How do you effectively pitch a business idea? The ability to pitch a business idea is one of the most important skills a young entrepreneur can learn. This skill will lead to more clients, more customers, and more revenue. A good pitch should include three essential components: a value proposition, an articulate explanation of how your company solves problems for customers, and an evidence-based story that describes how you’ll succeed in solving the problem. It should be four or five minutes long and engaging. You should be able to tell it in person or on a phone call. If your goal is to secure funding from investors, it may need to be shorter than 4–5 minutes.
Know Who You’re Pitching
Pitching is an art form. It takes a lot of preparation and practice to deliver a pitch effectively. Most entrepreneurs fail to get the desired response from their pitch because they have not put in the time and effort to create a good one. If you are planning on pitching your business idea to investors or venture capitalists, it is very important that you understand whom you are pitching your idea to and what they expect from you.
Always remember that you do not need everyone’s attention or approval. You just need the right people — those who believe in your business idea and want to see it become a reality. These are the types of people who will be the best investors for your business and help you realize your dream.
Here are some things to consider when preparing your pitch:
Know Your Audience — Your audience should have some interest in investing in businesses like yours. For example, if you are running a tech startup, then it would be wise for you to pitch your idea at a gathering where venture capitalists and angel investors interested in tech startups will be present.
Know What They Want — The sort of information an investor wants to know about a business idea differs from that which an ordinary person would want to know. For example, an ordinary person might want to know the financial history of the startup. Make sure you can communicate all responses effectively and efficiently.
Consider How You’re Presenting Yourself, Not Simply Your Idea
When pitching a business idea, there is more to it than the idea itself. In fact, most people who do not have the success they desire in business do not have the right mindset. Here are some steps to selling your idea effectively:
- Pause Before You Pitch. Before you even begin pitching your idea to a banker or venture capitalist, pause and consider what audience you are pitching to. What do they know about your industry? Where do they stand on the issue? How will they perceive your presentation? If you do not understand how the audience will feel about what you are presenting, you cannot effectively present it.
- Know The Facts. Do research on the topic of your presentation and know all of the facts before beginning. If you don't know all of the details or statistics about your particular industry, who will?
- Gather Your Thoughts. Put together a list of talking points (at least five if possible) that accompany each point you wish to make about your presentation. Practice these points repeatedly in front of a mirror so that when you go into the "real world" with this pitch, it comes across like second nature.
Investors Want to Know How They’ll Cash Out in the End
It is critical that you keep in mind the end-game for investors. They want to know how you will cash out, or get their money back with interest. Even if your business isn’t ready for an IPO or acquisition, having a plan for when it is will make you a more appealing investment.
The first thing an investor wants to know is what are your exit options. The most obvious is selling the company. For example, Facebook has been rumored as a candidate to be acquired and there have been reports of Twitter being bought by Google. But there may be other options that aren’t as obvious, such as a merger or the sale of just part of the business. The idea is that investors like to have flexibility in their investments so they aren’t limited to one exit strategy.
Next, they want to know what the value of the company could be if it were acquired or went public today. You can use sales multiples from companies similar to yours (based on size and growth) to determine your sales price. Keep in mind that investors want growth stocks so you need to show how quickly you can grow revenue and sales and why your company will continue to grow for years after its initial launch. They’re the ones putting up all of their cash so they need to know that they’ll be able to convert it into additional cash that they can return to their partners.
Bringing Your Pitch in for Landing
If you are able to effectively pitch your startup idea to investors, you have the potential to receive enough funding for it to become a reality. You will be able to afford spending months or even years working full or part-time in developing your startup solution, and if your solution is viable and successful, you will end up with a huge financial return. And who knows? Perhaps one day your startup will be worth multiple millions of dollars.