Tag Archives: investment

Refine your pitch, then refine it some more

I’ve met a few people recently who were pitching their new business. It struck me that Babe Ruthpeople often struggle to describe their business to an outsider in a way that makes it compelling and coherent. Getting the pitch right is one of the fundamentals of making your business work and over the years I’ve had some great advice on this, notably from Bryan Keating, Doug Richard and Bill Liao.

The basics of this are that getting your pitch perfected is the best use of anyone’s time and while it can be difficult and take a long time, it’s almost always free to do and is so completely worth it. Human nature means that businesses always do too much which creates a barrier to investment, sales and profitability. Having a well refined pitch can help avoid doing this and gives you a reason to stay focused and say “Nah, we don’t do that because its outside of what we’re good at”. A few gems that I’ve remembered:

1.       Narrow businesses succeed – make your business as narrow as you can early on & then execute relentlessly;

2.       Get your product to sell itself – this is possible only if customers will sell it for you so figure out what the single feature makes your product truly awesome and focus on that to the detriment of everything else;

3.       Write down a profile of your customers – give them names and tell the story about how they will use your product so you can understand how everything you do will help them or bring them to your company;

In all of this you need to teach yourself to describe:

1.       What your customers want. Customers buy a product for one of two reasons – to take away pain or to get competitive advantage. There are no other reasons. Decide why your customers will buy your product and build every feature with this in mind;

2.       Your story. It’s no good saying, that taxi drivers have a problem doing this or that. You need to be able to tell the story about the day you were in a taxi, saw that the driver wasn’t able to do something you thought was obvious or easy and you got out of the car in the middle of the street to go off and build your product. This is all about telling your story which, as Doug Richard points out, is the fundamental bit of making an early stage business work, not least because it’s the only thing you’ll have early on;

3.       Your promise. This is tied up in your brand and your company’s identity. Decide what you promise to do for your customers that no-one else can do or that you can do better than everyone. The promise might change a little in focus depending on who you’re talking to (bank versus customers) but if you get this right everything you do – your customer service, marketing, values and culture -  will flow from this. Everyone who knows says you should be brutally clear about this – rehearse it in front of the mirror and write it down. Also think how it will look on a web page or in a tweet as this is where most people will see it.

I think this stuff is incredibly important and it’s something that we work at every day at Learning Pool. Although we have grown a portfolio company we still try to make sure that we stay as narrow as we can to succeed while broadening the portfolio so we can grow. We also do A LOT of storytelling because it helps us achieve so much. Telling a story gives the people you are talking to a sense that things are real, they see the passion in your eyes for what you are doing and they learn to trust you. I sometimes feel sorry for the guys in the team who listen to me tell the story about the day we decided to build our first LMS product day after day but then I’m reminded… its 30% of our revenue and we wouldn’t have a bloody business without that story! Its also true and was one of the coolest days we’ve had at Learning Pool so its going to stay around for a while!

The cost of free money

Free MoneyWhen you’re starting up your new business, there are real temptations to go after government grants and other types of support so that you can get the business to the next level, build a new product or just plain survive. There are loads of people around who will tell you that this is a bad idea, that you shouldn’t do it and that you’d be better off focusing on revenue. While I agree with most of that, I thought I’d write down a few of my experiences of the real cost of this kind of support for your early stage company:

Bureaucracy – chances are if you are an entrepreneur filling out forms will be something that you both hate and are crap at. This will really count against you when it comes to securing grants.

Time – there is no getting away from it: entering into a relationship with your RDA or equivalent will take ages, you’ll need to meet them plenty of times and work very hard to make them understand your business. They’ll also ask endless questions that you will think are unreasonable and often stupid. Whether they are or not is irrelevant – you’ll need to stay up all night answering them.

Delays – my general rule of thumb is that things with an RDA take about twice as long as you (and they) think it will. These delays can be the thing that will kill you in the end. If you are relying on a grant to be approved you probably won’t be able to spend money in the meantime. Imagine someone got to market before you did because you didn’t spend that money quick enough?

Rejection – the likelihood is that you’ll be turned down for any type of meaningful support from your investment agency first time round. There are lots of reasons for this and only some of them will be related to you: They won’t understand your business; they’ll think you are unrealistic about your forecasts; you can’t prove that your market exists or will behave like you think it will; they won’t believe in you as a person or your team as a team; they don’t have any money (this one is getting more popular).

Cash-flow – cash is unbelievably hard to a) come by and b) forecast when you are getting started. Relying on cash-flow from a government agency is a pretty awful idea as they will inevitably not pay your claim when you think they will for a fairly unending list of reasons. If you are early stage company the chances are you’ll be getting grants from your RDA. This means that they can only pay retrospectively against money you have actually spent – they sometimes pay 40-50% of what you’ve spent. As a result you’ll need to a) have the money to spend, b) spend it in a way that complies with your letter of offer and c) wait until they process the claim until you see your money back. None of this will help your cash-flow in any way!

Claims – this is the part of the process that I hate most. Claiming the money once its been approved is a cumbersome, time consuming and pedantic endeavour.  In fact its so time consuming that you’ll often have to resubmit because the claim forms have changed and the rules are different (my record for this is 4 submissions and 14 months.. no kidding). When you get a bit bigger you can weigh up the cost of paying someone to do this as a major part of their job… although that’s not something I’ve ever been able to justify.

Cost – claiming support isn’t free. You’ll have to spend money in a number of ways – getting someone to write your business plan for you in a language that the agency (not you) will understand, paying an auditor to inspect your claims before they go in (normally for claims where the spend is over £10K) are just 2 of the ways that free becomes ‘not so much’.

Apart from all that, grants aren’t that bad… seriously, don’t rule it out!