Pitching Lessons
Plus Fab – Ouma Tema
WHAT DID WE HEAR IN THE PITCH?
Pygmalion effect / growth
Ouma begins her pitch by telling the story of her entrepreneurial growth; how she started from the boot of her car then moved to her garage and then to where she is today – a fully fledged and self-funded factory. By telling the story of her business growth, she conveys to the judges (investors) that there is momentum in her business and, given the trajectory of the previous growth, there should also be future growth. Growth implies strong demand and investors like strong demand. Any savvy investor, though, would interrogate Ouma’s growth journey to find out if it may have plateaued.
Who is the customer?
Ouma does incredibly well in describing her target market, going so far as to describe it in the third person. She describes her market in a psychographic way, highlighting the client’s needs, wants and outlooks. The ability to describe target clients in such detail is likely to have a very positive impact on investors. It demonstrates that Ouma is intimate with her market and can therefore more likely create a product-market fit.
Proudly South African
Ouma mentions that her operation is Proudly South African certified. Although this does not mean much commercially, Ouma does well to include any form of accreditation or certification in her pitch as it does add slightly to her authority in the industry.
Distribution
Ouma goes on to describe the distribution structure of Plus-Fab, in other words, the retail partners who on-sell her products. Too often, entrepreneurs forget to include distribution in their pitches but Ouma does not fall into this error.
Use of investment
Ouma gives a very good description of how she will use the prize money should she win it, outlining three very clear areas on how the money will be allocated. She goes on to provide reasons for why she would focus these three areas of investment, and she does this really well. However, as with any investor pitch, her use of the funds will certainly be interrogated by the investors (judges) during the follow-up question-and-answer session.
JUDGES CLARIFYING QUESTIONS & RESPONSES
Investment in own business
Engen Petroleum judge Zishaan Abbass probes Ouma on her need for investment. Basically, he’s trying to find out whether she has working capital (which she doesn’t) and, if she does have working capital, why does she not have the courage to invest in her own business? In her response, Ouma focuses on the three investment goals she covered in her pitch – the digitisation of manual systems, fabric-printing machinery, and online marketing and e-commerce).
She goes on to say the reason she doesn’t have working capital is because of the Covid-19 pandemic. The question the judges will likely be asking themselves is why the pandemic would have been bad for a business that has an online store when across the world e-commerce has thrived during the pandemic.
Also in her response, Ouma says she has had a wake-up call. This implies that she has the humility to admit her mistakes and that she is open to learning, something that should endear her to the judges.
Ouma then goes on to make the rather dangerous comment that Plus-Fab is in “survival mode” but quickly covers this tactical error by stressing that she is still operating which shows tenacity and flexibility. Focusing the judges’ minds on the fact that she is in survival mode will make them concerned that she simply wants the prize money to bail herself out of her working capital deficits. It would have been more helpful for her to counter this statement by again mentioning her three-point plan on what the money will be used for. Upon hearing a comment about survival mode, any seasoned investor would likely govern the use of their investment to ensure it goes specifically towards the stated plan – if they believe in that plan.
Finally, Ouma says, “When there is an opportunity, we take it.” This remark can be seen either positively or negatively depending on how the judges understand the context. Either they can see her as someone who takes advantage of opportunities or, more cynically, they could see her as opportunistic in that she may not deserve the prize but is trying anyway. This was a very dangerous statement to make.
What if you don’t win?
Before asking her question, Nedbank judge Monique Chinnah tells Ouma that she loves what she’s wearing. Ouma is very clever to wear her own product and demonstrate her designs, and it should bode well for her in the competition. Monique then goes on to ask Ouma what she would do if she didn’t win the competition. As part of her response, Ouma says she would pursue the international market and has already taken steps in that direction. How she will reach this international market is less clear.
Margin and financial controls
Raizcorp judge, Allon Raiz asks Ouma if she has sufficient margins. The reason he’s asking is that many small businesses operate on very low profit margins and, as a result, always remain in a cashflow bind. Most small businesses don’t know the answer to this question because they are unable to work out their profit margins accurately. This is almost always because of poor financial controls. Allon goes on to ask Ouma what controls she has in place. Ouma misunderstands the questions and thinks Allon is asking for her financial results. He clarifies his question, and Ouma responds that her financials are done by an external bookkeeper. In a business such as Plus-Fab, the question is: Is an external accountant sufficient in terms of financial controls? And, more importantly, does Ouma understand the true cost of each garment.
DISCUSSION QUESTIONS
- How do you understand the term “Pygmalion effect” and where does the term originate? (6)
- What do you understand by the term “product-market fit” and why is it so important for a business to achieve? (6)
- What is the difference between a psychographic and a demographic description of a target market? (4)
- What is the difference between a consumer and a distribution partner? (4)
- How would you sell differently to a consumer versus a distribution partner? (4)
- What do you understand by the expression “skin in the game” and how does this relate to Zishaan’s question to Ouma about investing in her own business? (4)
- Why do you think an investor would prefer investing in an entrepreneur who is open to learning rather than one who is not? (2)
- If a business has been operating in “survival mode” for an extended period, what do you think this conveys to a potential investor? (4)
- Provide two examples of financial controls. (2)
- If you had an online store, how would you go about marketing it to get people to make purchases? (6)
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