This is the 3rd slide in the business plan presentation. While the last slide described an attractive market opportunity, this one presents a problem: For some reason, the needs of a specific group of customers are not being met today. Not only that, but those needs are important to the group of customers, and the absence of a product or service to meet them causes them “pain” – impacting their money, health, or happiness.
Once again, you are looking for head nods from your audience. It’s critical for them to believe your target customers have a real demand. Soon you will unveil your product or service, and you can’t have your audience thinking “yeah, customers might find that nice to have, but not essential”. That’s a deal-breaker. It’s also critical for your audience to believe the demand is not being satisfied today.
Because this is so important, you may have to devote a fair amount of time to building a bullet-proof argument. There are a few tools that can help:
- A credible authority stating that there’s a gap in the market. That could be an industry leader, a research analyst, or a journalist.
- Market research conducted by a reputable firm, like NPD Group, IDC, Forrester, or Gartner Group.
If you can’t get either of the above, you may need to conduct your own research. One way to do this is to conduct a survey with a company like Zoomerang. You can craft a survey (get help if you don’t know what you are doing), pick a target market, and pay Zoomerang to get you a minimum number of completed surveys from your target. It can cost upwards of $1,200, but within a day or two you can get results that help you make a strong case for what customers really want.
Warning: I’ve seen a lot of entrepreneurs flame out on this slide. That’s because they’re so close to the material, they think the answers are clear to others. But that’s not always the case. They get rejected, and think “that investor just didn’t get it”. The truth is, the entrepreneur didn’t “get it”, and by “it” I mean a check. To avoid this, put yourself in the shoes of your audience, and expect them to be skeptical. Get outside feedback from people similar to those you’ll be pitching, and remember that the hurdles are always higher when you are asking for investment capital than when you ask for feedback.