Entrepreneurs receiving Advisor Feedback
Seattle is a hotbed of really smart people creating companies. It is exciting to see all of the support in Seattle to add structure to shaping an entrepreneur’s business model, market research, marketing, and other aspects of these companies.
I found the following interesting pattern that is worth a blog post. This shows how entrepreneurs that I’ve seen go from a PROPOSED PLAN for a business to a plan VETTED by experienced business leaders and industry experts. The following is what I see other people doing, and what I have seen work most efficiently.
Step #1: Pitch Deck version of Business Plan
A “Pitch Deck” is the PowerPoint slide deck that covers all parts of the business. Business Plans often take 200 hours (or about 3-months) to complete. Then they quickly become obsolete and nobody will ever read them.
Pitch Decks cover the CRUX of each vital part of the business. They are in a form that will be reviewed by EVERYONE of importance: a) prospective employees, b) advisors, c) prospective investors, and d) the CEO as he/she constant reviews the direction of the company.
I found that the Alliance of Angel’s pitch deck template is the ultimate template:
This is exactly what VC investors and Angel investors will need. It also covers the CRUX of each important part of the company.
NOTE: The AoA template has great advice in the notes of each slide.
HUMOROUS SIDE NOTE: All new entrepreneurs come with strengths in some areas and little experience in other areas. For example, an engineer will often lack marketing or sales experience. I’ve seen that new entrepreneurs get frustrated with some slides, and those are pointing out their weak areas (often that they didn’t realize). Those slides are hard because they don’t have experience doing business analysis in that area. For example, a “channel” for an internet company is how they can acquire traffic at scale at the traffic costs needed to scale their business profitably.
A pitch deck should only take a few days to fill out. So instead of spending 3-months on a business plan on your first draft of your business, instead you spend that time getting feedback from industry experts. That will shape and change your business to remove the problem areas and more deeply engage in areas to make your business succeed.
Step #2: Picking Reviewers
The next step is to pick people to review your business, which are often in these categories:
a) Great CEOs who created a company and grew it to a successful exit. They will point out if your company isn’t “balanced” because the business is weak in one area. They will also give advice on how to get over the “hump” to profitability.
b) Vice Presidents in Successful companies: This is useful to get feedback in areas new to a new entrepreneur (Marketing/Sales if the founder came from engineering. Engineering if the founder came from Marketing, etc.)
c) Industry Experts: Getting feedback from industry experts is very important. They will flush out important issues that are non-intuitive.
d) Customers: This feedback will bring real world issues to the front. The data from these meetings will shape the product, sales approach, positioning, and issues that will block sales.
Entrepreneurs should challenge themselves to get access to people who are the TOP in their area. This includes getting a meeting with a VP of a fortune 1000 company, or CEO of a company with $100MM in revenue, or the top industry expert that lives across the country. It will be a challenge to do the networking, but the payoff will be worth it.
HUMOURS NOTE: Most first time founders are VERY worried about someone copying their idea. Great people won’t sign NDAs (it’s insulting to ask). I found there are 3 kinds of people: a) some people will never leave their big company job, so they can’t steal your idea, b) they are entrepreneurial but are fully engaged taking their company to success, or c) they are entrepreneurs looking for the idea for their next company. Detecting if someone is in the C category is pretty easy to identify and avoid, so this becomes a non-issue.
Step #3: Time Constraints
After getting a meeting with someone exceptional, you will be limited to a 1-hour meeting. The best approach is:
a) The founder has 10-minutes to present the ENTIRE company with the PITCH DECK. This requires a succinct pitch deck with very clear communication.
b) This leaves 50-minutes for the advisor. The advisor will then direct the 50 minutes into the biggest problems of the company. This will best benefit the company and utilize their IQ and experience.
Step #4: Email Vet of Pitch Deck
When you get someone to agree to meet, send them the pitch deck a week before the meeting. They will ask the obvious questions before hand.
Step #5: Tough Questions before Meeting
These are tough questions that I personally think should be answered in the pitch deck before meeting:
- “10x” means 10-times, as in you need to provide a 10x better product than the competition. Otherwise you won’t be able to standout in a busy market.
- The four “10x” questions are:
- What is the 10x Pain Point the customer has?
- How does your product FULLY address this 10x pain point?
- Will this kind of customer pay?
- Can you get enough of these customers to reach your revenue and market share projections?
- What is the transaction of the company?
- How much revenue comes from each transaction?
- What is the cost for the company to complete the transaction?
- How much money in Marketing or Sales does it cost to acquire and close this sale?
Marketing / Sales / Biz Dev Strategy:
- What are the strategies in these areas?
- What kind of sales team will be built up?
- What strategy is used to acquire the internet traffic? (Biz Dev, Viral, CPA/CPC/CPM, etc.)
Internet Marketing Costs & Conversion Rates:
- What are projected costs to acquire traffic to the landing page?
- What is the projected COST-PER-FREE-ACCOUNT? (This includes the marketing cost to drive the traffic to the landing page)
- What is the projected COST-PER-PAYING-CUSTOMER? (This includes the marketing cost to drive the traffic to the landing page)
Step #6: The Meeting
The meeting is all about diving into the problem areas of the company. After the 10-minute mark, the person advising is in charge of directing the meeting. This will be a very dynamic meeting moving into the hardest parts of the company. The entrepreneur should be frantically take notes. (Capture the questions to work on answer later)
Entrepreneurs should know that advisors will often hold back on feedback, not wanting to be harsh. Entrepreneurs should very actively request as much feedback as possible. It is very easy for everyone around an entrepreneur to not want to give them negative feedback.
Step #7: Communication in the Pitch Deck
Often a meeting doesn’t go as well as an entrepreneur wants. Sometimes it is because the presentation needs to communicate better, and other times it points out real problems in the business plans.
All of the feedback that goes into making a clearer presentation is just as valuable as problems in the business plan. A clear presentation is required to have success with investors. It will also shape how to position and communicate the product in the product’s marketing.
Once the presentation is made clear, the entrepreneur then needs to trust that advisors being pessimistic will indicate serious problems in the company.
Step #8: Next Steps
Entrepreneurs normally receive feedback from a wide range of people. Over time, they can pick formal Board of Advisors from the people they have met. They can find someone that fits the needs of their company and someone that they work well with.