How to Make a Great Elevator Pitch: Part One

by Five Star Painting

If you’ve got a great idea but need some cash to get it going, you’d better start working on your Elevator Pitch. Even if you don’t need the cash or you have figured out how to use bootstrap capital, you still need to be able to sell your idea to: clients and customers, potential suppliers and employees, and even your spouse!

What is an Elevator Pitch?

It is the term used for a two-minute presentation; the amount of time it takes to go from the lobby to the investor’s office on the top floor and to capture investor interest (your audience could, of course, be someone other than an investor). Get it right and they’ll invite you into the boardroom for a more in depth discussion. It is also about the same time you need to convince other stakeholders that they should get involved with your enterprise.

Who is your audience?

The scenario goes something like this:

• You find yourself, opportunistically, in an elevator all alone with potential launch clients, possible future employees, VCs, Angel Investors, Bankers, Business Mentor or Coach.
• You remember to introduce yourself.
• You don’t forget to smile from time to time.
• You tell them what you are working on. Example: "Hi, I’m Mat Lafrance, President and CEO of a new service called GradeATechs.com. We do fast, on-site computer and network repair for homeowners and businesses.”
• You give it a short title. ("The title can't be as long as the story," Professor Max Neutze, Australian National University.)

What Makes a Good Elevator Pitch?

A good Elevator Pitch is made up of two key elements:

1. Lay out the pain statement. What problem is it that you are trying to solve?
2. Show the value proposition. How does your venture solve that problem for an individual client or customer?

Be specific—how exactly does your product or service benefit a single client or customer? Can you show, on a spreadsheet, in a compelling way, how by buying your product or service, a client will make money from it or lower their costs or do both? Did you introduce anything innovative into your business model and what is the ‘pixie dust’ or differentiated value in your model that will help you create a sustainable enterprise with a long term competitive advantage that results in some type of ‘franchise’ or ‘concession’ that you can exploit?

Example: "You know people can either disassemble their PC, put it in their car, take it to a local repair shop, be told it'll take two weeks and will cost $150 only to find out that it will really take three weeks and cost 250 bucks and that their hard drive got accidentally wiped. Alternatively, they can log on to or call GradeATechs.com, make an appointment and have a highly trained, certified Grade A Tech come to their home or business and fix the problem in a couple of hours for $120, guaranteed."

Give them some idea of how big the opportunity is and who the competition might be. Will this be an enterprise that will provide you with more opportunity than if you just took a JOB? Never say that if you could just get (say) 1% of this (really huge) market, you would be set for life. That sort of ‘stat’ is meaningless and undermines your credibility… Will the enterprise outlive the founder? Can it eventually continue without you?

Every great Elevator Pitch must meet four key tests:

1. Must be succinct. You’ve only got one or two minutes.
2. Easy to understand. Both your grandma and your grand kids have to get it. Your product or service should appeal to more than one generation or, at a minimum, at least you are able to explain it to multi generations.
3. Greed inducing. Investors want to make money. Clients want to know that buying your product or service is a negative cost—the benefits generated are greater than its cost.
4. Irrefutable. If your Elevator Pitch leaves the investor or customer with more questions than answers, you’d better go back to the drawing board.

Are there some other things you could usefully work into your pitch?

Sure. If you can do it, here are a few other things to include: Talk about your business model, your team, and your technology, whether the opportunity is scalable and why you think you are going to be successful—what you actually bring to this.

Example: "What's neat about GradeATechs.com is that we have a backend system called GASnet, which basically matches our Techs with our clients—clients give us a couple of windows when we can do a site visit and then our Techs can log on to GASnet and take the jobs they want; maybe, for example, the ones closest to where they live. Plus we have an endless supply of workers too—there are engineering and CS or IT students at colleges and universities in practically every major city who want to make 25 bucks an hour!"

Also, talk about cash. If your cash conversion cycle (CCC) is negative or simultaneous, say so. This is a powerful advantage. For example, GradeATechs.com gets paid online using GAS.net as soon as they complete a site visit—they simply run their customer’s credit card. They have few receivables. They don't pay their techies for up to two weeks, so for, say, a house call, their cash conversion cycle will be, on average, negative one week. If your CCC is negative or simultaneous, then you can grow very quickly without a lot of external funding (bank financing, VC funding, etc.)
But if you are, for example, a consulting company that doesn’t ask for deposits or retainers up front, doesn't ask for progress payments and only gets paid 30 to 90 days after you deliver your report, you can run into trouble (i.e., run out of cash). In this case, the more work you take on, the more cash you burn through—you still have to pay your employees and suppliers while you wait to get paid. So this is an important part of developing a sustainable (bootstrap) business model.

If you don’t think cash is king, think about IBM for a moment. It sells around $85 billion worth of products and services a year, one customer at a time. There is no magic button they push and suddenly, they have $85 billion in their bank account. How long do you think IBM would last if they forgot something as basic as collecting their receivables or asking their clients for retainers and upfront payments for services or products to be delivered in the future? If we assume they have a 10% margin and each quarter’s sales are identical, then their costs per quarter (what they have to pay out to their employees, their suppliers, and their pension obligations—everything) is around $19.125 billion every three months. So if IBM somehow forgot to collect their receivables, they would need bank lines of credit of at least $19 billion just to survive for 90 days. Even mighty IBM wouldn’t last very long if they don’t pay attention to the basics.

Finally, tell them how you intend to drive sales—most opportunities are useless if you have to spend $2m on a Super Bowl commercial before you get your first client. If you can’t find a way to cost-effectively market your products or services (i.e., sign up clients or customers without heroic efforts), you are sunk anyway.

Always reserve your domain name (and make it exactly the same as your company name) and print up business cards and hand them out like confetti. Nothing is worse than having someone point out that the domain for your proposed enterprise is already taken. If you are creating a for-profit business in Canada, you need the dot-CA and dot-COM. If you are starting a not-for-profit, you can probably make do with a dot-ORG registration. Annual costs for each of these ranges from $6 to $15 so pretty much everyone can afford to reserve their domains. You can search for domain names yourself using simple tools like the search bar on the home page of http://www.domainsatcost.ca/. (This is a site run by a friend of mine, Rob Hall, in Ottawa.) Registering names is a cinch (you don’t need a lawyer to do that for you) and setting up a website isn’t rocket science either. I run my own server and build my own sites (it shows). I have 25 domains that I own or manage for clients. If I can do it (I am 57), anyone can do it.

-Five Star Painting

Learn more about 5-Star Painting at topfranchises.franchisebusinessreview.com.