Is Your Idea Worth Investing In?
Every year, entrepreneurs spend countless hours planning and preparing for the perfect investor pitch. They research, practice, and pick apart every piece of their idea and/or business to find success in the form of an investment to propel them to the next level. However, all of this time spent preparing and practicing can be futile if there is not a strong foundation first; namely, “Is the business built on an idea worth investing in?”
This is not always an easy question to answer with so much personal time, attention, and energy focused on developing that idea. Saying there is a little bias may be a rather large understatement. That’s where gaining further perspective allows you to assess whether it is, in fact, a “good idea” or not. And even if it is a good idea, exactly how good is it?
To decide, you have to consider not only if it is a “good idea,” but if it is a profitable one—two very different matters. Profitability depends on many internal and external factors, only one of which is how good the actual idea is in the first place. And it can only truly be evaluated by looking at it from different perspectives. Understanding these factors from various perspectives, and how they influence profitability, will give your idea a stronger leg to stand on when under the certain scrutiny you’ll face in that investor meeting.
Seven Questions and Perspectives to Evaluate Your Idea … Before the Pitch
- What do you think makes your idea unique?
Think about you as your own customer, not as an inventor and/or entrepreneur who spent months or years perfecting a product or service. Consider what specifically makes your idea unique and interesting. Why would you choose what you offer? Once you’ve identified your value proposition, use that as a baseline when considering other perspectives.
- What do others think make your idea unique?
Now that you have your baseline, start asking others the same questions—family members, friends, strangers, fellow entrepreneurs. Record their answers and analyze where they fall according to your baseline. Look for any patterns or weaknesses and think about how to address them. Take the time to consider the results of your research and how they affect your baseline.
- What is your competition doing?
Once you have a better understanding of your customer perspective, take a thorough look at your competition. What are they doing differently? What are they doing the same? Similarly, look at trends in the market and your specific industry. Where does your business fit in? What pain point does it solve that your competitors are missing? What are your differentiators?
- If you’re not already in the market, how will your competition react when you enter it?
Getting your idea to market is one thing, but keeping it there is entirely another. Consider the impact your idea could have on the market and how competitors might respond. This is an extremely valuable perspective to have when preparing for a pitch.
- What will critics say?
This is often overlooked. Why? Because it’s unpleasant! We don’t want to hear the bad feedback. It’s so much better to relish in the compliments. But this is crucial. Think about the perspective of those who have negative opinions of your idea or business. Is there any validity to them? If so, how can they be addressed? Taking in the thoughts of critics is incredibly important for ensuring you are not missing the mark. If you don’t address them, your investors will.
- Do the numbers make sense?
Numbers don’t lie. There is no gray area. Either your business can be profitable or not. If the numbers aren’t there, there is no hiding it. Consider the following:
- Are there holes in your research?
- Was there an error in the data?
- Is there any way to lower costs without affecting quality?
- Is there any way to increase distribution?
Numbers are a massive factor in any investment. Ensuring yours make sense will go a long way with investors.
- How much sentiment is attached to your idea?
Now that you’ve examined the perspectives of others, it’s time to reexamine your own perspective again, especially its weaknesses. One of the biggest mistakes someone can make when pitching an idea is getting too sentimental. Don’t get me wrong—you want to tell your story. It makes the most impact. But emotions and sentiment will never take the place of profitability. And if you are too sentimental, it may appear that you are trying to cover something up. It’s crucial that you are able to separate your sentimentality to the project from your logical stance on the viability of it as a profitable enterprise.
Barker Associates provides strategic guidance and outsourced CFO services to companies of all sizes. We can provide the higher level of strategy your company needs to grow, including helping to prepare for that ever-important pitch. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.