From $100k to $1 Million: Nail the Positioning ASAP

Now that you have a few paying customers, you need to figure out how to scale to a much larger customer base. Positioning is a discipline entrepreneurs need to master especially if they have aspirations of raising money. And even if you choose not to raise money, a crisp positioning enhances your odds of success.

Professional investors – especially Venture Capitalists – care about three things in determining a good investment: Market, Team, and Technology. The priority of the three varies. Some prefer a strong team over a well-defined market opportunity, and a well-positioned business proposition. Others put market first.

I happen to belong to the latter camp. Too many times in my own experience have I seen great entrepreneurs beating their heads against markets that simply do not respond. Too often have I seen solutions from great technologists looking for problems to solve.

In 1M/1M, we take you through case studies of entrepreneurs who do a particularly good job positioning their products. They analyze their markets and eco-systems well, to clearly articulate exactly what problem they solve, and how their solution differs from the competition. They also explain well why the market opportunity is large.

Remember, Venture Capitalists ONLY invest in very large market opportunities. If you are planning to build a small $5 million a year business, that is not for VCs. That is something you need to bootstrap. The Total Available Market (TAM), thus, becomes one of the biggest topics of conversation in any VC meeting. And if you say you have a $17 billion market opportunity, you better know how to define that at a very granular level, or no one will believe you. It is better to refine your “real” opportunity with a bottom-up analysis and articulate a smaller market, than an arm-waving top-down number which feels unreal and puts your credibility in question.

Once you have crossed that hurdle, however, comes the challenge of your Go-To-Market Strategy (GTM). You cannot boil the ocean. With limited resources, how will you penetrate the market and gain traction among early customers?

The greatest tool that I have found in defining a cost-efficient GTM is Segmentation. If you can tightly segment your market, and find niches where your product or service has immediate applicability, your chances of survival and success go up dramatically. Many of the case studies we use do an excellent job of explaining their market segmentation strategy.

I also believe that Positioning needs to be looked at as a holistic effort, spanning not only value proposition, messaging and competitive strategy, but also pricing and channel implications. If you have a $5000 product, it clearly does not lend itself to direct sales.

In the end, if you have been able to understand and articulate a comprehensive positioning for your business, fund raising becomes viable, and execution becomes efficient.

If there is one thing that VCs master, it is a refined ability to poke holes in your business plan. It is something I have also mastered, unfortunately. Those of you who have attended my roundtables have experienced this first hand.

There is, however, something enormously valuable in this exercise of litmus-testing your idea against the critical eye of an experienced investor.

In the 1M/1M Self-Assessment, I have provided a list of questions that you should ask yourself to prepare for such scrutiny. Before opening yourself up for external dissection, I strongly recommend that you take yourself and your ideas through an internal analysis.

And be honest. Be brutally honest as you seek answers to the questions.

While optimism is a requirement for entrepreneurship success, fanaticism is a surefire recipe for failure. Any area of concern, any lack of clarity needs to be addressed readily, honestly.

In my mentoring, I always tell people that my job is to help you ask the right questions. If I have achieved that, I have brought you three quarter of the way to the solution.

I want to close this piece with the same message to you – be sure to ask the right questions.

And ask them before investors get to ask them, and catch you off guard.

Note: If you need to plug your knowledge gaps in Positioning methodology, you can do so with the 1M/1M Curriculum.

Photo credit: Michael R Perry/Flickr.com.

This segment is a part in the series : From $100k to $1 Million