“How do you make money?” It’s a simple question that investors love to ask startups. Unfortunately, it doesn’t always have a simple answer. In a pitch deck, the slide that answers this question best is the Business Model slide.
At STORY, we’ve written dozens and dozens of Business Model slides for startups of all shapes, sizes, and business models.
Naturally, we wondered:
So, we started digging, and spoiler alert, we found little-to-no expert resources online that clearly explained how to create a winning business model slide. This slide was typically overshadowed by other slides and was rarely discussed in-depth.
These sort of moments are what we live for: a chance to do some research to get a data-driven answer. But, for this study, we also wanted to cross-reference any online expert opinions we found with what is actually being put into practice in real-world pitch decks.
Here’s what we did.
First, we explored the internet to find expert recommendations on the business model slide. After stringent background checks on each author, we filtered out fluff articles and narrowed them down to ten total written resources. These clearly outlined investor expectations on the business model slide.
Note: Most of the articles we found were general pitch deck articles that gave a quick nod to the Business Model slide while also discussing other slides. Only three of our sources exclusively discussed the business model slide in-depth.
Next, we analyzed each resource and found a total of 66 opinions from investors, entrepreneurs, and industry experts.
We then bucketed each opinion into seven categories:
Afterward, we cross-referenced our database of publicly available pitch decks (ones that we didn’t write) to compare these opinions with real-world decks. In other words, we wanted to see which recommendations were being put into practice.
Out of our 100 deck database, only 32 included a business model slide. Why so few? We assumed that many pitch decks removed this slide as it usually contains sensitive information such as pricing, costs, and profits.
Finally, we then used the same categories as above for those 32 slides, which allowed us to see what advice was put into practice.
Now, onto the fun part — our analysis.
In the chart above, expert opinions found online are labeled as ‘Opinions,’ and observations from our pitch deck database are marked as ‘Observations.’ The top four most notable categories are Products and Services, Pricing Model, Cost, and Expenses, and Profit Margin. Why include profit? If price and costs are on the slide, founders might as well calculate margin so investors don’t have to do it in their heads.
Another Note: Cost and Expenses did not have any observations in our database in the chart above. Again, this is because this slide usually contains confidential information and was likely removed before sharing a deck publicly.
The definitions we used for each category are as follows:
Products and services are the core of any business.
On the business model slide, entrepreneur and startup consultant Maurizio La Cava emphasizes:
“It‘s very important to show investors your ability to make money out of your project.”
Showcasing products and services will give investors confidence in and clarity on the business. Thus, it makes sense that this category ranks first both in observations and opinions, gathering 22 opinions and 23 observations. Founders are definitely putting this recommendation to practice in their business model slides.
From our observations, founders discussed their products through one or two examples to illustrate how many revenue streams the business has or will have. Moreover, this slide usually showed example images of what the product looks like or will look like. These examples also include descriptions, but no more than two lines usually.
We found that, at a minimum, a business model slide should answer these questions about products and services:
It should also be noted that this category is often paired up with a Pricing Model. This will be explained further as we move on to the next category.
Here are a few examples from our database on how Products and Services are presented on a slide:
A Pricing Model outlines the pricing of a startup’s products and services. This is also sometimes referred to as a Revenue Model.
We counted 12 opinions from investors and 16 observations from our database in this category ranking it second. Interestingly, we found that not all business model slides we studied included pricing. Again, our assumption here is that many founders delete this information before sharing their deck publicly. We mentioned earlier that Cost and Expenses data had zero observations, likely due to confidentiality concerns. It’s safe to say the same goes for the pricing category.
COO of Palo Alto Software and marketing expert Noah Parsons notes:
“[After] you’ve described your product or service, you need to talk about how it makes money. What do you charge and who pays the bills?... It’s important to flesh out the details here...and discuss how your pricing fits into the larger market.”
When showing a Pricing Model, it’s also a good idea to illustrate how the business scales. For example: if the business were to have X number of customers, the business would expect to generate Y amount of revenue with a given Pricing Model. Additionally, payment and contract terms are also usually expected on the slide.
Below are some example slides with Pricing Models from our database:
It takes money to make money, as the saying goes. In this category, investors from our study expect to see the cost of goods or services sold (COGS) to gauge whether the company will have a healthy cash flow.
Our pitch deck database exhibited zero observations here. Again, confidentiality could be a huge defining factor behind this. All the pitch decks in our database that we analyzed have been published online; therefore, founders most likely removed details of any costs and expenses beforehand.
Additionally, based on our experience, we also usually see this category more emphasized in financial slides, as opposed to the business model slide. Either way, founders should consider including this information here if financials are healthy.
These last few categories have the lowest number of recommendations from our research and the lowest number of observations. Regardless, these should still be considered for inclusion in Business Model slides.
Customer Metrics describe a customer base’s overall buying and product or service usage behavior. For this category, we found seven opinions from our research and six observations from our database. These metrics are usually essential for companies that are raising funds post-launch. At this stage, these startups benefit from using this data in their pitch decks to demonstrate traction and product-market fit.
Profit Margin is usually represented as either a percentage or on a per-sale basis. In our research, we found 8 opinions and 12 observations under this category, showing that this recommendation is consistently practiced by founders. Examples are usually shown through graphs, hard numbers, or percentages.
These are estimates of a startup’s annual revenue. This is usually represented in graphs or tables that indicate the projections over the course of three to five years. Often times this can be found as a separate slide all together on a pitch deck.
Last, but not least, is everything else. Some opinions didn’t fit into any of the other categories. Thus, we created an umbrella category to serve as a catch-all, which garnered a total of four recommendations from our research and zero observations from our own database.
Recommendations here were not necessarily business-related; rather, they were more general reminders on presentation and language.
As with any presentation and especially pitch decks, brevity reigns supreme. Keep it short and sweet so investors can easily absorb what’s being presented and always try and say more with less.
By combining quantitative analysis of expert opinions with a qualitative analysis of publicly available pitch decks, we were able to draw a few data-driven conclusions on what should be included on a business model slide.
Ultimately, potential investors want to clearly and concisely see how a startup will make money. Perfecting the business model slide is key to the most positive outcome.
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