In this third and concluding segment on ‘Creating effective pitch decks’, we shall dwell on the business plan, the team, the capital asked for, and the deployment plans for the investment.
The business plan is a very important part of a pitch deck. An early-stage business plan is a forecast of how the business may scale up in future. It should cover all elements of the business, such as product, marketing, sales, distribution, margins, item-wise costs, people, and so on.
I was once asked which was the best fiction I have read and I recall saying it was an early-stage startup’s business plan. This may sound funny but, the fact is, it’s almost impossible to predict how the various moving parts of the startup will change over time, and most forecasts go awry.
The first business plans of giants like Google, Amazon, Facebook, and Uber make for fascinating reading, because what the storied founders estimated and what unfolded in reality are so different.
A good business plan includes the profit-and-loss statement, balance sheet and, most importantly, the cash-flow statement. The cash-flow statement will indicate how much capital is required for the business before breakeven. Many startup plans do not indicate breakeven because it is not a goal, but that is an entirely different matter.
In my book Failing to Succeed, I wrote about a 2x2x2 formula I recommend to early-stage founders. Simply put, double the costs, halve the revenues, and halve the margins after the business plan is ready. This will bring out the worst-case scenario on capital requirements, because markets may change, customer behaviour is unpredictable, the product may fail, competition may do something else, and the best laid plans will go out the window.
After the business plan, ask for an amount from the investors (say, ₹50 lakh) with a clear plan on how it will be deployed.
For a chain of tea cafes, for instance, this could be the number of new cafes to be opened, the spend on marketing, people, technology, operations, and so on. It is always a good idea to plan 10-15 per cent for miscellaneous and unknown expenses.
Finally, the most important thing investors look for: Does the management team have the background and experience to execute? The harsh reality is that anyone can build a solid startup on powerpoint. Rolling up the sleeves to execute on the ground differentiates the doers from the dreamers. This is the most critical parameter on which investors take a call for early-stage investments. It is rare to find a successful startup that started with a weak team.
(The writer is a serial entrepreneur and best-selling author of the book ‘Failing to Succeed’; posts on X @vaitheek)