Your value proposition is perhaps the most important single sentence you’ll craft about your business. It’s all-encompassing: it tells anyone who’s listening what you do, who you do it for, and why.
The value proposition is the foundation for the rest of your pitch deck messaging. So let’s start with a simple but effective value proposition formula:
For (target market) who (customer need), (product name) is (product category) that (value add).
Now let’s break down each part of the value proposition formula and talk about how it contributes to a better understanding of your business.
Target Market
Emphasis on the word target. Especially for early-stage, in-market companies, stating a clear and specific target market can be difficult.
If you’re in a season of the business where you’re trying to figure out who’s most motivated to buy, this might be unclear. If you’re already generating revenue but have a diverse set of customers, it might feel like you’re being untruthful by narrowing your scope for the sake of a pitch.
But that’s why you have to remember the cardinal rule of building an Essential Pitch: aim to be 100% clear and as little as 50% accurate.
Your target market should be who you see as the specific group that is most heavily impacted by the problem, most motivated to buy a solution to the problem, and ideally a group you’ve already started going after with some success. Their core needs should shape how you build your solution and how you’re bringing that solution to market.
EXAMPLE: For a run coaching app, the target audience might be novice runners ages 25-50.
Customer Need
Look at this as a succinct nod to the problem. You’ll have a problem slide later in the deck (or talk about the problem if this is a conversation without visuals), so it doesn’t have to capture a full picture of it. But it should hint at it.
The way you describe customer need is important. A common trap is that founders will unintentionally connect customer need to a feature of the solution rather than the solution itself.
For example, that run app might have guided runs, sync with any smart watch, and offer a library of run-related strength training workouts for off days. These are all great features, but they’re not core to the problem of the target audience. These are not what makes a customer seek out a solution in the first place.
Instead, the customer need for that app might be that the target audience of users are training for their first distance race. It’s a concise way of hinting at the problem: because these are novice runners, they might not know where to start with training toward this goal. That’s where the solution comes in.
Product Name + Category
These are pretty straightforward. The name of the product is obvious. The category tells me something about the method or type of solution you have.
Is it a service? Is it software-as-a-service (SaaS)? It is a web app? A mobile app? A physical product of some kind?
In the case of our running example, it’s a web app.
For some product categories, it might be worthwhile to note the type of business model: B2B SaaS tells me you’re selling to other organizations instead of to consumers; consumer marketplace tells me you’ve got multiple stakeholder groups but the buyers are individuals.
For service businesses, if you have a well-known segment to use, add it in there. Consultancy, agency, and firm all hint at you working mostly on a project basis, perhaps with a recurring roster of clients.
Value Add
The value add is the meat of your value proposition statement. The best startup value prop will drive home the ideal outcome.
It’s not enough to just understand the problem or need that leads your target customers to seek out a solution—you need to know how their experiences will improve by choosing your solution.
But because this is a pitch and because this value proposition formula is designed to kick off any conversation about your business with a bang, you should get creative about how you share this.
For the running app, we already know these are people who are new to running and seeking out help with training for their first distance race. So it sounds like they’ve already decided to run a race. But what would happen if they never found a solution to their lack of knowledge around running? Injury? Not finishing the race? Never running again?
In that case, the value add should relate to that: getting across the finish line injury-free and ready for the next race.
Your Winning Value Proposition—and Why It Works
Now we put it all together in this battle-tested value proposition formula:
For (target market) who (customer need), (product name) is (product category) that (value add).
For novice runners ages 25-50 who are training for their first distance race, Run It Up is a mobile app that gets them across the finish line injury-free and ready for the next race.
Why does this work? Three reasons:
- It hits on all the components: target customer, customer need, product category, and value add.
- It primes you to be curious about business fundamentals you’ll go on to outline in the pitch: how the audience segment was selected, the size of the market opportunity, competition in the industry, unique technology and differentiation, and most importantly, existing traction and how you’ll continue to grow.
- It’s not only foundational to understanding the business, but it’s also concise and snappy, providing a perfect kickoff to your pitch.
The Difference Between a Value Prop and a Hook
Starting your pitch with your value proposition helps avoid one of the top mistakes founders make in a pitch: kicking off with a cryptic hook.
Don’t get me wrong, I love a strong hook that shares an unbelievable stat or introduces a fictional customer. But doing that after the value proposition has already been shared means your audience knows immediately why that stat or example is relevant, which makes it more compelling.
Value Proposition Bonus Tips
- Keep it concise | Don’t make it a super long run-on sentence. Remember, 100% clarity and as little as 50% accuracy is the aim.
- For marketplaces, add a second sentence | It’s tough to properly present two sides of a marketplace in a single sentence. Take one sentence for each side of the marketplace, starting with the most motivated-to-buy side—also known as the demand side.
- Edit over time | I can’t tell you how many times I edited my value proposition over the life of my business, especially in the earliest moments. It wasn’t out of indecision; rather, these were small tweaks to boost the clarity, narrow the scope, and demonstrate an enhanced understanding of the value add.
Developing a value proposition for a pitch deck or any conversation about your business is critical: it serves as the introduction and foundation for how you outline your business fundamentals.
