Business Plan / Go-to-Market Slide
Now that you’ve set out the problem, solution, and market size, it’s time to wrap up the introductory third of your pitch by connecting the dots between your wonderful product and the millions of people who need it.
Let me start with a story. My first startup experience, during the dotcom bubble days, was a device to connect to the internet using satellite. When we started building the product, I didn’t realize quite how small the satellite market was. Long term, that placed a limit on the size of the opportunity, but in the short term it was wonderful because the market was extremely tight-knit. With a small amount of advertising, a booth at one trade the entire industry attended, and individual outreach to a few satellite operators, within a year our product was known to everyone who needed it.
My next startup adapted the same technology for a different use – simulating networks. Instead of the satellite industry, the product was targeted at the far larger enterprise IT market. With a related product for a related industry, I expected to be able to use a similar go-to-market strategy; i.e. a little advertising, a couple trade shows, a bit of individual outreach. It failed miserably. The first year saw almost no sales. We almost gave up.
The enterprise IT industry is huge, but with size comes diffusivity. There’s no trade show that all network engineers attend, no news site where they all keep abreast of changing technology. They’re constantly inundated with pitches for new products. I eventually realized my target users—the IT departments of large enterprises—buy their equipment from large resellers like CDW, SHI, and Dell.
So we put together a partner program and reached out to the big resellers to show how they could become industry thought leaders with our great new product. They asked about our revenues and customer list, then told us to check back after we got to $100 million. That was a dead end. But if the big resellers weren’t interested, the smaller ones should be. With tens of thousands of small IT resellers, there was no shortage of opportunity, but it wasn’t practical to approach them individually. Most of them order through the big distributor, Ingram Micro. It took months of meetings and contract wrangling, but we were eventually onboarded as an Ingram Micro vendor with our products listed in their catalog for any reseller to order. Hurray! After much rejoicing, we waited for the POs to roll in. And waited. And waited. It was very depressing.
Meanwhile, we’d given away or loaned a few of our simulators to labs and bloggers who used them to test other products and published their reports online. A few people started to notice. We added a low cost version of our simulator that managers could order without going through the byzantine procurement process, and a portable version other vendors could use for customer demos. We offered a try/buy program where people could play with a unit before ordering. And sales trickled in. Big companies purchased through their usual resellers, who knew nothing about our product except a part number, but a few realized that if one client was asking for our product, perhaps other clients would be interested, too. Even CDW, Dell, Insight and SHI added our products to their catalog when customers demanded it by name. I’ll leave the discussion of the horrors of channel conflict for another day.
So we started growing, slowly at first, then faster and faster. Still, despite ten years of advertising, trade shows, paid placements, free samples, keyword marketing, digital marketing, SEO, and hiring salespeople with golden rolodexes to do individual outreach, to my eternal consternation, not even 10% of the people who need the product have ever heard of it. Diffuse markets are tough. Of course, that meant a big player in the industry could acquire our business and take advantage of their name recognition and distribution network to multiply sales in days.
My experience is far from unusual. In fact, I’ve seen it repeated over and over. The main lessons for me are:
- Go-to-market strategy: it depends on the dynamics of the market, not the product. Even the same technology running on the same hardware sold at the same price required a completely different strategy when selling to network engineers instead of satellite engineers.
- Corollary: selling your product to multiple markets is more complicated than it seems. You’ll need a different strategy, different distribution method, different sales people, and a somewhat different product for each. Depending on how different the markets are, you’re almost starting from scratch.
- Distributors and resellers: they may be quick to put you in their catalogue or sign you up as a partner, even do a webinar or two together, but in the end, it’s up to you to build demand from the customers. When you get to $100 million, they can augment your sales team to reach their large base of customers, but until then, role is make it easy for big customer your products.
- Evolving strategy: During the initial phase, direct sales were required. As we grew, distribution one-tier and two-tier distribution became more feasible.
- Sales vs marketing: Are you doing outreach to individual potential users, or trying to get your message out widely to large numbers of people? And how will that change over time as you scale?
Pitching the Business Plan
Not everyone agrees, but I think the business model/go-to-market strategy slide belongs in the first third of the pitch where you outline the business. You’ve explained there’s a problem and you have a great solution, and you’ve just shown there’s millions of people who need it. Now you need to connect the two. Just because you have a great product with a large market doesn’t mean you have a good business unless there is an efficient way to reach all those potential customers.
There’s a lot of questions to be answered here that depend on your particular market. So there’s really no template for this slide. Remember, investors typically know nothing about your market and you only have ten minutes, so keep it high level (unless you’re pitching to people familiar with your industry.) You have one question to answer: how will customers find out about your product?
Often, the answer will open another set of questions. For example, if you’re selling a consumer product in stores, what is the sales price and margin? If you’re selling online, what is the customer acquisition cost? For a B2B SaaS product, what is the yearly fee and what makes it sticky? So you’ll need a few bullets to outline the overall plan. Make sure to mention how you expect it to change over time.
The business model slide is frequently overlooked by entrepreneurs. But it’s critical to explain how you intend to reach your customers and this will give us a sense of how easy or difficult your business will be to build.
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