How to Ask for Money for Your Small Business: The Elevator Pitch
Starting a business is hard work. The day-to-day operations of running a business can be exhausting in itself. There’s always so much to do and so many people to please. But asking for banks and lenders to invest in your business? That can be one of the hardest parts of all.
The task of asking for money can be tricky because the answer can often be devastating. Building a strong business plan with ample research can still result in a “no” or a bad deal from an investor, and that can set you back to square one. So how do people successfully negotiate with potential investors? What is an elevator pitch, and how do elevator pitches result in a fully-funded business?
If anyone has watched the popular television Shark Tank, they might tell you that you need a business plan that shows no weaknesses. A quick ten-minute pitch is all you need to get investors interested, and then your business will be up and running. However, as is often the case with real life vs tv, reality is not as easy as television makes it out to be.
Elevator pitches can be tricky, but they aren’t the be-all-end-all of getting investors interested in your business. How do you ask for money and negotiate a successful deal? Let Fiscal Tiger help you out.
Phase One: Constructing the Pitch
Defining an elevator pitch is simple; making one, on the other hand, can be a challenge. To start, an elevator pitch is supposed to be a synopsis of your business idea that is short enough to get your concept across to an imaginary person in the time it takes to get between floors in an elevator. In other words: quick, to the point, and convincing.
However, constructing an elevator pitch can be tricky. It’s easy to fall into industry jargon and use flashy words, but often times our target audience has no idea what your business is about or what those words might mean. Instead, try to focus on punchy ideas that any random stranger on the street could understand.
For example, if your business wants to create an augmented reality app for smartphones, you’ll want to use examples and words that anyone can understand. Referencing the international popularity of Pokemon Go might be more successful in getting their attention than referring to the more technical side of developing the app. You don’t want people to get lost in the confusion. However, it’s ok to get a bit sales-y in your pitch. The loan office knows you’re there to ask for money, so there’s no need to tip-toe around the truth.
Here’s some step-by-step instructions to help you start constructing your perfect elevator pitch:
- Write a list of ten of the most important parts of your business. Focus on the most interesting and memorable facts, the things that will really make you stick out.
- Go through your list and edit out any jargon or redundancies. Be very critical of your own list, and focus on enhancing the really outstanding qualities of your business plan.
- Start putting your list into sections about who you are, what you do, how you do it, why you do it, and who you do it for. Ideally, you’ll have a couple of compelling sentences to answer each question.
- Order the information you’ve compiled in a logical way, with the most vital information at the beginning.
- Start with a catchy-opener: either a fact that sticks out or a question.
- Practice your speech, and say it in front of willing friends or family members. Record yourself, too, and pay attention to your pitch. Are you speaking in a friendly tone, or slightly rushed? What feedback can your friends give you?
- If you feel confident with your draft, but still want to cover all your bases, make an alternative speech that you can turn to in case the investors aren’t showing a lot of interest. It’s always good to have a Plan B!
Phase Two: The Questioning
Once you’ve memorized your pitch, ensure you’ve done all your research before you meet with potential lenders. There are bound to be some follow up questions, and lenders will be able to tell if your speech was just a monologue without further information. Plus, if you’re selling your great business idea, you’ll want to have a complete business plan specifically for lenders, a diverse understanding of your industry through intensive market research, and a compelling business model before you enter their office. All of the prepping you’ve done prior will come in handy during this essential moment.
Start out by asking your yes or no question. For our example, you could say something like: “Have you ever wondered what it would be like to see dinosaurs in the modern world?” This question will get an almost universal “yes,” so you can then continue on with your cool app idea. It draws in their attention and also pinpoints how you plan on addressing a curiosity or need in your market. On top of that, you can gauge their interest based on their answer. If they’re not very excited, you can switch to your Plan B version and talk directly about the money it will make. If they are very excited, you can stick to your original script.
However, you most likely won’t get your answer right after you complete your pitch. Although Shark Tank makes it seem fast and simple, they often don’t show the additional steps that need to be made. For one, the investor is going to want to see the products, and potentially test them out. They will also want to ask a series of questions about your market and what you hope to achieve in the first year. Following that, they may even run a credit check to look into your credit background.
Phase Three: The Negotiating Table
Finally, once all the questions and tests are over, the lender will want to work out a deal with you. They may have provided you with the “yes” you wanted to hear, but don’t be ready to jump in without looking through your options.
Depending on your credit history and the amount of money you are asking for, your options could vary in terms of length of contract and percentage of interest. Be aware of what is a good deal, and what is going to potentially hurt you in the long run. Even on Shark Tank, after all the television work is done, contestants can still back out of a deal if they feel the investment isn’t right for their business. It might not make for good television to see them back out, but it can be a smart business move.
Riding the Elevator
Elevator pitches are simple ideas, but not necessarily an easy thing to construct. Trying to confine all your ambitions and dreams into a couple of fast minutes can seem impossible. But creating a solid elevator pitch can be an essential tool as a business owner. Getting your pitch memorized and ready can help you build confidence and will no doubt come in handy throughout your time as a small business owner.
Plus, you’ll never know who will be in an elevator with you next!
Image Source: https://depositphotos.com/
Katie McBeth is a researcher and writer out of Boise, ID, with experience in marketing for small businesses and management. Her favorite subject of study is millennials, and she has been featured on Fortune Magazine and the Quiet Revolution. She researches SEO strategies during the day, and freelances at night. You can follow her writing adventures on Instagram or Twitter: @ktmcbeth
This post was updated December 7, 2017. It was originally published October 1, 2017.