about the media plan. Spend more time on this. Second, how is your approach any different from what anyone else would do in a similar situation? If you’re starting something, you’ve to be very focussed on lead generation and conversion. There is no luxury of trying everything. So please be clear about what you’ll NOT do that someone else in a similar situation would do.
- No competition: There is one. Period. No one may have the same product but they may be addressing the same need differently. Even if you’re first to market, there will be others along. So pls in the least say that none found so far. Saying No competition just makes judges smile.
- Talking product before the need: This one goes like this: Good morning Judges, our product ABC is the best XYZ system…. The problem here is that the product features mean nothing to the judges unless they know the customer problem being addressed. This means that first few minutes are lost just trying to understand the need and then mapping the features to the need. Also some judges would get biased against you – here is another techy who has no clue about the customer. Yes, its an unfair situation – judges should be more competent and they should be more careful. But what else can you do except to play the situation?
- Pitch is copy paste of the plan: This one is really bad. Consider this that anyone can read your plan faster than they can read the slide you’re showing and they can read the slide faster than you’re speaking. So, if the slides are a copy paste of the plan and the pitch is a reading of the slides, then the judges get into Q&A long before you are done. More importantly, you’re no longer in charge of the flow and are put on defensive pretty fast. So put effort into the slides (they are to assist in the pitch and are not the pitch themselves) and the pitch. Practice and get feedback from folks you respect.
- Focus on validation of the idea: This is THE most important aspect of any business plan. Show that you got early users who continue to use your offering frequently or that you have a beta site with a customer who is willing to pay and you’re playing in a different league. This shows that you’re on your way to be a proper business and are not merely yet another idea. You’re seen as a serious player. I’ve even seen judges start answering each other’s questions if they see validation!
- Uniqueness/defensibility get good marks: This is the corolory to the competition point above. Different positioning is essential but if you have something like a patent, license or customer base, then your plan is seen as superior to others. Its very seldom that judges get into the defensibility of patents for your innovation but are quick to see business method patents for what they are.
- Communicate communicate communicate: This cannot be underemphasised. Most people start talking with the intent to communicate every nitty gritty of their plan. They want to show that they have really thought it through and have done the hard work. However, no judge wants to hear all details in the first go and gets either lost or bored. What they need are the key points of the plan. Communicate these and provide support for these. Just to differentiate between key points and support, I’ll provide the following two thumb rules: First, do not have more than 5 key points. Second, in your pitch the key points should be put thrice whereas the supporting points only once. Rest assured that this will get the judges’ attention and they can still ask questions should they need more data.
- Do the numbers: A lot of times the financial projections have parts that do not tally with others. Lets take an hypothetical example to simplify matters : a revenue projection of 1 lac in a month with 1 sales person where the deal value is Rs 500. This means 200 deals in a month, over 6 deals a day assuming no weekends and near 100% conversion rate. This would be stupendous if only true! The judges see this since they corelate revenue with cost. Whoever wrote the plan saw the revenue projection and the number of sales people. In all probability, he didn’t even put down the deal value in the plan. The judges see that and the rest as well.
- Read the rules and structure your answers: This is downright silly. If you have been asked a question in a preliminary round then doesn’t it follow that judges have been provided a framework where there are marks for answers to each question? Many people do not seem to realise it. If A has been asked, they answer B! Another set of people seem to think that volume equals substance and they write lengthy answers just as in college exams. A third set refuses to answer questions on the grounds that its sensitive and that it would be revealed in the next round. In all these cases, a judge gives you low marks and that’s it.