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Your Elevator Pitch: Communicating Your Revenue Model is Key

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Your Elevator Pitch: Communicating Your Revenue Model is Key

Published: September 9, 2010 Updated: May 24, 2012

At our SBDC in Columbus, Ohio we occasionally run a contest called,;Pitch It-. I-s an elevator pitch contest that gives budding entrepreneurs the opportunity to practice their pitch delivery in front of an audience and panel of business development judges. Everyone who hits our stage is excited to have a chance to talk about their business. The passion in their presentation is evident, but what usually is not is how the business will generate revenue. Here Michael Bowers* enlightens us on how to present a pitch the right way.

You have a cool business idea. You are ready to move your business idea to a real business. You are ready to raise money to take your idea to the market. You're out there pitching, pitching and pitching your idea. Why aren't you getting money? Because you aren't telling the investor what they want to hear...How you are going to make money? Let me be clear, I know you are discussing the product, the market, the management team and projected financial statements (the standard stuff) but are you telling them...How you are going to make money?

Put yourself on the other side of the presentation. What would you want to hear? What you wouldn't want to hear is how the entrepreneur thinks they'll make money. You don't want to hear generalities? You want to hear specifically what steps they plan to take to target, sell and close business. Here are a few things you can do to better articulate your intentions:

  • Focus on adding value: A couple of years ago I wrote a post called 'Value Inflection Points'* where I discussed the concept of building value in your company by focusing on activities that build value in the business (it's real good, you should read it).
  • Focus on 'execution-oriented' activities: Execution is more important than anything else. VC's will tell you that 'A' teams with 'B' ideas will beat 'B' teams with 'A' ideas. This is due to the 'A' teams ability to execute.
  • Be specific: Don't talk in generalities. Be very specific in describing your plan to attack the market and get people to buy your product.
  • Pitch, don't beg: Think of this as a sales presentation because it is. You are pitching your ideas to investors to get them to buy into your company. Granted some investors are jerks but good investors that like your business will look to create a win-win for both them and you.
  • Get help: If this is your first time seeking funding do not go it alone, get some help. There are a number of free resources like the Small Business Development Centers* (click here to find your local SBDC*) or TechColumbus * (if you are in Central Ohio) that are charged with helping entrepreneurs succeed. You should also look at mentors and advisers that have been there, done that to provide you guidance.
  • Be flexible: Learn from every experience and apply it to your plan. You may start out on one path but through discussions with customers or investors you can gather valuable feedback on your product that may take you down a more profitable path. Be willing to listen to this advice and incorporate as appropriate.
  • Don't beat your head on the wall: This kind of goes along with the previous point but when something isn't working, do't keep using it. I know a guy that has been pitching the same product since 2000 and he has never gotten any investment. His product was actually not too bad when he come up with it but due to his lack of willingness to change he missed his market window and he no longer has a viable product.
  • Don't focus on Percentage - focus on Dollars: In the war between investors and entrepreneurs many of the battles come down to valuation. You think your company is worth $20 million and the investor values it at closer to $2 million. What do you do? These difference in opinions can be the difference between selling 10% of your company and 40% of your company. Trust me you won't win this one but if you focus on working to reach a realistic valuation you can reach a level you are comfortable with. Look closely at where the company is really at today and what you need and when you need it to move your company from milestone to milestone. At each milestone what is happening and how is this impacting the value of the company? Work all of this through and bring it back to make a case for where you honestly think the valuation should be.
  • What's the bottom line?: I'm not talking about the company's financial bottom line, rather the big picture bottom line. Do you need the money? Are you clear to yourself how you are going to deploy the funds to build your business? If you need the money you have to get it. Don't engage in unnecessary confrontation over silly details. Work to build your case to get the investment.
  • Focus on sales and marketing, not the product: Revenue is what will drive value and get investors excited. Everything else is window dressing.

Seeking investment is a challenging process. The key is to put as much detail as you can into what you are going to do to drive revenue and valuation. If you do this and stay committed and diligent, your odds of success will increase dramatically.

Now that I have you thinking drop by the blogs of a few of my friends and consider their thoughts on this subject. Susan Solovic discusses how the professional presentation is key to attracting investors and Caron Beesley shares why your business needs an elevator pitch and how to stand out in the crowd. Happy reading!

 

You can also find Tonya on twitter at @TonyaWilson

* This hyperlink goes to a non-government website

About the Author:

Tonya Wilson
As a member of the Ohio SBDC at Columbus State, we provide entrepreneurial development assistance and business consulting to start-up, emerging, and existing business owners. In addition to one-on-on advising, we create, coordinate and promote programs and events to inspire, educate and engage individuals who wish to start or grow a small business.

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