Business clarity Archives

May

What business are you really in?

Veravizion No Comments

Business clarity, Business Competitiveness, Business Success

How do you define your business? Can you tell what business are you really in?

Seriously, do take a moment and complete the following sentence.

I am in the business of ___________________________________.

Why is it important to know what business we are in?

Because it helps us decide exactly what to sell, whom to sell to, and how to sell. Without this clarity, businesses struggle to continue to survive.

Most of us define it based on:

What we do: we print books and brochures; we are in the printing business.
What we own: we own factories and workshops; we are in the manufacturing business.
What products we sell: we sell toys; we are in the toys business.

However, this seller-centric approach is not optimal. What if customers stop using what we do, or stop making stuff with what we own, or stop buying products we sell. We will soon be history.

Then how should we think about what business we are in?

Let us understand with an example.

What business is Amazon.com in?

Amazon.com does packaging and delivery of stuff. Of course, they are a logistics and supply chain company. But they do not earn revenues from trucking and shipping.

Amazon.com owns large fulfilment centres and warehouses to store stuff. Clearly, they are a storage and warehouse company. But they do not profit from rentals and leases.

Amazon.com sells around twelve million products. Sure, that makes them a retail company. Except, they do not make money off the products they sell.

Rather, they make money by earning commissions through sellers. That means they are in asset-light brokerage business, right? But then, they own tons of assets, both physical and digital?!

So, what business is Amazon.com really in?

Amazon.com defines themselves as a customer-centric technology company. They use technology to connect retail buyers and sellers on a unified platform. They use data analytics to understand more about their customers – both buyers and sellers. Amazon leverages these insights so that sellers get more buyers, and buyers get a wider range of selection for cheaper from multiple sellers.

How could Amazon.com have clarity about what business they are in when they do so many things?

Because they do not define their business by what they do, or what they own, or what products they sell.

Amazon defines their business based on what purpose they serve for their customers.

That is the key.

We must define our business by what purpose we serve for our customers.

It keeps us aligned with the customer needs all the time. Moreover, it allows us to pivot with changing customer needs and preferences. Most importantly, it helps us build sustainable competitive advantage and ensures business continuity.

A product does not define a business, the purpose it serves for its customers does.

If products defined businesses, then Sony Walkman cassette player, Ambassador car, Toys “R” Us, Apple Newton, Pontiac, Polaroid camera, Nintendo, Palm Pilot, and many such products would still be around.

Yet, several companies have failed for not developing this clarity.

Kodak helped people create lifetime memories. However, Kodak thought they were just selling photographic films. So, when an engineer (ironically from Kodak) invented a filmless digital camera to achieve the same purpose in a better way, Kodak ignored. Not thinking about what business they were really in, they focused on their product – films. They completely missed the purpose they served.

Blockbuster enabled people to enjoy movies at home. But they thought that they were in the business of video rentals. At the time, Netflix also rented out videos by mail. Yet, Netflix figured out that they were really in the entertainment business. This clarity helped them pivot from the mail-based video rentals to DVD rentals to subscription video on-demand (SVoD).

The clarity is essential

To reiterate, we must define our business by what purpose we serve for whom.

Once we build this clarity, it is easier to articulate it to our customers thereby attracting the right customers and propelling our sales forward.

If you are yet to start your business, then why not do so by answering this question: what purpose of which customer do you want to serve?

<– Startup Pitch: Are You Ready for the Shark Tank?

How can we make difficult decisions? –>

Cover Photo courtesy: Mark Fletcher Brown on Unsplash.com

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May

Startup Pitch: Are You Ready for the Shark Tank?

Veravizion No Comments

Business clarity, Business Success, Entrepreneurship, Funding, Investor Pitch, Startups

This article on startup pitch in the Shark Tank India by the author first appeared in the 6th March 2022 edition of the English daily ‘The Hitavada’, in the business insights section of the Newscape supplement.

If you are an entrepreneur, how do you present your pitch to the investors to actually get funded?

Easy-peasy.

Wear your cool company t-shirt, open your presentation with a little stunt involving your product, and use a lot of MBA jargon (in short-forms) to impress the investors.

Right?

Well, not sure if ‘The Sharks’ agree.

Shark Tank India

The show “Shark Tank India” took the nation by storm and managed to catch everyone’s attention. The show brought forth some incredible innovations, fantastic business ideas, and passionate entrepreneurs on screen, leaving audiences inspired and spellbound. The timing of the show couldn’t have been more perfect. Amidst India’s booming startup culture, the show offered an ideal platform for top pitches to make an appearance.

This is especially significant since it is very difficult to get an opportunity to actually present your pitch in-person to serious investors. Yet, it was bizarre to watch so many of them not make the most of this golden opportunity.

Specifically, one could observe two points in the startup pitch:

Firstly, many startups, despite having a terrific idea and a go-getter attitude, had to return empty-handed.

Secondly, while it was exciting to note that more than half of the startups secured some funding, a little analysis of such ventures revealed that many did so at markedly reduced valuations. Consider these insights:

the original valuations by the Founders were brought down in a staggering 95% of the startups.
the valuations of the startups that were funded, were lowered by an average 63%.
only three ventures could justify their valuations. But then, two of them were valued at just Rs. 5.00 and Rs. 101.00 (not missing any zeroes there). Ha!

If you are tempted to blame the sharks then please consider this. The sharks are doing their job alright. (They are called sharks for a reason – they are small, aggressive, and move quickly.)

So, why couldn’t the startups do better in the Shark Tank?

Apparently, the startups are not following a few basic principles of presenting investment proposals.

Here I suggest three actions to prepare a better pitch:

Build deep clarity about your venture.
Develop understanding about investor expectations.
Be comfortable with numbers.

Let me elaborate.

1. Build deep clarity about the business venture.

This sounds elementary yet it is most important. Founders must develop complete clarity on four aspects of their business: the market (or customers), the product (or service), the execution, and the team’s capabilities.

This clarity helps answer questions like:

What gap is the business trying to fill and for which customers?
What does the business offer on a pain-pleasure continuum? The business must either solve a painful problem faced by real people or offer a unique pleasure experience.
Does the business have capabilities to solve it exceptionally well?
How does your business make money?

When you have clarity of thought on the above, you are able to answer all the questions during startup pitch – whether asked directly or disguised in business jargon like B2B/B2C, burn rate, CAC, churn, gross margin model, MVP (Minimum Viable Product), PMF (Product Market Fit), revenue model, runway, traction, valuation, value prop, working capital model, and so many others.

Let me explain one here.

Take Product-Market Fit.

Many startups struggle with achieving the product-market fit because of lack of clarity about target customers and right product positioning. PMF is the evidence that your product perfectly addresses a genuine gap felt by many customers. Be it a consumable or a technology product, the question it answers is: is your product relevant to its customer base?

For example, a popular international doughnut brand could not sell doughnut as a breakfast item in India. Why? Because doughnuts were relished only on special occasions but not as a breakfast option. We Indians are too loyal to our pohas, parathas, and palappam.

Here is the key insight:

If YOU don’t have complete clarity about YOUR own venture, you will never be able to communicate it clearly to those who matter.

2. Develop understanding about investor expectations

Most investors look for evidence of ROI in your business venture through these three questions:

Is it profitable?
Will you be able to scale it or pivot it, as required?
What returns will they get and by when?

Accordingly, the sharks were asking questions intending to seek answers to the above questions.

Hence, it is important to develop this understanding before the startup pitch. It will help you focus your time and efforts on the right sharks that can offer not just money but also their expertise.

The last point is especially important. Many investors are impassionate to the venture; they are there primarily for the financial returns within their expected investment horizon (because they may be investing other people’s money too).

Therefore, be extremely genuine, upfront, and realistic with the investors. Acknowledge that they may understand ‘doing business’ better than you do.

3. Be comfortable with numbers.

When you share information about your venture, why should the sharks believe you? More precisely, what will make them believe you?

The answer is ‘Show and Tell’.

Always supplement your statement with numbers and reliable data. To do that, you must be comfortable using numbers in your communication.

For example,

rather than saying, ‘we are showing phenomenal growth and high profits’,

Say, ‘we are growing 250% Qtr-on-Qtr’ or

Say ‘we sold 42K pieces for Rs. 72Lakhs in 3 months with a gross margin of 68%’.

On the show, the sharks appeared more receptive and responsive to the entrepreneurs explaining their venture with credible numbers.

When you do so, the investors will make the right deductions, and BELIEVE IN YOU.

As they say, nothing speaks like results.

Taking these actions will not only improve the odds to secure funding, but also help entrepreneurs to justify their valuations. You don’t need only banana chips* to do that.

Easier said than done?

Well, maybe! But it is not that difficult either.

Why not prepare your next pitch along these lines and see the difference yourself?

Right ‘O then! Time to put on your black turtleneck?! ?

This article on startup pitch in the Shark Tank India by the author first appeared in the 6th March 2022 edition of the English daily ‘The Hitavada’, in the business insights section of the Newscape supplement.

* in reference to the ONLY venture on the show that could justify its valuation and got funded at that valuation.

References: https://en.wikipedia.org/wiki/Shark_Tank_India

Cover Photo courtesy: SET India

The image used is subject to copyright. Shark Tank India is a popular reality show by Sony Entertainment Network (SET). The article is not an advertisement of the show or its new Season 2 but an independent article by the author.

<– Customer-centric Sales is the New Competitive Advantage

What business are you really in? –>