3 Questions to Ask Before You Start Pitching
I recently listened to a founder’s pitch to an investor that went off the rails as soon as the founder opened his mouth. The investor struggled to understand what the founder was trying to communicate. The entire meeting was painful to watch. A few hours later, the same founder pitched another investor, and the meeting went great. What was the difference? At the beginning of the second meeting, the founder sought to understand his audience by asking a few simple questions. This allowed him to deliver his pitch in the way the audience preferred. The change was small but powerful. Here are a few questions founders can ask to help understand their audience:
- Have you had a chance to review any of our materials? Founders often assume investors have reviewed their pitch deck, one-pager, product demo video, etc. But sometimes investors haven’t received the materials or haven’t had an opportunity to review them. They’re human; they miss things. Some are just busy and run out of time. Understanding what they know about your company (if anything) is important. Filling in gaps is different from starting with a blank canvas.
- Where would it be most beneficial for me to start? Some investors want to dive straight into the solution you’ve built and the business. Others want to understand the founder and their journey that led to founding a company. Beginning the conversation with what matters most to the audience greatly increases the likelihood that they’ll clearly understand what you’re trying to do.
- Would it be more helpful to stay high level or to explain the details? For technical founders who live in the weeds of their technology, this is an especially important question to ask. Some investors love the technical details, while others love the big picture. It’s important to understand this and deliver your pitch at a level that interests them. Miss the mark and the conversation could spiral downhill fast.
Understanding the audience goes a long way toward helping founders communicate effectively and gain support. The questions above will help accomplish that, but it’s by no means an exhaustive list. Plenty of other questions would also work. Regardless of what you ask, I’d limit it to two or three questions.
Big Companies as Customers: Pros and Cons
Large companies can be attractive targets in a startup’s customer acquisition plan. Partnership deals can allow small companies to benefit from the sales machine at big companies (at a cost, of course). They often have tons of salespeople and existing customer relationships that are hard to replicate. Landing a big company as a customer can be equally as helpful. They may sign a deal that brings with it revenue that’s significant for a startup. And using their logo can help you close other deals.
Today I spoke with a founder who had a large company as a customer, to the tune of millions in annual revenue. Then one day the middle managers at the larger company decided to end the relationship. Overnight the revenue evaporated. The founder was scrappy and able to make things work in the end, but the situation was stressful, to say the least.
Targeting large companies isn’t a bad strategy for startups. It has tons of upside. If things go really well, a large company can account for a material amount of revenue. Founders should be aware that if that happens, a single relationship can make or break the company.
If founders pursue big companies as customers or channel partners, they should keep a close eye on what percentage of revenue originates from a single relationship—and continue seeking other customers, of course, to mitigate risk.
To Be a Great Leader, You Need a High EQ
One of the toughest situations I had to navigate as a founder was a key team member threatening to leave my team. During a strategy session about an important topic, Bob and I saw things differently. Neither of us backed away from our position, and it turned into a heated debate. We were respectful of each other, but later that day I received an email from Bob saying he would like to leave the team because we didn’t see eye to eye. Bob was extremely smart and talented. He owned all the details of a critical part of the business. Translation: it would be hard to replace Bob, and a critical part of the business would come to a standstill if he left.
I didn’t realize the seriousness of the situation until I read Bob’s email. I immediately realized that it could spiral out of control unless I handled it correctly. I got Bob on the phone, and we listened to each other’s viewpoints (instead of pushing our own). I told him I valued him as a team member, and we agreed to sleep on things.
I felt there was more there, so over the next few days we talked it over and got to the root of his frustrations. I learned that it had nothing to do with what we were originally debating. The company was growing, and Bob’s role was becoming more demanding. He didn’t understand why he was being asked to take on many new responsibilities. This was news to me, but once I understood the problem I came up with a solution.
I realized I hadn’t articulated my vision for where the company was going, so the extra work didn’t make sense to Bob. He didn’t understand how he fit in. He just felt overworked. I started communicating my high-level vision more clearly and frequently to the entire team so that everyone would understand their importance to making the vision reality. I transitioned certain responsibilities away from Bob and hired someone to work closely with Bob and take them on. We put the plan in writing and agreed to it. Everything was back on track. Bob and the rest of the team understood the vision and were satisfied.
That situation was a great lesson. I learned that being a leader is not just about being hard-charging and executing. It’s about people, too (other people—not just you). Leaders need to have emotional intelligence and awareness to understand what your team needs (even if they can’t—or don’t—articulate it) and provide it.
Cultivate this ability in yourself. Your team will run through walls for you.
Greatness Often Requires a Push
Years ago, my company had reached an inflection point. We were trying to grow, but everything was starting to break. It felt like we were taking one step forward and two steps back. I wasn’t sure how to handle it all. One day my mentor nonchalantly told me, “You’ll figure this out and be good in a few months.” At the time I was stressed out and doubting myself, so that comment took me aback.
In our sessions together, she pushed me hard and pointed out things about me that I’d never paid attention to. She knew I had the ability to deal with the situation even when I didn’t see it in myself. She pushed me to a level I didn’t know existed and helped me make the most of my abilities. True to her prediction, I was on top of the situation in a few months.
I’m not the only one who’s excelled because of this type of relationship. Professional athletes have done so forever. They have the physical abilities, but others help them make the most of them. Coaches, trainers, and a litany of other staff members play a vital role in their preparation and success. They help push the athlete to a level they otherwise might not have reached. Name an exceptional athlete—I’m pretty sure their success owes a lot to others pushing them.
If you’re trying to do something great, consider surrounding yourself with people who believe in you and will push you. Those nudges might just be what you need to go from good to great!
Tough Decisions Are Necessary – Abandoning Your Values Isn’t
Making tough decisions is what founders and CEOs sign up for. It comes with the territory. Tough decisions are tough because they hurt people. However, there’s a distinct difference between a tough decision and a dishonorable one. I was chatting with a founder in a difficult spot who may have conflated the two.
His company is facing a challenging time and he needs to reduce his staff. That was a tough decision, but it was one that he had to make for the company to survive. I asked how he intends to handle the transition of departing employees. He said he plans to pay severance but not sales commissions earned. The team worked hard in anticipation of being paid commissions, and now they won’t receive them. The founder has the money to pay them, but he’s choosing not to.
Downsizing the team to give the company a fighting chance at long-term survival is a tough call. It sucks, but it has to be done. If it’s not, the company could die. Some won’t understand this decision now, but they will if the company starts thriving and hopefully hiring again. Not paying people what they’ve earned is different. No matter what happens in the future, everyone will remember how part of the team was treated on the way out. It shows the company has questionable values. It’s likely to lead to a variety of unintended consequences. It’s not how people should be treated and is simply the wrong decision.
Founders will find themselves in tough spots during their entrepreneurial journey. Navigating these situations will require tough decisions, but founders shouldn’t use them as an excuse to detour from personal or company values. They should still do the right thing.
Weekly Reflection: Week Fifty-Two
Today marks the end of my fifty-second week of working from home (mostly). Here are my takeaways from week fifty-two:
- Off days – Over the years, I’ve learned to embrace off days. This week I had one of those days, and I didn’t fight it. It put me behind workwise, but I was in a better place mentally the next day.
- Q1 – The quarter is almost over and it feels like it’s flying by.
- Feedback – I’ve been getting lots of feedback this week, which has been a good learning experience. I enjoy hearing others’ perspectives even if I don’t see things the same way.
Week fifty-two didn’t go as planned, but I made the most of it. Looking forward to closing out the quarter next week.
Diverse Investor Panel Takeaway
Tonight, I tuned in to a great conversation that various diverse investors on a panel were having. One of them said this about early founders: “There is funding for what you want to do, but you have to convince people that it’s worth the investment given the lack of data points.” This was a great point and I totally agree.
When a business has traction, it starts to be derisked from an investment perspective. A growing customer base and revenue are metrics that can indicate the business’s trajectory and help investors gain confidence. When the business is at an early stage, those data points just don’t exist. And in that situation, it’s the founder’s responsibility to articulate their vision in a way that investors can easily grasp and that excites them. When early founders can do that, they’re more likely to convince someone to invest!
People Are Receiving Cash – Will They Spend It at SMBs?
At CCAW, we always knew when income tax season began. Some of the parts we sold were necessary for a vehicle to operate safely, so they were must-haves. Our average order value was around $350—a considerable purchase. Lots of customers waited to buy until they had an influx of cash. Tax refunds fit that bill perfectly. The day refunds hit, we’d see a spike in sales. This usually happened in February or March and marked the beginning of our busy season.
Today I was reflecting on how much tax refunds affected our business and the small and medium-sized businesses of other founders I know. We’re currently in the midst of tax season. The deadline has been pushed back to May 17, but historically, most people anticipating a refund file well before the deadline.
And many people are about to receive cash from another source. Earlier this month, the American Rescue Plan Act of 2021was passed. This legislation provides direct stimulus payments (the proper name is economic impact payments) to individuals if they meet certain criteria. The stimulus payments are intended to lessen the economic blow of the pandemic. I hope it achieves that goal. If it does, it should result in consumer spending.
Last year individuals received stimulus checks in April, but we were early in the pandemic and there was lots of uncertainty. We’re still in the pandemic, but we have a better understanding of COVID-19 and more businesses are open. I’m curious to see how the combination of tax refunds and stimulus payments affect small and medium-sized business. Not to mention the broader economy. I’ll be watching this closely and talking to founder friends on the front lines. Should be interesting to watch this play out.
Will Road Warriors Become an Endangered Species?
It’s likely that some of the workforce will keep working remotely or hybrid going forward. I just don’t see people going back to an office Monday through Friday. One thing I’m unsure about is the future of business travel. I was a road warrior early in my career and know the lifestyle well. Fly out on Monday, fly back on Thursday (if you’re lucky).
During my years of weekly travel, I learned to accept it. But when I stopped, I told myself I never again wanted to travel that much for work. Business travelers have been home for about a year now, and I’m wondering what normal will look like for them. I’m sure they’ve adapted and learned to close deals and effectively address client concerns via video. In-person contact will still be valuable and business travel will continue, but at what frequency? Monthly or quarterly instead of weekly?
I don’t know the answer, but whatever it is, it will have broad ramifications. For example, business travelers were the most profitable customers for airlines. If they return at 50% medium term, what will that do to the industry? And to hotels and credit card companies?
I’m curious about what the new normal will be for business travel and how affected industries will adapt. It could be a huge entrepreneurial opportunity in the making.
Know Your Market
I had a good conversation with a successful founder who’s now an angel investor. We discussed his investment criteria. He wants to back founders going after huge or fast-growing markets. Even if they’re small now. In fact, even if they’re new now. No founders in permanently small or shrinking markets, no matter how terrific the founder may be.
Market size is something that’s important for founders to be aware of. Get this right and you’ll have wind in your sails. Big markets are usually easy to spot. Quantifying how big can be a challenge, but knowing a market is big isn’t usually too hard. Fast-growing markets are similar: easy to spot, harder to quantify. Recognizing new markets can be trickier. I don’t have a great rule of thumb and plan to do more research on this, but I think that starting with understanding the problem makes sense. How pervasive is the problem? How painful is it? If tons of untapped customers are experiencing a high level of pain and will readily pay for a solution, you may have found a great new market.
It’s important for founders to understand what type of market they’re going after. Pick the right market and you can ride a tidal wave to success!