[Guest post by Sanjay Anandaram, an entrepreneur-turned-investor. This eye-opening article is really a touchdown on the most important question that every entrepreneur/business manager should answer - 'What business am I in?".]

Quick, which companies come to mind when you read the following?

- “Relationships Matter.”

- “Broadcast Yourself.”

- “____________ is a social utility that connects you with the people around you.”

Each of the above describes an internationally leading company on the internet. I’ve picked these as examples to illustrate a point. Namely, the importance of being able to describe your business in simple language to an average consumer. Or, as one venture capitalist likes to question eager entrepreneurs “How would you explain your business to your grandmother?” This may sound trite and facetious but has a very important purpose.

Answering this question requires one to articulate what the objectives of your company are to your target customers in simple language. Many times, entrepreneurs when asked to describe their business use complicated and vague sentences peppered with jargon. I like to term it “buzz-word compliance.” Consider this example, “we leverage technological innovations to deliver solutions across demand-supply service chains at globally lowest costs”. I’m not sure what the entrepreneur wishes to convey but it is certainly buzzword compliant and might perhaps actually sound important!
However, this kind of language is so abstract that it describes any and every business since all businesses at a high enough level offer cost-effective solutions to their customers by leveraging technology (after all, even using a phone can be “leveraging technology”)! But then are all businesses really the same?

Using complex language to describe things when simple language will suffice is often times an indication of ignorance and insecurity. The entrepreneur hopes to hide his ignorance by taking refuge in obfuscation. Using complex language also gives a sense of false superiority as it bestows a cloak of importance on the user. It indicates a failure to think clearly and almost shows contempt for one’s audience. And what of the poor audience? They are left confused, frustrated and soon ignore the speaker. And such examples abound from all around us especially in the government and corporate sectors. Look at this case of meaningless verbiage from a company memo “Through focusing on the company’s objectives, CSFs (Critical Success Factors) and risk profile, we can determine an optimal audit review approach and resource requirements and skill to ensure that maximum value is extracted from the function!” Phew! Does anyone know what is being said? Can you imagine the effect of this memo on those executives in the company who not only had to read it but had to actually make sense of it and take action, whatever that might have been?

Therefore, as an entrepreneur, it is a very good idea to first write out what your business is all about in a few sentences and what makes it unique. Use simple language to describe what you do and why it is different from what others are offering. And remember, the better you have understood your business, the easier it is to express it in simple terms. After you’ve done describing this, try explaining your business in no more than two sentences to potential customers. Do they understand what you do? Do they think it is interesting? Would they buy from you? If so, why so? If not, why not? Learning to listen to the responses of your target audience is important. The questioning and listening provides very useful inputs and insights that can be important for refining your core values. It is through such an iterative process does one arrive at the simple elucidation of the core value of your business.

Here’s an apocryphal example of Albert Einstein describing his Theory of Relativity thus: “If you are with someone you love, an hour seems like a minute; If you are with someone you hate, a minute seems like an hour. My theory describes this relative passage of time.” This is an example of stating an incredibly complex theory in simple layman terms.

Can you describe your business in such simple language? What do you think?

By the way, the companies with the interesting descriptors or positioning statements are, in order, LinkedIn, YouTube and Facebook respectively.

[The article first appeared in FE and is reproduced after author's permission]

Tags: Entrepreneurship in India, startup toolkit, VC speak