We investors see this all the time. An entrepreneur pitches using a deck with no slide for competition. When asked (as we always do,) the response is “This is new. We have no competition.”
Niet! No! Unh unh.
Professional investors laugh when they hear an entrepreneur come out with that one. That
statement has killed more investment deals than almost any other. It is a failed litmus test for the entrepreneur, even if the plan is for a totally new device or service that could take the world by storm. Well, come to think of it, this is especially true in such an instance.
Dis you really do your research?
The statement shows a lack of research or previous thinking that is a red flag for us investors. Whether you have not been able to find companies doing “something like” the plan, or you has not considered the most obvious killer of new ideas – doing nothing, it is a faux pas that should never be allowed to happen.
Your potential customers could choose “do nothing.”
[Email readers, continue here…] Doing nothing is the main competitor for most products and services, whether a compelling new idea or a seasoned product long proven to be effective. Remember that the buyer must commit resources, money and time, toward the purchase of your product, and even if the product repays its investment in a few months, there may be issues you know nothing about that make no decision the right decision for this and perhaps many buyers.
External factors to consider
Consider the state of the economy. Perhaps buyers cannot obtain attractive financing in the current market. Maybe there is advance knowledge of new technologies around the corner that makes any decision today a risky one. It could be that a larger competitor has met with its customers, promising to extend its product line into this very niche. There are thousands of variants of the theme, where no decision is the right decision.
Do your homework!
So, do your homework especially well by putting yourself into the minds of your potential customers. Widen your search to include companies with products peripheral to yours, where extension of their product would seem logical, especially if you plan to be successful early in making sales into their market.
If you are raising funds, list “do nothing” as a viable competitor in your slide deck. If you are training your sales staff, work especially hard on responding to emotional and factual counters to a final close of a sale. Practice overcoming the potential objection long before standing in front of investors, customers or even your board.
After all, fooling yourself should never be an option.
Great article! As someone who competes against the status quo far more often than tangible competitors, this rings particularly true to me.
When my team started our company we had anticipated the need to articulate how we’d “built a better mousetrap.” What we didn’t realize initially, however, was that we’d spend far more time explaining why they needed one in the first place.