Monday, February 4, 2019

5 Unique Elements Make A Winning Selling Proposition

If you are looking for funding and customers for your new business, you need to identify your “unique selling proposition” (USP) right up front, in 30 seconds or less, to differentiate yourself in today’s information overload. That may sound obvious, but as a new venture investor, I rarely see it happening. Investor and customer attention spans are short, and both will write you off quickly.

A winning USP example is the FedEx lead “When it absolutely, positively has to be there overnight.” This statement leaves no confusion in the minds of investors, or customers, of what the company does and how it is different (and better) than the competition. Now we are ready to listen longer to hear all the details and decide if the potential sounds real and doable to anyone.

Of course, now that you have investor attention, the devil is in the details. Every investor and banker I know looks for a few more key elements in the plan and pitch that will ultimately make or break the deal, including the following:

  1. The target customer segment definition and size. Will you be selling to businesses or consumers, or both? Investors realize that the resources and risk required to hit both markets concurrently are great, so they will likely look for focus, or a staged approach. Of course, we all prefer billion dollar opportunities, with double-digit growth rates.

    A niche market sizing or a shrinking opportunity may make a good family business, but is likely not of interest to investors. Even large opportunities may already be highly saturated (more than 10 existing players), making another “me too” player not exciting.

  2. Problem or need uniquely addressed by your solution. Great products solve painful real problems, and are not just “nice to have” or “easier to use.” Ideally the solution embodies intellectual property that you own, giving you a sustainable competitive advantage. You need evidence or a prototype to prove feasibility with credibility.

    For example, everyone would agree that a cure for cancer is a worthy solution, if you can show evidence that it works, and can be replicated and sold for a rational cost and price in the market today. A new easier to use social network may not get anyone excited.

  3. Educated customers ready and able to pay for the solution. Truly disruptive technology solutions are suspect, since many fear change and are not motivated to move away from current approaches. Investors know that extra time and money are required to educate the market to whole new things, like the move from horses to automobiles.

    Witness the difficulty even today to find success with alternative transportation platforms, including Segway, electric bicycles, automobiles that fly, and even electric cars. Another investment barrier is good social solutions which appeal only to people with little money.

  4. The net value of this solution from the customer’s perspective. Value is perceived only in the eyes of the customer. If you see the solution as very valuable, but the target customer doesn’t, there is no foundation for investing. Also, the benefit of the solution must be offset against the cost of all other options available to the customer.

    Even if your USP is a cost reduction (10 percent) for an existing commodity, success is not assured. In my experience, existing customer habits and loyalty will minimize customer movement to a new offering which offers a net savings of 20 percent or less.

  5. The qualifications of you and your team to build a business. Building a product is not the same as building a business. Investors look for new venture founders who have strong business skills or experience within their team, as well as expertise in the product or business domain. I recommend a co-founder or team to complement your strengths.

    For example, I had the pleasure of working with Bill Gates and Steve Ballmer, when Microsoft was just a startup. These two were perfect co-founders, with Bill having the technical expertise, and Steve bringing business experience from Procter and Gamble.

In reality, these five elements constitute your unique selling proposition to investors, after they hear and believe your USP for customers. Even if you don’t need external investors, and intend to bootstrap the new venture yourself, you may use the points here to assess your own investment. Life is too short to endure the pain of starting any business with the odds stacked against you.

Marty Zwilling

*** First published on on 01-22-2019 ***



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