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The Unexpected Pros And Cons of Business Competitions

The Unexpected Pros And Cons of Business Competitions

PRO: Free money to get your business started.

If you win, you could be awarded over $100,000 in cash and/or prizes that you can use to build, hire, and get your startup off the ground. In most cases, there are no strings attached and you don't have to give up a percentage share of your business equity. Be careful, though, because some competitions don't award any cash at all, just services, and you have no choice in service providers.

PRO: You can make the most of new contacts.

The chance at winning big bucks isn't the only reason to compete in a business plan or venture competition. In many contests, especially those sponsored by business schools, judges and other competition organizers reach out individually to applicant companies both during and after the evaluation stage. That process can often help entrepreneurs establish new contacts and mentors to help grow the business.

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CON: Each application requires significant time.

There are downsides to competitions of this nature. Most entrepreneurs estimate they spend between 10 and 40 hours prepping the application packet for each competition. That's a full-time job for 1 person for up to a week!

CON: There's a lot of fine print.

Beyond practical concerns about time management, many business plan competitions are rife with some of the same potential pitfalls that exist whenever an entrepreneur puts his or her ideas on the line. For example, some contests ask winners to fork over equity in their business; fine print that could wind up hurting a startup attempting to woo investors down the road.

CON: People can steal your ideas.

Disclosure can be a problem, too. Many entrepreneurs don't realize that once they've brought the basic tenets of an idea into the public domain, the clock on the patentability of that idea starts ticking for 1 year.

And, if your idea isn't patentable, what's to stop someone - perhaps with more resources than you - from hearing about your idea during the competition and building something similar before you do? Make sure that you find a way to protect your idea and create a significant competitive advantage that others cannot duplicate. You're competing against more than just the other teams that are participating in the competition.

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The Unexpected Pros And Cons of Business Competitions