Poke Holes In The Pitch - Here's What To Say When Someone Approaches You With A Fantastic Business Proposal

If there's one thing founders are good at, it's pitching.

They have to be good at it by definition, otherwise you'd never know who they are. They are usually some of the most passionate people you will ever meet; brimming with confidence, charm, an appetite for risk and a distinct lack of fear. They are constantly dreaming about how to change the world, and many of them eventually do.

When a founder is speaking about their product or service, you'll invariably hear the same words over and over again:

• "Growth"

Founders are ultimately interested in one thing, and one thing only: expanding.

They'll regale you with tales of how they've been growing at breakneck speed (or how they will "definitely" do so in the near future). You'll hear about all the countries or territories they want to expand into, "soon". They'll talk about all the cool new features or services they'll be adding to their product or service "once we get off the ground".

And if they've lived abroad or read one-too-many articles from TechCrunch or Forbes, they'll probably also throw in terms like "growth-hacking" or "10x".

Don't be too impressed.

• "Profits"

Founders never believe that their product or service can fail financially. As far as they're concerned, it's always a guaranteed golden goose - which just needs your magic touch (skills, money or network) to start laying eggs.

"Profits will double in just 6 months", they'll say to you over a glass of wine in that fancy restaurant they've just invited you to. "There's no way but up with this venture: the best time to get in on the action is right now". But it is imperative that you ignore or dismiss any such claims, and do your homework on the market demand.

As my mother used to say, "shine your eyes", and don't let yourself be fooled by greed.

• "Disrupt"

This is the big one. All founders believe that their app, product or service is so revolutionary, so groundbreaking, that the competition will never see them coming. It will upend the entire industry, or so they confidently claim. It's the newest, cleverest, most innovative player on the market.

Never mind that every current market player before them thought the same thing, and that every competitor who comes after will also think they're reinventing the wheel.

Go into each pitch meeting with an open mind, but carry a healthy dose of skepticism with you.

HOW TO COUNTER-PITCH:

By the time you've reached your third glass of wine, they're hoping you'll be primed and ready to pull out your chequebook. A lot of uninformed investors are already seduced at this point by the sales pitch which, mind you, has been rehearsed, polished and sparkled up very well, by definition.

Or as my friend Brendan likes to say, it's been "waxed".

But after you've downed those last few drops from your glass, exploit the liquid courage to now ask some hard-hitting questions. Best case scenario, they're expecting it (and even welcome your inquisition). Worst case scenario, you're about to poke major holes in their pitch - but this is actually a plus, because it might just prompt them to go back to the drawing board and come back with a better concept.

To help you out, here are just a few questions you need to ask your next prospective business partner:

• Ask about the person

Forget about the product, app or service for a second, and focus on the person pitching you those sweet dreams.

Who are they, really? What's their background? What did they study, and where? Where have they worked before, and why did they leave? Why did they decide to launch this new product or service? What was their core motivation - are they trying to actually solve a problem, or are they looking for a quick buck?

Who have they worked with before - can you get some references? Can those references buy you a drink sometime soon? Why is the waitress taking so long with the bill?

• Ask about the team

Every company in the world is built by, run on and held together by its team.

A bad team will tank even the most foolproof of inventions, while a rock-solid team will weather even the harshest of recessions and bankruptcies. So don't be afraid of asking some tough questions about who you will be working with, or working for. Think of it as "asking about the person", but plural.

Sometimes, a CEO has an excellent grasp of his product, but a terrible grasp of human judgement. It is entirely possible for a competent person to surround him- or herself with people who are incompetent; just take yourself back to those days of doing the classroom group assignment alone.

• Ask about the technicalities

Dig deep with this one. First and foremost, ask to see the product - live. Play with it, engage with it, experience it for yourself. Never put your skills, your money, your time, your effort or your network behind a product or service that you haven't experienced yourself firsthand.

Ask about the nitty-gritty details: the app's font, for example, or the product texture, or the service's name. Criticise constructively, offer suggestions where necessary and ask for the motivations behind design decisions. As the ground-level co-founder or investor, make sure you are 100% happy with the product, app or service before putting your total weight behind it.

• Ask about the competition

Surprisingly, a lot of founders are very blind to who their real competition is. Any founder who tells you they have no competitors is lying to themselves and to you - because there's always a threat looming on the horizon.

A lack of knowledge of the competitor landscape signals either wilful ignorance or insufficient market research. A founder should know more about his competitors than his competitors themselves.

• Ask about the finances

This is the elephant in the room. A founder who shies away from this topic, or in any way appears vague or noncommitant, is displaying a clear red flag that you should heed.

Remember: a founder always wants to grow their business, and a large part of this exercise involves convincing people to give the business money - both customers and investors. As such, this topic needs to be discussed as frankly, honestly and knowledgeably as they possibly can.

Don't be afraid to fire away some uncomfortable questions. How much has been set aside to fund the company's operations? Who are the other investors in the venture? How much is the founder themself putting up? Where do they expect to get more money from? Who do they have running their books, and what's their history with financial management? What are their financial projections, and are those projections realistic based on the market and the company's offering?

• Ask about the logistics

It's all well and good to have an 'A' (app, product, service, etc.) and a 'B' (the target market), but getting 'A' to 'B' itself is an exercise in efficient planning.

Where will the company operate from? Who are the current suppliers, and what are the payment terms with them? How will delivery of the service work, and what payment methods will be used? How will industrial waste be disposed of, for example, or who does the founder know at certain municipal departments that can facilitate that 'A' to 'B' process?

A strong tenet of successful business operations is planning, and a founder who is terrible at planning ahead is not a founder you want at the helm of a company.

• Ask about the marketing

This is another very important aspect of getting a product ('A') to its intended customers ('B'). The founder should know who they're targeting, how they're going to target them, why they're targeting that specific segment, and the most efficient channels that will be used to successfully convince 'B' to part with money for 'A'. You don't sell Ferraris at a high school science fair.

• Ask about the expansion plans

While a startup should have everything planned for the big launch date, it should always be looking beyond that point. So ask about the growth and expansion plans - which countries/segments it will go into next, how it will achieve that, and why it should consider those specific territories or market segments.

Different locales have different contextual realities that need to be taken into account in terms of political, economical, and cultural landscapes.

A church franchise would make like gangbusters in Nigeria, for example; but cross the border into Niger and you'll likely be staring at red balance sheets for months on end. Even within Nigeria itself, a move from the southern regions to the northern regions would have significant impacts on certain operational aspects of such a franchise.

• Ask about the timeline

In addition to being really good at pitching, a lot of founders are also pretty good at downplaying the amount of time it will take to accomplish certain tasks. This is born out of an increased sense of optimism that the people around them don't generally share, but it can run the company into operational and logistical problems down the line if left unchecked.

When it comes to planning, it's always best to err on the side of "longer than necessary". Don't be afraid to ask your budding founder buddy how long it will take to get certain operational aspects from 'A' to 'B', how long it will really take to launch, and how long it will take to eventually expand the team. Run far from any founder who gives you vague answers or tries to divert from timeline specifics.

And lastly, take any actual timeline estimates they give you with a grain of salt; better yet, simply multiply those estimates by a time factor of two or three. It's for their own good.

• Ask about the ethics, the legal aspects and the company's internal compass

This goes back to the very first question about the motivations of the founder. If they're truly in business to solve a customer pain-point, they will take care to achieve that goal in as ethical a way as possible. A founding CEO with dollar signs in his eyes may not be as careful as current legislation needs the company to be, and this will affect everyone in the long run.

Check to see if basic legal aspects have been considered: like copyright, for example. Basic company registration processes are another area to do your due diligence on. Some founders approach you without even so much as a registered company, a domain name or a trading license to their name.

When the long arm of the law comes for the company, it will take all of you down with it, so make sure you're not caught in a net you could have easily spotted from afar with a little foresight.

• Ask about your expected role in the company

Sometimes you'll be approached to partner up in a venture, but one of two things soon becomes obvious:

1) Your role isn't being clearly defined; or

2) Your skills and the role's requirements aren't a good fit.

Ask yourself (and the founder) what skills make you the right person for the job. Ask them what is expected of you in terms of contributions (money, time, skills or networks), and where they see you in the next 2, 3 and/or 5 years. And of course, ask them what you will be getting in return.

• Ask them to pitch it again after a short period of time

The thing about pitches is that they drain energy while being carried out. While the first-time pitch may be energetic and prophetic, you want to see if they can keep up that enthusiasm after a few days or weeks, after you've properly done your homework on the concept.

Moreover, a sound idea should make sense regardless of when or where it is pitched, so switch up the venue and schedule a second meeting during a different time of the day. The same way 1 + 1 will give you the same answer whether in Malawi today or deep under the Atlantic Ocean in 2 weeks, your founder's ideas should still make sense to you after a short passage of time (and due diligence).

CONCLUSION

These points cover the basics, but it's not an exhaustive list. Partnering up with someone requires you to put in the work to thoroughly vet the person as well as the concept.

Your gut instinct plays a significant role here as well, as cliché as it may sound. You do need to trust whoever you're about to get into bed with, so make sure you can fully, 100% vouch for them. The world runs primarily on trust; not money, nor love, nor even peanut butter.

A millionaire considers himself a rich man because he trusts that there are people out there who would be willing to trade their skills, goods or services for his paper money or the digital bytes in his bank account. Even putting his money in the safekeeping of a bank requires placing a lot of trust in the bank's IT system, the country's electricity system, and the university's school curriculum (which produced the engineers that man all those systems).

Trust makes the world go round, so make sure your aspiring CEO inspires lots of it.

And get a lawyer. Because trust is nice, but ink is nicer.

-----------------------------------------------------------------------------------------------------------------

Dr. Mohammed Shehu is a digital creative director and keynote speaker who specializes in building brilliant brands. He has been instrumental in launching and overhauling several continental brands and has hosted workshops on brand management, social media communications and creativity. To invite him to speak at your next event, mail him at mo [at] shehuphd [dot] com.