Here’s some insider advice for aspiring entrepreneurs, from professional investors. Each of us has a list of things we look for early on when identifying whether we want to go to the next step in analyzing a plan. Come to think of it, these are good for challenging any business plan.
Size of your total available market
First: You must address a big market, large enough to allow you to have a shot at making a dent with a great product or service and growing to a size that will make the company valuable at the exit.
We often draw the line at believing that a company can capture enough of the market to generate at least $20 million in revenues by the fifth year in the market. But many, many businesses will never be able to obtain this kind of market size or share. Your big market can come from having a dominant share or just by being in a very large space. Both work – with the dominant share preferred by most investors.
Your message must be simple
Second, you must have and be able to tell an easy to understand story to your prospective customers, suppliers and investors. If your product is too complex to describe in a few words, your opportunity to sell it will suffer, and investors will quickly lose interest or the ability to follow your explanation.
Create a “mantra” for your business
I’ve often repeated that entrepreneurs must construct a short, single sentence “mantra” that explains what you do in as few words as possible, sometimes using the name of a well-known company as a proxy for your activities. “We are the next Zoom of Internet one-to many interactive broadcasting.”
Your secret sauce
And third, you must have some “secret sauce” that is unique and makes you and your offering stand out among the thousands of possible competitors. If up against a monster like Zoom, tell us your secret sauce early to avoid us tuning out before you begin. So what gives you a head start, a barrier to entry, an extra value that others cannot easily emulate? Secret sauce is important to investors and to you in competing against a company with more money, a brand name, or a head start.
A big market. An easy-to-understand story. Secret sauce. Why not spend a few minutes right now, and explain to yourself how you address each of these.