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2011

Steve-Strauss--in-article-Medium.pngIs there anything hotter than Facebook right now (other than, maybe, and just maybe I say, the sun)? I think not. But that said, many small businesses have yet to figure out how to turn the media hype and vast popularity of the social media behemoth to their own advantage and actually grow their business using Facebook.

 

But what you hear is that everyone else is doing it, right? Why aren’t you? Hurry up! Get on the bus, Gus! The Facebook train is leaving the station and you better be aboard. Choo choo!

 

What if it’s all a bit overwhelming? What if you don’t know the purpose of a “Like,” or the difference between a Brand Page and a Facebook Places Page? How are you going to tap the power of Facebook in that case?

 

Don’t worry. We’re here to help.

 

Click here to read more articles from small business expert Steve Strauss.


Recently, Facebook launched a new site called Facebook for Business (Facebook.com/Business). And no, it is not yet another Facebook permutation you need to master. Rather, the site provides resources to help any small business easily understand how it can use Facebook to grow their business (I’ll explain how it works in a moment).

 

It’s not surprising that Facebook undertook this initiative. Not only are more and more businesses migrating to the social networking site in order to go to where the eyeballs are, but many are increasingly using their Facebook Page instead of their own website.

 

All of which begs the question that Facebook for Business tries to answer: How does one actually use Facebook to grow their business? Before Facebook launched a dedicated portal, which finally brings together step-by-step tutorials on using all of Facebook’s marketing features, many entrepreneurs likely found Facebook marketing to be hit or miss.

 

Example: I have a good pal who is a photographer. His challenge was figuring out a way to grow his business on the cheap. We were talking on the phone one day, and I mentioned that given those parameters, he should try advertising on Facebook.

 

He asked why Facebook and I relayed an amazing success story I had just read – on Facebook: The wedding photographer in the profile also wanted to grow his business, and decided to try Facebook. What he liked about this platform was his ability to zero-in on his exact target demographic. He placed ads for his wedding photography business that would show up only on the Facebook pages of women in his city who were 24 to 30 years old and whose relationship status was “engaged.” Perfect, right?

 

Right indeed. During a 12 month period, that $600 advertising buy netted him almost $40,000.

 

My friend was so impressed that he immediately tried the same tactic. However, he didn’t get the same result. Not nearly. Down but not out, he actually spent a few weeks tracking down the photographer mentioned in the Facebook Success Story, found him, and asked for help/insight. Thereafter, my pal’s campaign was much more successful as he learned what he had been doing wrong.

 

But today, he would not need to go to the expense and effort of finding the photo guru; instead, he would just go the place where you should go to learn more about how to use Facebook in your business – Facebook.com/Business.

 

Essentially, this intuitive business portal demystifies four of Facebook’s useful business features by providing entrepreneurs with resources and tips for how to best use them for their specific business needs. It’s an easy to understand user’s manual.

 

The four marketing tools highlighted are:

 

  • Pages: Create a space to interact with your fans, get to know potential customers and build a community.

 

  • Ads: Reach the audience you want with ads that let you target by age, location, interests and more.

 

  • Sponsored Stories: Take advantage of friends talking to friends with sponsored stories, a natural way to amplify word of mouth.

 

  • Platform: Transform your website into a social experience with plug-ins and custom apps.

 

To explore your options, and to learn how to use these features, visit Facebook.com/Business (or click the links above) and check out the step-by-step tutorials. It’s easy and quick. You will be a pro in no time.

 

 

 

About Steve Strauss

Steve Strauss is one of the world’s leading small business experts. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. Steve is also the author of the Small Business Bible and his latest book is Get Your Business Funded: Creative Methods for Getting the Money You Need. A popular media guest, Steve is a regular contributor to ABC News Now and frequently appears on television and radio. His business, The Strauss Group, creates unique, actionable, entertaining, and informative multi-media small business content. You can read more articles from Steve Strauss by clicking here.

White-in-article.pngby Reed Richardson.

 

In Part I of this series we explored some of the compelling reasons small businesses might want to branch out into government contracting and some of the marketing and operational nuances involved if they do. Here in Part II of our series, we distill some of those larger themes into concise, actionable advice from experts in the field.

 

Tip #1: First, get your red tape in order. Here are five quick and easy administrative steps a business owner should complete before embarking on any quest for government contracts.

  1. Get a nine-digit DUNS number for your business. 
  2. Know your business’s NAICS codes.
  3. Complete the federal government’s free Central Contractor Registration (CCR) and certify your small business as specially designated (e.g. veteran-, woman-, or minority-owned), if applicable.
  4. Obtain an active Marketing Partner ID Number (MPIN) from the CCR.
  5. Use your MPIN to register and certify your business using the Online Representations and Certifications Application (ORCA).

 

Tip #2: Conduct market reconnaissance. To find out which agencies have recently bought what your business is selling, look through the statements of work on current federal contracts, which can be found on the FedBizOpps website, explains SCORE mentor Jean Jolkovski. “Then go find similar projects in those same agencies nearby.”

 

Pull-Quote2.jpgTip #3: Get listed (wisely). The federal government has dozens of industry-specific catalogs that its employees and project managers use to find pre-approved vendors from which they can buy. Getting your small business listed in these catalogs, which are called GSA Schedules, isn’t so easy, however, and if not done right it can turn into a big headache. “I always tell small businesses to hire someone to negotiate the process for getting listed with the GSA,” explains small business contracting expert Marc Amtower. “Otherwise you can end up with too low a price or, like a lot of companies, eating the shipping cost.”

 

 

Tip #4: Understand your competition. The government makes it fairly easy to see what other vendors are out there selling in your market space, notes small business contracting expert Marc Amtower in his book Selling to the Government. The primary method of doing this involves running a report called the GSA Schedule Sales Query (SSQ). Amtower estimates that the top five percent of vendors on each GSA Schedule reap somewhere between half and two-thirds of all contracts, while the bottom two-thirds usually share a measly 10 percent. “This provides you with a baseline on the food chain for your niche.”

 

Tip #5: Get free inside information and contract assistance. There are two key resources a small business owner should connect with to begin their search for government contract business—Procurement Technical Assistance Centers (PTAC) and Offices of Small and Disadvantaged Business Utilization (OSDBU). While PTACs are government-funded, third-party partnerships established to help connect buyers and sellers, OSDBUs are funded and staffed from within each government agency. “The people staffing an OSDBU don’t have any contracts and they don’t have any money,” notes Jolkovski, “but what they do have is lots of information.”

 

For example, the OSDBU at the federal Department of Transportation (DOT) offers a handy online contact list of procurement assistance specialists, broken down by individual DOT agency. Other OSDBUs, like the one at the federal Department of Labor (DOL), run quarterly Vendor Outreach Sessions, where entrepreneurs can market their capabilities directly to DOL managers in face-to-face meetings. Local PTACs also offer matchmaking events and procurement training seminars to help small businesses.

 

Tip #6: Tell the government what you can do. To successfully market your small business to government buyers, it’s imperative to create a concise, one-page summary of your company’s qualifications. Known in the contracting world as a Capability Statement (CAPE), this document should include a brief description of a company’s products or services, past industry performance, and staff or leadership. “This CAPE should also be in a pdf or jpg format,” notes Micromentor.org counselor Kenneth Larson, “so it can be quickly attached to an email and then easily opened.” (For more on how to write an effective CAPE and to see some successful, real-life examples, check out Larson’s smalltofeds.com blog on the topic.)

 

Tip #7: Make it easier for the government to do business with you. Marketing expert Amtower recommends that every small business make its online presence more government contract-friendly by dedicating a separate web page to government purchasing and by accepting payments from the GSA SmartPay credit card. “And don’t forget to include the GSA SmartPay logo on your website, alongside those of other accepted credit cards like MasterCard and Visa,” he adds.

 

Tip #8: Get clearance to double the size of your potential market. Because more than half of all government contract money is spent on classified projects, Jonkolvski points out that obtaining a security clearance can open up an even wider range of potential new business. To learn more about the process, check out the Defense Security Service’s Facility Clearance Checklist. There, you’ll find an important first step involves being sponsored by either a government agency or another cleared company. (Here’s a copy of a sample sponsorship letter.)

Finding_the_right_vendors-article.pngby Reed Richardson.

 

This is Part I of a two-part this series about how small businesses can enter into the government contracting market. In Part II of our series, we distill some of the larger themes explored below into concise, actionable advice from experts in the field.

 

For entrepreneurs looking to expand their customer base in a struggling economy, finding new customers becomes critical to survival. So, why not go after what is inarguably the biggest customer of all, one that is almost guaranteed to have a need for whatever product or service a company may be selling? After all, as government contract expert Kenneth Larson points out, “There isn’t much that Uncle Sam doesn’t buy.”

 

Of course, it’s not just what the federal government buys that should get a small business owner’s attention, but how much and from whom. “The major reason to go after government contracts is purely the size of the market. Federal, state, and local government spending accounts for more than 30 percent of GDP,” explains Marc Amtower, author of Selling to the Government. “So, why wouldn’t small businesses want a piece of that?” And thanks to federal guidelines, that small business piece—targeted to be 23 percent of the nearly $500 billion allocated each year—is substantial, totaling $97.9 billion in newly awarded contracts in fiscal year 2010.

 

Pull-Quote2.jpg“The U.S. government market represents the single largest market in the world,” Amtower explains in his book. “[Anyone] can play in it. But not everyone will, and of those who do, most will not succeed. Why?”

 

Patience is a virtue (and a necessity)

A common reason that small businesses fail to crack into the government contract market involves lack of patience and dedication. “A lot of them think that they can somehow expedite the process of getting that first contract,” Amtower says. “But then, after they get six months in and still have nothing to show for it yet, they give up.”

 

For early stage entrepreneurs, six months may indeed seem like an excessively long time investment with no payoff, but most experts say that landing an initial government contract usually takes even longer. In fact, a recent survey of active small business contractors found that it took them, on average, nearly 20 months to land their first federal contract.

 

“It’s not for people who want a quick hit,” advises Amtower. But the payoff, once a business does get its foot in the door, can be lucrative. The same study also found that, of those small businesses listed as an approved government vendor, fully four out of five now have more than $1 million in annual revenue, with about half of that amount coming directly from federal contracts.

 

To build early momentum, shoot for small victories

For a small business’s first foray into the government market, jumping into a bidding war over a long-term prime contract is likely a bridge too far. So, after checking off the necessary administrative steps to sell to the government, a better first-time goal might involve getting approved for one of the General Services Administration (GSA) Schedules. Though somewhat confusing in name, the federal GSA Schedules don’t involve timelines or calendars, but instead function like vast catalogs of government-approved business vendors, broken down by products and services.

 

For example, federal employees in need of, say, a new office chair can pull up the appropriate GSA schedule and shop for different models by their features and prices just as he or she would at any commercial, office-supply store. To purchase, they simply charge it to their government-issued SmartPay credit card, sometimes known as a P-card. (Federal expenditures for less than $3,000 do not require bidding or prior approval—what is known as “paperless procurement.”) The main benefit of selling through the GSA Schedule is that most transactions are of the instantaneous, credit card variety.

 

“For a small business just starting, these micro-purchases can be a great place to get your feet wet,” Amtower explains. Though small, all these incremental purchases can add up to a staggering sum. According to the GSA, there were 98.9 million SmartPay credit card transactions in fiscal year 2010, which rang up to a total of $30.2 billion. “I’ve got a small business client right now that makes $3 million a year just from government credit card sales,” Amtower says, adding that this company’s average SmartPay transaction is only $1,500. This nickel-and-dime sales profile runs counter to many pre-conceived notions about securing multi-year, multi-million-dollar government contracts, he acknowledges, but sometimes pursuing the former instead of the latter makes more sense for entrepreneurs.

 

“You’ll never be a major player by doing it that way, but maybe you don’t want to be,” Amtower says. But he’s also quick to point out that getting one’s small business products or services listed on the GSA Schedule still doesn’t guarantee anything in the way of actual sales, you still have to market your business effectively. “It’s just another tool; think of it as a fishing license rather than the fish.”

 

Selling is selling

“Selling to the government is really no different than in the commercial world,” explains Phoenix, Arizona-based SCORE mentor Jean Jolkovski. “One, you need to establish what you’re selling and two, why they should buy it from you instead of someone else.”

 

This requires small businesses seeking to land a prime or even a subcontract to take an active role in marketing their products and services. To do that, Jolkovski says, entrepreneurs must thoroughly investigate which government agencies and large private contractors might make good potential customers and partners, respectively. But once these contacts have been identified, don’t assume your small business status is enough to land you the deal.

 

“There are 600,000 small businesses registered with the federal government,” Jolkovski points out. “So, if you begin a sales conversation by saying ‘Use me, I’m a small business’ that’s a big red flag to most government contractors, because then they think that’s the only thing you have going for you.”

 

Instead, he recommends using a more typical sales pitch, one that starts off with a focus on your business’s unique sales proposition. “You have to find somebody who wants what you’re selling, then get a face-to-face with the project people who will need what you’re selling.” Only after all that, Jolkovski says, do you want to bring up any certifications your small business might have.

 

No guarantees

“You don’t jump into becoming a prime contractor right away,” explains Larson, who doles out his decades of government procurement expertise on his blog smalltofeds.com. “You usually sort of ease into the business with the intent that you’re going to learn and grow. Often, small businesses position themselves with larger organizations as a Team member or subcontractor.”

 

“Teaming,” as it’s commonly referred to in the government contract world, can be tricky, however, and small businesses, in particular, must constantly be on their guard. But even if a small company becomes a Team member on an ultimately successful bid, Larson says this doesn’t necessarily mean they’ll reap the expected rewards. “Prime contractors are notorious for walking all over their subcontractors,” he warns. “Sometimes they’ll promise the world but then keep 95 percent of the work for themselves, giving the sub the minimum amount of work to fulfill the terms of the contract.”

 

In addition, Larson points out another big caveat that small businesses must consider when dealing with federal contracts. “The federal government usually contracts on a five-year basis, but it budgets on an annual basis,” he explains. So, even if a small business finally inks that lucrative multi-year contract, Congress must still allocate the necessary money every fiscal year to fund it. “If it doesn’t, you could be stuck.” As a result, most experts caution entrepreneurs to avoid putting too many of their eggs in the government contract basket.

 

Still, government contracts can be an excellent source of cash flow, Larson notes, providing a small business with that steady stream of income necessary for it to achieve real, sustained growth. As an example, he points to one of his former mentored companies, the California-based IT firm VSolvIt. “When they started five years ago they had nothing, but last year they landed a five-year, $14.5-million contract with the USDA,” he says. With that kind of regular income, he adds, thriving, rather than merely surviving, now becomes the goal.

 

“It’s really an art form,” Larson reiterates, “but once you understand the nuances of how to market and sell to the government, it can definitely be worth it.”

White-in-article-portrait.jpgby Reed Richardson.

 

It’s an age-old predicament for entrepreneurs: Sure, you may have built a fabulous new product or developed the next killer app, but if you don’t also do a good job of marketing it to customers, your business can still end up failing. So, how can small, local businesses, a majority of which spend less than $2,500 a year on marketing according to a recent Merchant Circle survey, overcome this problem? The first step, say many marketing experts, begins with a change of mindset.

 

Put Marketing First in Your Mind

“For most small business owners, marketing is viewed at best as a nice add-on or at worst as some kind of foreign science whose secrets are locked away in an ivory tower somewhere, writes John Jantsch in his popular book Duct Tape Marketing. “Small business marketers need a totally different definition of marketing—one that’s honest, relevant, and more like real life.”

 

To get a sense of how this new definition plays out, Jantsch has developed a handy graphic about the purchasing process, something he calls the Marketing Hourglass. In a recent blog post about his Marketing Hourglass’s seven steps, Jantsch notes that “the most fundamental shift of all in marketing is the need to logically and systematically move prospects along the path of know, like, trust, try, buy, repeat, and refer—this is the entire game these days.” He adds that “any business that fills each of these seven touchpoints will be well on its way to finding and keeping customers.”

 

Pull-Quote.jpgProfile Your Target Customer

One common mistake among inexperienced marketers involves rushing ahead without a clear idea of which customers your small business is trying to reach in the first place. “Often, my small business students try to begin with tactical decisions, like whether they should put an ad in a newspaper,” explains Glynns Thomas, a small business marketing instructor who teaches an online course entitled “Small Business Marketing on a Shoestring.” “Instead, I try to pull them back a bit and get them to define their target market. By thinking about their strategic foundation first, that will then feed what kind of tactics to use later.”

 

Skipping this crucial step, Thomas adds, means a small business is likely to end up with a scattershot marketing plan—a Yellow Pages ad here, an email campaign there—that doesn’t tie together and nets little in the way of return on investment. “Small businesses really have to paint the picture of who their ideal customer is, where they can be found, and how they behave, and get really specific about it,” she explains. “If you try to market too broadly to, say, 1,000 people, you may only get 10 sales, whereas if you focus on 100 really well-matched potential customers, you may actually net 50 sales. It’s kind of counterintuitive, but by going smaller, you can actually get more in the long run.”

 

One low-cost tactic that Thomas favors involves marketing partnerships. As an example, she cites the experience of one of her students, the owner of a Greek restaurant located in a shopping mall’s food court. To expand beyond the primary customer base of mall foot traffic, Thomas suggested that the restaurant—whose menu focuses heavily on freshly prepared ingredients—partner with a nearby gym that has a similar, health-conscious clientele. In return for offering an initial discount to the gym’s members, the restaurant gained the ability to run a free ad in the gym’s monthly member newsletter, giving it hundreds of exposures to a like-minded audience. “It’s all about finding other businesses that are complementary to your mission without being competitive.”

 

Match Message to Market and Don’t Forget to “Sell the Hole”

Once you’ve identified your business’s key customer constituencies, then it’s time to craft a marketing message that fits your market and also speaks to its needs. This doesn’t have to be a complicated or expensive process, says small business marketing consultant Bob Wiltse, but if you don’t address both the former and the latter in your pitch, you’ll likely get little bang for your buck.

 

“A big mistake I see from a lot of small businesses is that they need to stop selling their product and start selling what their product can do for their customers,” explains Wiltse, who also writes a small business marketing blog called 390 Main Street. “For example, if your business is manufacturing power drills, don’t sell customers on the drill, sell them on the hole it makes. After all, that’s what the customers really want to use the drill for anyway. Likewise, if your company website just offers me a list of products without telling me why they’re better than your competitors, you’ve just commoditized yourself and left me little choice but to compare your products to others based on the only other piece of data I have, which is price.”

 

To boost your marketing profile and draw in more potential customers to your company website, you should consider a number of best practices, like adding embedded videos—for things like product demonstrations—and search engine optimizing (SEO) your website’s text content. If done right, these steps can be a very effective way of drawing people in through online search sites like Google, Yahoo, and Bing and then keeping them there once they arrive. What’s more, these steps are not so complicated that, given some time and dedication, a small business owner can’t handle it by him or herself. (For a more detailed look at SEO, check out our article on the topic.) Even better, free tools like Google Analytics can track this search traffic and see who is visiting your website, where they’re coming from, and what they’re looking at once they get there. This data can then be used to refine your target market even more and further hone your sales message.

 

New marketing tools like these are increasingly popular, but not universally known, Wiltse says, and so he says he often sees frustrated small business customers come into his office saying the same thing: “Everything I used to do isn’t working anymore.” For example, he points out that buying a costly, static ad in a Yellow Pages directory may have a diminishing return in an increasingly digital world and that many small companies would be better off establishing an online presence on local business search sites like Yelp, Yahoo Local, and Google Places. (In a perhaps telling move, the Yellow Pages Association recently changed its name to the Local Search Association.)

 

These local search sites typically charge nothing for their basic listing service. What’s more, they offer a much more dynamic and interactive platform, allowing businesses to provide more detail about their products and services while letting customers share reviews about their purchasing experience. And as smartphones and mobile tablets become increasingly popular conduits for finding businesses, having a robust local search presence online will become even more important. (For a good first step in checking your business’s current local search status, Wiltse recommends using the listing consolidator getlisted.org.)

 

Use Social Media to Keep ’Em Coming Back (and Bring Their Friends)

Once you’ve sold a customer, enticing them to repeat their business and refer your business to others becomes the final step in the marketing process. And when it comes to maintaining and strengthening your existing customer relationships, social media has proven to be a revolutionary platform. “Social media makes it so much easier to stay in contact with customers and keep your business top of mind,” Thomas notes, adding that its interconnected nature and “share” features makes asking for customer referrals much easier (and less uncomfortable). But, she cautions, building out your business’s social media presence should still be done with due diligence.

 

“I always recommend to small business owners that they start off small, with one or maybe two social media platforms, like starting a Facebook fan page and maybe a Twitter account for their business. And even before you formally set them up, I suggest they use the sites for a few months to get a sense of how they work and what people’s expectations are,” Thomas explains. During this trial period, she suggests that entrepreneurs create a list of several dozen sample Facebook posts or tweets that would be both appropriate and interesting. These will be the templates for future posts once their business social media is up and running.

 

“Often, I get small business owners who’ve already started with social media coming to me saying ‘I have no idea what to post,’” Thomas says. “That can lead to trouble because the whole idea of small businesses using social media is to engage with your customers, not just to tell them, ‘Buy my stuff!’” This kind of hard selling can be a turnoff, no matter what the media platform or message and it runs counter to the whole point of effective, shoestring marketing, Thomas notes. “When your target market and message are defined well, they meet the right person at the right time, and when that happens, marketing is no longer intrusive or annoying, it’s helpful, and that’s exactly what you want.”

White-in-article.pngBy Reed Richardson.

 

The following is Part Two of our two-part series on entrepreneurial elevator pitches. In Part One, we examined the reasons why every small business owner should master an elevator pitch and offered tips on how to structure one for maximum impact. In this follow-up section, we focus more specifically on targeting an elevator pitch to an investor or venture capital audience.

 

Although elevator pitches can be presented to a variety of audiences in the service of several different business goals (as we saw in Part I of this series), their most common purpose among startups and early stage small businesses no doubt still involves the attraction of capital. But whether it’s an angel investor from around the corner or a large VC firm in Silicon Valley, this cohort often proves to be the most difficult for an entrepreneur to impress, inundated as they are with similar pleas for financing day after day. So, to stand out from the rest of the pitching crowd, it pays to fine-tune one’s presentation to improve one’s chances of scoring that potentially life-changing investment.

 

Using the elevator pitch to get your foot in the VC door

“From my experience, a lot of introductions to venture capitalists happen in written format,” notes Andrea Rice, president and co-founder of CareerCore, a New York-based executive consultancy. “The entrepreneur may know someone who knows a potential investor and that becomes a way to get an email in front of the right person.” But while it may be tempting for an entrepreneur to attach their entire business plan and send it along in hopes of wowing a potential investor, Rice says this initial opportunity is better thought of as the proverbial short elevator ride via correspondence rather than a formal meeting.

 

Tips-sidebar.png“You’ll be lucky if the VC spends more than a few seconds on your email,” explains Rice, who has spent time on both sides of the pitching table, first as a Wall Street equity analyst listening to pitches and then, more recently, as an entrepreneur making pitches to raise funds for her current venture. “The purpose of the email,” she notes, “is to get the VC to look at your Executive Summary. The Executive Summary is the written equivalent of an elevator pitch for an entrepreneur.” (For a detailed breakdown of what this email should contain and to see a sample written executive summary, check out Rice’s “Elevator Pitch to a VC” blog post.)

 

Avoid the “form letter” elevator pitch

Dr. John Cooley, co-founder of the energy storage startup firm FastCap Systems, says that during the several months his company spent prospecting for seed stage venture capital, he and his partner routinely tweaked their core elevator pitch to best fit who was going to hear their presentation. “Sometimes our first slide was a description of our team, sometimes it was a description of our technology, and other times it began with the more classic description of the problem we were trying to solve,” he recalls.

 

This is a wise strategy, according to Rice, since each investment group and VC firm has its own favorite industry sectors and within these firms each principal often has expertise in an even more narrowly defined sub-sector. So, recalibrating your pitch to more closely target the individual audience’s “sweet spot” makes good sense, she explains. “Ideally, you’re talking to the right partner, the one who cares the most about your [market] space,” she says. “But you still want to paint the opportunity in the best light no matter who is listening to your pitch.”

 

 

Why rehearsing your elevator pitch matters; remember the “10th C”

Subtly changing your elevator pitch for each presentation naturally suggests the need for some extra rehearsal time to ensure a smooth delivery, one that avoids glaring omissions or embarrassing redundancies. In his book Elevator Pitch Essentials, author Chris O’Leary similarly emphasizes the importance of having a clear, concise, and consistent pitch—these three characteristics being part of what he calls the Nine C’s that comprise the best elevator pitches. But entrepreneurs shouldn’t overlook the fact that, in small presentation settings, studies have found there is a tenth “C” that has a surprisingly powerful ability to sway minds: confidence.

 

Alex “Sandy” Pentland, professor at the M.I.T. Media Lab, studies nonverbal communication and one of his recent experiments focused on exactly these kinds of situations. In a Q & A with the Wall Street Journal, Pentland explains that even though his study’s subjects were mid-career executives presenting real business plans, the peer ratings of those plans had little to do with the plans’ actual content. In fact, Pentland was surprised to discover that the ratings could be accurately predicted simply by assessing the confidence of the pitcher’s voice and body language. “It was how they delivered the plan that determined how it was rated. That’s pretty amazing,” explains Pentland. “They were listening to how excited the presenter was about the plan; they were not listening to the facts.”

 

Obviously, there are significant hazards to venture capitalists making significant investment decisions based solely on such immediate, emotional feedback, which is why they include lots of other steps in their pre-investment due diligence. Nevertheless, there’s still a lesson here for entrepreneurs about the intangible value of displaying confidence and enthusiasm in one’s elevator pitch. “In venture capital, one of the things investors pay attention to is the buzz in the start-up group and the way it feels,” Pentland notes. “And what the venture capitalists are actually doing, I think, is reading the honest signaling.”

 

Avoid these common elevator pitch pitfalls

Showing enthusiasm for one’s own business idea may be a no-brainer, yet many entrepreneurs balk at signaling that their pitch also excites competing investors. This effectively sells your idea short, says Rice. “You want to leverage any momentum that you have when pitching a VC, particularly if you’re an early or seed stage startup,” she notes. “So, if you can communicate that there are others legitimately interested in investing in your business, you shouldn’t shy away from mentioning that.”

 

However, using one’s elevator pitch to try to unleash a VC bidding war is an obviously poor decision, so conveying outside interest does require some subtlety, Rice acknowledges. “If I’ve just pitched a VC firm out in Silicon Valley via conference call, for example, I might end my pitch with something like: ‘I’m going to be out on Sand Hill Road all next week and would love to schedule a face-to-face meeting with you one day while I’m in the neighborhood.’”

 

Such an understated tactic has another positive side effect—it demonstrates the ability to navigate a relatively cutthroat investment environment, which is often seen by VCs as a precursor to executive performance in the future. “To VCs, bringing in a great idea is no big deal,” notes Kourosh Kaghazian, managing director of M.I.T.’s annual Elevator Pitch Competition. “They also want to see them demonstrate why they are the proper person to successfully execute the idea.”

 

All this pressure to stand out, be confident, and prove one’s capabilities can result in what is perhaps the most common mistake made when pitching investors—information overload. Packing too much story and data into an elevator pitch almost always leads to one of two different end results, both of them bad. Either the presenter rushes through the pitch—burying their core message under a blur of words and data—or talks for far too long—wearing on the audience’s patience and causing them to lose interest.

 

“You simply can’t expect to answer every possible question with your pitch and you have to accept that,” explains Kaghazian. “It says to the investor that you have trouble prioritizing information.” And if an entrepreneur can’t handle pulling off a 60-second elevator pitch, most investors will naturally begin to doubt his or her ability to handle running an actual company.

White-in-article.pngBy Reed Richardson.

 

The following is Part I of our two-part series on entrepreneurial elevator pitches. Here, we examine the reasons why every small business owner should master an elevator pitch as well as offer tips on how to build one for maximum impact. Part II of this series focuses more specifically on tailoring your elevator pitch to an investor or venture capital audience.

 

If you only had one minute, could you effectively explain what your small business does to a complete stranger in a compelling manner, one that makes them want to hear more? That, in essence, is the art of the elevator pitch, so named because the duration of the typical elevator ride approximates the 60 seconds an entrepreneur would have to share their story with a potential customer, partner, or investor.

 

Pull-Quote.pngThe ability to break through the clutter of the marketplace and differentiate one’s venture from competitors isn’t as easy as it sounds, however. Small business owners, who themselves are routinely pressed for time, can certainly sympathize with this dilemma. But that’s where a good elevator pitch comes in, explains author Chris O’Leary in his book Elevator Pitch Essentials.

 

“It never fails that the more potentially helpful someone is [to your business], the busier they are likely to be. If you want to be successful, you need to take this problem seriously,” writes O’Leary. “An elevator pitch is designed to quickly catch the attention of the audience, persuade them to pay attention to what you have to say, and convince them they want to hear more.”

 

Why every small business should prepare a basic elevator pitch

For many entrepreneurs, perfecting an elevator pitch might seem like an unnecessary extravagance, one more appropriate for a Silicon Valley boardroom than a Main Street storefront. “Most companies never get venture capital funding, especially outside of the technology world,” notes tech startup consultant Anil Dash in a recent blog post on alternative methods for funding startups, So why bother with an elevator pitch, if, as Dash spells out, there are lots of other ways to wrangle financing?

 

The answer lies in the broader benefits of developing an elevator pitch. First, just the process of distilling one’s business venture into a concise and sharply-crafted 60-second marketing message can be a helpful way to examine (or reexamine) a business’s core message and value proposition. Then there’s the wide range of alternative audiences a business’s elevator pitch can be tailored to, whether they be potential suppliers, promising customers, or future employees. And yes, other common sources of startup funding—local bankers, interested equity partners, even friends and family—would probably be more inclined to hand over a check after hearing a well thought-out and enthusiastic sketch of a business idea.

 

For Dr. John Cooley, perfecting his company’s elevator pitch was just such a stepping-stone to taking an idea and turning it into a full-fledged business. Back in 2008, when his company, FastCap Systems, amounted to little more than some experimental tests in a lab, Cooley and his co-founder decided to enter the M.I.T. Sloan School of Business’s annual Elevator Pitch Competition (EPC). Their innovative plan, which uses a new kind of electrical capacitor to solve the problem of renewable energy storage, ultimately won the competition and earned them the $5,000 grand prize. But while the money was a nice bonus, Cooley says the real payoff came from the experience and the legitimacy his company gained from the going through the process.

 

“It gave us some work under our belt and helped us a lot with networking and connections,” Cooley explains. What’s more, because he and his co-founder Riccardo Signorelli (who presented the pitch at the EPC) have advanced degrees in electrical engineering but no formal business training, Cooley says crafting their successful elevator pitch also built up their sense of entrepreneurial confidence. “We learned that you don’t have to have a business degree to start a business,” he says, chuckling. “You just throw yourself in and it kind of snowballs.”

 

Start with the problem

When developing an elevator pitch, the first thing to keep in mind is that it’s not about trying to close a deal but rather start a conversation, writes O’Leary. In his book, he identifies the somewhat daunting Nine C’s that he says comprise a good elevator pitch, but many of these key elements are fairly intuitive. The goals for your pitch should be more modest and realistic, he adds, like enticing an audience into wanting to hear more, rather than trying to immediately convince them that they should buy into your enterprise.

 

Likewise, you don’t want to lead off with a long recitation of your company’s vital statistics—information that can readily be found on your website—unless you want your audience’s eyes to quickly glaze over in boredom. Instead, you want to engage your audience with a compelling story about your business, and since every good story involves a hero confronting an obstacle that must be overcome, your elevator pitch should be structured in the same manner.

 

“You need to start with an explanation of the problem your business will solve,” explains Kourosh Kaghazian, a second-year Sloan student who is the managing director of M.I.T.’s 2011 $100k Entrepreneurial Competition. (To see more elevator pitches, check out the M.I.T. 100k Entrepreneurship channel on YouTube.) However, just calling something a “problem” isn’t enough, he points out. “You need to give data and stats to more fully describe the scope of the problem.” Once your pitch is armed with such context, it then becomes easier to move on to the next part, explaining your solution. And because brevity is key to covering as much ground as possible in a pitch, Kaghazian points out that this opening section should amount to no more than two or three lines when written out, or the equivalent of about 10 to 15 seconds long when spoken.

 

As a good example, Kaghazian points to the winning presentation from last year’s Elevator Pitch Competition. That pitch, from an M.I.T. student-led social venture project called Sanergy (check out one of their minute-long elevator pitches on YouTube), opened with a clear, scene-setting description of a widespread problem: “2.6 billion people from around the world lack access to adequate sanitation. The resulting disease causes nearly two million deaths each year.”

 

Solve the problem, sell your expertise, and close with a call to action

After having spent the first quarter of the pitch firmly establishing the problem, it’s then time to move on to the meat of the pitch—delivering a solution. In the case of Sanergy, the M.I.T. presenter spent the next 30 seconds or so explaining how their socially responsible business model will mate free hygiene facilities in developing countries with local, renewable energy production. Again, it’s important to add specific numerical context in this section too, as Sanergy did by noting the potential “$2-billion market worldwide.”

 

Merely offering a dazzling theoretical plan still won’t make for the very best elevator pitch, though. To push a pitch over the top, it should also spend five to ten seconds detailing the real-world expertise of the company’s leadership and why they have developed not just a solution, but the solution. For established small business owners, this is a good time to briefly discuss their years of industry experience and professional credentials. In the case of a nascent startup like Sanergy, demonstrating one’s bona fides is admittedly more difficult, but it can be done through advisory boards, feasibility studies, and prototype/pilot projects.

 

To wrap up an effective elevator pitch, it’s a good idea to re-summarize the solution in a few seconds and then finish up with a short, one or two-line call to action. “It’s important to make clear what you want out of your audience,” Kaghazian says. And while this conclusion typically involves asking for a commitment of some kind, what pitchers should be prepared for next is a series of probing questions about their enterprise. And that’s as it should be. After all, the symbolic elevator ride is now over and you still have your audience’s attention, so it’s now time to step out and get down to real business.

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