So many things to cover in 5 minutes. Most founders try to cram an impossible amount of info into a pitch deck, then panic and painstakingly slash out entire slides, like tearing away pieces of our own soul. In this difficult process, where do you draw the line to avoid eliminating essential pieces of the story?
Today I watched the graduates of the Propel Accelerator pitch an investor panel. There was one topic every company was asked about…
Pricing – THE Essential Pitch Slide
If a pitch deck had only a single number in it, I want to see your price. Pricing?! What about the story? Why not the market size? Or the team? What if I have lots of prices?!
Slow down. There’s lots of ways to tell a story, draw emotion, and persuade with pathos and ethos. That is essential too, but this is a finance blog so let’s focus on the numbers. Investors care about the numbers, so you should too.
When investors hear your pricing, they evaluate you from several angles:
Consumer Pricing Perspective
We know what a can of coke is worth, and we know what a car is worth. Where does your product fall in that spectrum? Is this something easily attainable to the masses, or highly valuable and requiring a long sales process.
Market Pricing Perspective
Where does your price sit vs. the competition? This implies whether your product is superior or inferior. Like it or not, it does. Many founders are amazed to discover raising prices increases sales. That’s due to the psychology of pricing. Investors, too, consider competitive posture with great weight.
CFO Pricing Perspective
Pricing is also an indication of your cost structure. If you’re selling a widget for $10, investors infer that you believe your cost will be less than $10, maybe $7 or maybe $3. If the investor has experience making similar widgets for $15, you probably just lost his or her confidence.
CEO Pricing Perspective
Pricing is an indication of your value in the global economy. Is this a $10/mo subscription, or a $100,000 enterprise contract? Your sales and operations will differ substantially to support these different price points. If you’re pitching the enterprise contract, does your team have enterprise sales experience? Do you have personal connections to those customers? Did your go-to market strategy match your price?
Pricing is the most important number to investors
Investors care deeply about pricing because it makes so many implications about your business. It is at the intersection of sales, operations, finance, and marketing. It can make or break companies.
How much time have you spent pricing your product/service?
What assumptions did you make when pricing?
What does your price imply from the four perspectives above?