If you are new to the world of Regulation Crowdfunding and local investing, it may seem like everyone is speaking a different language.
No, I’m not talking about French or Italian, I’m talking about business acronyms.
For young investors, particularly those from Gen Y and Gen Z, understanding business jargon for investors can appear particularly daunting. And yet, it would be a challenge for even the most seasoned investor to name and define the fundamental business acronyms for our industry.
Well, it’s your lucky day–we’ve done the hard work for you.
In today’s article, we are going to give you a crash course on three of the most important business acronyms for investors: USP, ICP, and PMF. By the time you finish reading, you should have a solid understanding of what each one means and how you can put these acronyms to work as you analyze new opportunities for Reg CF investments.
Let’s dive in.
USP Acronym: Unique Selling Proposition
So, the USP.
No, I didn’t misspell your local shipping and printing office, and my apologies to all of the island lovers here, I’m not here to transport you to the University of the South Pacific.
The USP acronym stands for Unique Selling Proposition, also known as the “unique value proposition” or just “value prop.” Simply put, it answers the timeless question: “Why should customers pick this business?”.
And since Momma can’t be your only customer, most businesses will need a USP to explain why they’re special.
What if a business is SO unique that they don’t have any competitors to compare USPs with? That’s great, but just remember the two reasons why an idea isn’t already a business:
- It’s brilliant, and no one has thought of it.
- It’s a bad idea (or the timing is off).
Before you commit to investing in any business or real estate development project, it’s crucial to analyze the USP of the offering business. If it takes longer than 30 seconds to understand what differentiates the business or investment opportunity from similar organizations/opportunities, tread carefully.
Pay attention to the target customer segment and size (more on that below), the problem or need addressed by the organization, and whether the organization is qualified to deliver on its USP.
ICP Acronym: Ideal Customer Profile
Now, you may not need to do a detailed market analysis to determine if a business has a strong USP. A good strategy is to try putting yourself in a customer’s shoes… ah but wait…
Who are their customers?
To truly understand a company’s USP, we need to dig a little deeper and tackle the ICP acronym, or Ideal Customer Profile. While ICP generally describes the market a company is selling to, buyer personas make up the specific individuals who influence or make purchase decisions. In short, what does a company’s ideal customer look, act, and think like?
An easy way to streamline your analysis is to imagine who benefits most from a company’s product or service.
Think practically about who the business is targeting and how successfully they’re positioned to solve a problem or need in the market. If you struggle to identify a customer segment most likely to purchase a product or service, it may be time to rethink your investment.
PMF Acronym: Product-Market Fit
If you can effectively pinpoint a company’s USP and ICP, you’ll be better positioned to identify and understand our final and most important of all business acronyms for investors:
PMF or “Product-Market Fit.”
PMF takes abstract ideas about whether or not a company’s product or service offering is unique and whether or not the business has effectively identified its perfect customer, and brings it all back to reality.
In a nutshell: do people want what a business offers?
Achieving PMF is crucial to any successful business endeavor. It means that there is a market (i.e., demand) for what a business is selling and that people are willing to pay for a product or service because there are no better alternatives.
If your objective analysis of USP and ICP leads you to the conclusion that the business in which you want to invest doesn’t offer a product or service that can satisfy the market, it’s time to move on.
Vicinity: Easily Evaluate Local Investment Opportunities
Understanding a company’s ICP, USP, and PMF can help you determine if you’re tapping into a unique opportunity or if just buying another can off the shelf.
Of course, you’ll still want to check out the financials and read up on the risks to get a holistic view of the opportunity. A great feature of investing through the Vicinity platform is that every investment opportunity comes with a comprehensive overview of the “who,” “what,” “how,” and “why.”
Knowledge is power in the investment game, and our community of local investors is always provided with the data points necessary to effectively evaluate a company’s potential–from financials to business model to proposed terms.
If you are ready to take a more calculated approach to your local investment portfolio, sign up today. If you want to learn more about Vicinity and Regulation Crowdfunding, drop us a line at [email protected].