What you need to know:
- An entrepreneur should paint a picture of where they want to go. It is against that backdrop that people can willingly invest in your business.
Many entrepreneurs have not learned the dynamics of pitching; failing to understand how to sell their business.
However, if one cannot tell their business story, it becomes difficult for another to gain interest.
Richard Zulu, the team leader at OutBox Hub, says how an entrepreneur demonstrates their understanding of the business is important because that is what a pitch is about.
When pitching, certain aspects must be well pronounced such as where you are going, your vision and to clearly spell how you will get there.
“A pitch is about selling and influencing others to buy into what you are doing. Therefore, it is very important that the entrepreneur has a good understanding of the business and ably communicates that,” he says.
Nuances of a good pitch
The problem or opportunity you are addressing: people want to find out if it is big enough; is it affecting as many people? Who cares about it? Is it frequent? It should be an opportunity or problem that is frequent and many are trying to get around it yet the alternatives are not as good as needed.
The investor needs to see the value they will get by investing in your business. For some, this value is in terms of solving a problem that is affecting their business. For instance, if an investor is looking for ways to get maize from out growers, an entrepreneur pitching about organising out-growers to provide maize speaks to the investor. They will be adding value to the business and solving the investor’s problem.
“When pitching, most people are only looking at getting money but no one cares about you getting money. Your pitch must speak to someone’s need either by adding value or creating an impact. Either way, you need to be clear about the value you are bringing on the table,” Gudula Naiga, the owner of Gudie Investment Expert Leisure farm says.
Other investors are looking to buy shares in your business to become your partner. Therefore, they want to know how you will manage the available resources.
How are you different from what everybody else is doing and why is it that your solution will be the best in addressing the need?
Investors are also looking for evidence that you have tried to address the problem or need and that it is actually needed.
“That is traction and here it is largely around showing the product or service you have built, where you have deployed it and the lessons garnered. However, it is critical that you ensure that the evidence is good enough for one to invest in you,” Zulu says.
Someone should be able to paint a picture of where they want to go. It is against that backdrop that people can willingly invest in your vision.
“In traditional financing, it is called a business plan but when pitching, it is more of your growth plan; this is where I am, this is where I want to go and this is what I need to get there,” Zulu says.
That largely points to your revenue model; how are you going to sustain the product? Do you have a good understanding of your costs, margins, and what it would take to make the sales?
“Your revenue model must be sound and feasible in terms of where it is going. Sometimes, depending on your business level, the data to make projections on how to make money may be insufficient. In such cases, you need to demonstrate an understanding of unit economics. That encompasses the unit production cost, the unit selling price and how much you make on each product or service,” he says.
However, many fail to say how their business will make money. For instance, if you deal in honey, why are you selling 10g of honey at Shs3,000, what margin are you making, and who are you selling it to? In essence, Zulu says many do not understand who their actual customer is thus cannot do the pricing right. As such, there is a mismatch between the product and the target market.
An entrepreneur must give a clear picture of how they are going to address this issue at hand which means summarising their business model canvass.
“If you are to attract investment, you should be aware of your customer, how you will reach and serve them, and what value that customer requires from you so as to give you a revenue. You should also know how to keep and grow that customer and the activities, and resources you need to make that happen.
Summarily, you must also have a clear idea of your budget and when you hope to break even,” Naiga says.
Know your customer
While you plan to say, make bags for females, you need to know which woman will buy them because the needs of a teenager vary from those of a mother and a school girl. The customer niche is very crucial.
Market and market share: The understanding of these is crucial when pitching. For example, if you are planning to do something for women in Kampala, you must know their population then understand which portion you will supply, say, 100,000 women but start with 10,000 in your first year. “Knowing your road map is important,” Naiga says.
If you want to make bags, does your team understand, say leather? Do you have someone who understands money, and knows how to make bags? The team’s experience is very important.
“Is there a relationship between the team and what you intend to do, are they subject matter experts, do they have the technical expertise or they advised by people to meet the need thus take this business forward,” Zulu says.
The panel may want to see your management structure to know if you have a board because while one may not be sufficient on their own, they may have a group people backing them that are extremely knowledgeable thus able to guide you to avoid mistakes because they have a name to protect.
If you are already an existing company, Naiga says investors are interested in knowing your compliance. Are you a person of integrity which is now measured by how fast you can get a tax clearance? Are you saving with NSSF?
Some may ask the certificate of good conduct which many did not care about yet it helps investors know that you will not ruin their name.
Zulu says a pitch day is not just about pitching but the relationship the entrepreneur cultivates with the panel because it takes time for people to understand what you are doing and buy into your vision.
“You have to compliment all your qualities by spending time with the people you want to invest in your business. It is more like a dating period. By the time you make the pitch, they have some ideas and provide the necessary feedback and report,” he says.