No product or service will ever live in a state that’s free from competition. Whether it’s direct or indirect competition, whether it’s competition for your wallet or competition for your attention, all of your products and services will compete.
This brings us to the fourth tip that you must keep top of mind when pitching your business to an investor – consider who your current competitors are, and who your future competitors might be. No matter how differentiated you think your product or service might be, and no matter how patented or protected it is, there is always going to be competition in the market.
Too often, I have witnessed entrepreneurs proudly making the following bold statement when investors ask them about competition – “We don’t have any real competitors!” When you as an entrepreneur give an investor that answer in your pitch, you will see them react in one of two ways:
- They’ll “switch off” from what you are saying and start looking down at their watch.
- They’ll look angry and perceive you as being ill-prepared and ignorant.
When discussing who your competitors are during your pitch, use a “competitor map” to visually show your relativity to each of your competitors in the market. On the competitor map, depict price on the x-axis and the level of benefits on the y-axis, then chart your company’s position in relation to your competitors’ based on your product’s price and benefits in comparison with theirs. You could also use a competitive map to chart your product’s price versus the level of quality in comparison with your competitors.
A mistake that many young entrepreneurs make when constructing their pitch is not considering their indirect competition. For example, if you own a telecom company that sells airtime, a company selling lotto tickets would be your indirect competitor. They don’t sell the same product as you, but in a context where your customers have low disposable incomes, they will generally make buying choices that are not directly related to your airtime or your competitors’ airtime, but rather between purchasing airtime or a lotto ticket from your indirect competitor. Their decisions are based on the value they want from the product they are purchasing.
I’ve found that entrepreneurs who do a thorough competitive analysis before meeting with investors, very often realise that their product has little to no competitive edge, and they then need to go back to the drawing board to redesign their product or services, so that they have clear and formidable competitive advantages.
Take the time today to list your direct and indirect competitors and make sure you include that information in your next pitch in a well-presented competitor map or two. The investors will take you more seriously if you prove that you have done thoughtful and thorough research on your competition.