Small Business Lending – Getting Loans with Debt

Loan with Debt

The Small Business Lending Ecosystem is getting crowded and more confusing by the day. If you’re scratching your head wondering which is right for you? You’re not alone. To help you out, all this week we will discuss the small business lending world, and the ways in which you can learn more about the system for your own success.

We will share Tracy’s story, and what we did together to figure out the right option for her. You see, Tracy had found herself in a decent amount of debt by this point in her business, and that made getting loans a bit harder. 

Unsure of how to take your business from good to great? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Tracy's Story

Tracy ran a successful catering business. Her clients were mainly corporate and other small businesses, predominately servicing smaller events. As such, Tracy had solid growth. As she grew, her capacity was strained. Consequently, her overtime hours were up. Plus, it was hard to find enough equipment. Tracy rented certain pieces of equipment. Because she was catering more events, we agreed that it was more economical to purchase some key equipment instead of renting them. 

Unfortunately, Tracy hadn’t always been responsible with her spending in the past. Therefore, she built up a fair amount of debt. While her credit rating wasn’t awful, it needed some work. 

How Did We Help Tracy?

First and foremost, Tracy needed to expand. Tracy had her business model down. Her client retention rate was high. As a result, she could accurately forecast demand. Therefore, it was pretty easy to calculate which equipment would be more economical to own versus rent. Now, all we needed to do was to acquire the financing. Preparing the application and necessary paperwork was easy. However, the hard part was finding the right lender for her.

Getting Loans with Debt can be hard

So, which lenders were right for Tracy? How did we choose? Well, Tracy had an established business. It was profitable and growing. We could use the new equipment as collateral to support this loan. But, to obtain the funds, we faced some challenges, namely, the size or the load and her sub-optimal credit score.

Not a Good Fit for a Large Bank

Given these criteria, we explored our options carefully. With her debt load, Tracy wasn’t a good fit for a large bank loan. Plus, she failed to meet the SBA criteria. Therefore, we had to explore alternative lending sources. Tracy needed about $100,000 to purchase the equipment that she needed. Knowing that any lender would view her as a risk, we split our funding strategy into 2 pieces. First, we calculated how much we might be able to receive from the Marketplace lenders. Next, we figured out how we might finance the rest through a Lending Platform. 

Benefits of Being a MWBE

women-owned business has access to programs that wouldn’t normally be available. Therefore, we applied to non-profit lending sources, with low to no interest rates. A quarter of needed funding came from these lenders. For the remaining 75%, we chose use the marketplace lender, Lendio®. 

How Did Tracy Get a Loan with her Debt?

Small Business Ecosystem

Tracy got the funding she needed to expand. As expected, the interest rates weren’t great from the marketplace lenders. However, since we used the non-profit lenders, we reduced their impact. At the time, Tracy hadn’t certified her business as a MWBE (minority or women-owned business entity). We helped her with that application process.  As a result, she is now eligible for more government-based opportunities. With the purchase of the new equipment, her profits increased. She paid herself more and reduced her debt.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Small Business Lending – Loans to Expand a Business

Lending Expanding Business

We’ve already begun our conversation about small business lending, and how the field of it is growing more and more confusing as time goes on. The small business lending ecosystem is getting crowded and more confusing by the day. If you’re scratching your head wondering which is right for you? You’re not alone. We’d like to share Tony’s story, and what we did together to find the right options for him when he went looking for loans to expand his business

Unsure of how to take your business from good to great? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Tony's Story

Tony ran a successful laundry service business. His clients were mainly corporate and other small businesses, predominately restaurants. Tony had been growing well. As he grew, his capacity was showing some strain. His overtime hours were up, and his laundry facility was running near its max. Tony is a cautious guy, and he was nervous to try and painlessly find a loan to expand his  business. He’s a smart businessman, but he has a bit of bank-phobia. He doesn’t understand all the jargon, thinks they talk down to him, etc. 

The first thing we said to Tony was: “You didn’t go to school for Finance, so cut yourself some slack. They wouldn’t understand why you use detergent X for client Y, so they’re no different from you. They just have different skills” Tony agreed, and this started the process of helping him become more comfortable and at ease with the process. 

What Did We Do with Tony?

Working together, we'll be able to help you expand your business

It was obvious from the start that Tony needed to expand, and a loan would help his business. Tony had his business model down. He could tell you to the penny where everything was spent, and he knew and could forecast how much a volume an average client would need. Based on his current growth trends, it was pretty easy to estimate how much additional capacity he would need. All we had to do was get it all down on paper in a formal that the loan underwriters and officers would understand. The most important things to qualify for a loan are usually an income statement, balance sheet, and cash flow.

So, which lenders were right for Tony? How did we choose? Well, Tony had an established business, which was profitable and growing. He had collateral in terms of his current and future equipment. He had a good credit score, enough to ensure his eligibility. 

Given these criteria, we decide to shop around the traditional bank and SBA route. Tony waited a little too long to expand so we needed the SBA process to go as quickly as possible. To do that, we needed to make sure that we had all the boxes check before we submitted the application. There are a lot of little things that can hold up an application. It’s good to have all those fixed beforehand. 

Finding Loans to Expand Businesses

Tony found the loans he needed to expand. It was a little later than we hoped, but an SBA loan is never fast. Luckily, the overtime hits and capacity crunch was manageable, but we weren’t able to bring on new customers until our capacity was in place. Once we had the new equipment on-line and workers hired, we back on a growth track. Tony has since learned not to be so hesitant about getting capital that it puts him in a bind. He’s since got another loan for more equipment, but this time he did it as soon as he started to see the signs of capacity pressure.

An example of how you could expand your business, given the seed money

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

The Small Business Lending Ecosystem – What to Know 

Small Business Ecosystem

In recent years, there has been an explosion of small business lenders (SBL). And this is a good thing, for sure! But buyers should beware. For some businesses, loans provided by alternative lenders is a godsend. But for other businesses, it could be a one-way ticket to bankruptcy. Over the next few days, we at ProStrategix want to explain all the different concerns and successes that the small business lending ecosystem can provide. From businesses in need of economic help to those that want to look outside of the traditional banking system, small business lending is something worth considering for your own business. 

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

What is the Small Business Lending Ecosystem?

First and foremost, we wanted to provide a quick snapshot & overview of the SBL ecosystem. This graphic from Business Insider is a wonderful explanation of the many kinds of lending.

A chart from Business Insider depicting the small business lending ecosystem

The graphic provides a way to look at the different types of lenders by class. Let’s go through a quick rundown of what each of these categories are in this small business lender ecosystem.

Balance Sheet Lenders

Kabbage, an example of a small business lending group in the ecosystem

Small business owners probably hear enough about balance sheets, but let’s translate this bank-speak into plain English. Essentially, these lenders mean the bank won’t sell your loan. Many lenders sell loans to others at a discount to reduce risk. As a consequence, balance sheet lenders are more cautious and will go through more scrutiny since they are the ones carrying the risk. The SBA was created in part to help mitigate some of this risk, and many of these lenders will steer you to these products.

Marketplace Lenders

These lenders, also called peer-to-peer lenderspost your application to their network of investors. Interested parties will be aggregated into a final loan offer. Since the risk is distributed, these lenders tend to be a bit more forgiving with respect to credit score and time in business. However, you will pay for that generosity through generally higher interest rates.

Lending Platforms

One example of a company in the Small Business Lending Ecosystem

These are platforms where an algorithm reviews metrics from the application to match borrowers to particular lenders. This provides an opportunity to comparison shop across a broad range of lenders and loan products. This can be helpful for people who don’t have time or the expertise to comparison shop on their own. While these are helpful, they are limited to the number and types of lenders in their network. They are typically alternative lenders, which mean higher rates than a traditional bank. There will be a service fee attached to the loan as well. 

Payment Companies

Paypal, an example of a small business lending group in the ecosystem

Payment companies are also getting into the act. Paypal and Square are also offering loan products. They are relatively new, but also offer small businesses an alternative route to traditional lending in this ecosystem.

In Conclusion

Our next series of blog posts will speak about how we used this ecosystem to help a number of our clients in different stages of growth. There is not a one-size-fits-all approach to the SBL ecosystem, so each business should carefully consider their options before making any decisions.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Will 401ks Become Easier for Small Business to Offer?

401ks: not as easy to access as you might hope

401ks are some of the most important retirement plans that are available to employees in 2019. And there is an important question to ask: are 401ks going to be able to be offered by small business owners easily in the near future? 

The answer is… maybe. It’s not simple, and as far as we can tell, it’s not cheap ⁠— especially if you have fewer than 20 employees. 

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

The New U.S. Department of Labor 401k Rule

What is it?

Well, it broadened the definition of employer associations. On paper, the rule makes it easier for small businesses to group together to offer 401(k) retirement plans. This is done through what is called an Association Retirement Plan, ARP for short. Wow, that sounds great, you may say. But, how are we going to group together? Who’s going to foot the bill or do the work? Ah, and there’s the rub. Like most of the proposals from this Administration, it’s big on words but benefits only a few.

What does it mean to us?

Let me share our story. Like most small businesses, we want to offer healthcare and retirement benefits to our employees, but we can’t afford it. When we heard about this rule, we were encouraged. We thought, awesome, great, let’s check this out. We researched the NYC area for business groups and open plans, thinking surely someone is going to jump on this. What did we find?  

Zilch!  

Yep, nothing. We found myriad Professional Employer Organizations. But they’ve been around for years, as has the Chamber of Commerce. So, we were left with the same choices that we had before.

Professional Employer Organizations (PEO)

What are they?

“Professional Employment Organizations generally contract with employers to handle administrative employment responsibilities, such as payroll and tax withholdings, workers' compensation insurance, and other benefits.”

Jackson Lewis

PEOs have had a somewhat rocky history. While there are plenty of reputable ones. There were laws passed in several states in the early 2000s due to charges of impropriety. At least in New York State, you need to be registered with the State and comply with state regulations, such as requiring yearly financial audits, etc. While under this new rule, small businesses can technically create these groups, the overhead and the expense of running and maintaining one is significant. So, no real win there.

What does it mean to you?

If you want to offer healthcare, retirement, and other benefits, you can contract with a PEO. They do offer premiums that are better than you can get on the open market, but they generally charge about $1,000 – $2,000 per employee for their services. It does take the headache of complying with payroll taxes, withholding, etc., so for some, it may be worth it. One might expect premium costs to go down if more people enroll, but as of yet, we’ve not seen it.

Here’s  brief video on what PEOs are and how they can help you

So, Will the Changes Help Us?

The sad truth is nearly 40 million employees, or roughly, 25% of the total workforce lack workplace retirement benefits. One would think that this executive order and subsequent rule would help. However, in the harsh spotlight of reality, that seems unlikely. While the option exists, the cost remains prohibitive. Going to a PEO was an option before as it will be after the rule takes place. It would seem that they, not us, are the real winners in this case. Again, this is no different from the myriad of actions by this political administration(like Tax Cuts), that sounded great but only benefited a few.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Get Capital Without Getting Clobbered

Get-Capital-without-Getting-Clobbered

As we said in our post, “Small Business Lending is Booming”, the market is awash with capital. Just because you can get capital, doesn’t mean you should. It can be risky, and some loans are more dangerous than you might think So, how can you get capital without getting clobbered?  

In fact, Kabbage just got $200M in funding to support its AI-based small business loans. When the market is saturated with capital, lenders start making riskier loans. Riskier loans mean higher interest rates, for example. Follow our three simple steps to know how to say afloat. 

Unsure of how to take your business from good to great? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a FREE thirty-minute consulting session. 

First, can you grow faster than the interest rate being charged?

How do you know? Simple, what’s does your business plan project? Don’t have one? Write one.

Right now, small business lenders might be more willing to allow less thorough plans or none at all. You might think that’s a good thing, but it’s not. Remember, if you can’t grow faster than the interest rate, you’re losing money. Defaulting on easy capital is just as damaging as defaulting on hard. In other words, that’s the first way you can get capital and get clobbered.

A business plan requires a business model. Your business model can tell you whether or not you have a good chance to grow at the rate you need to grow in order to beat the interest rate. With one, you’re much more likely to be able to get the right capital without getting clobbered.

Second, how is your credit?

It’s unlikely that you will qualify for a low-interest rate with a small business lender if your personal credit score is less than 700. We’ve heard of lenders now willing to give capital to people with scores as low as 600.

While it may sound like it’s a great thing to give people a chance, unfortunately, it’s not.  They’re not going to give you the capital for free. A lower score will mean higher levels of interest. 

This takes us back to our first point. You can get clobbered if you get
capital at a rate which is higher than you can grow. If you can, you would be
better served to fix your personal credit before you seek capital.

Having a high credit score is the second thing that can help you get capital
without getting clobbered.

Lastly, What’s your debt cash ratio (DCR)?

Your what? This is basically a fancy term which looks at how large of a loan you can reasonably afford based on your size.

See our post “Small Business Lending is Booming” for the formulas to do the calculations. If you fail those fitness tests, then perhaps you should explore other options.

Being overleveraged is the final way you can get capital and get clobbered. It limits your options later if there is a downturn or a slowing of your growth. Since you’ll still have to pay back the debt, you’ll have less cash on hand for everything else.

You can really get clobbered if you gave any personal
guarantees to get that capital. Why? Because now your personal possessions are
at risk. If you’ve been
in business less than 2 years and/or you lack collateral to offset the debt,
you may be forced into this position.

Being
properly leveraged is the final way to get capital without getting clobbered.

If all of this has made your head spin, you’re not alone. Unfortunately, this is really important to understand. The last place anyone wants to be is swimming in debt from a small business lender. 

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Why You Should NEVER Use Merchant Cash Advances

NEVER-use-Merchant-Cash-Advances

A merchant cash advance is a form of financing that should be avoided like the plague. Over the years, we’ve seen a number of struggling businesses fall victim to these predatory lenders. Don’t be one of them.

Feeling like your business isn’t going the right way? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Merchant Cash Advances are NOT loans

When they reach out to you and position their products, they sound like loans. They look like loans. But, these are NOT loans.

In the aftermath of the financial crisis, banks were cutting back on lending just when small businesses needed cash the most. Companies such as Yellowstone stepped in. They got around lending regulations by calling what they did “merchant cash advances,” not loans

Bloomberg

Even judges will admit there is very little distinction between the two, but unfortunately, there are very big differences in the consequences.

They know all the selling tricks in the books

They hire anyone who can sell, and scruples of those agents are highly questionable.

The best brokers earned tens of thousands of dollars a month, former employees say; others slept at the office, fought, sold loose cigarettes, and stole from each other.

Bloomberg

The most notorious tactic is the bait & switch. It typically starts with an unsolicited fax or e-mail offering a large loan at a low rate. Once you respond, they generally say that in order to qualify for the bigger loan, you have to accept a smaller amount and make a few payments as a trial. Then, the hammer falls.  For example, Bloomberg reports on one poor couple.

The advance turned out to be for $36,762, repaid in $800 daily debits from their bank account starting the day after they got the money. This would continue for about three months until they’d repaid $59,960. But when he followed up the next month to inquire about the status of the bigger loan, he got no response.

Bloomberg

Merchant Cash Advances can have APR (annual percentage rates) of up to 400%

Say what? Yes, that’s true. It’s usury at its worst. Because they are merchant cash advances, the percentage rate in the forms they send you are NOT the APRs. For example, one of our clients reached out to us after getting themselves into trouble with Yellowstone Capital.  According to Bloomberg, they are one of the worst.

In that agreement, Yellowstone stated a “specified percentage” of 25%. It sure looks like an interest rate, right? Wrong. It’s definitely not. In the agreement, they state the amount given and then, the amount owed. Thus, they’re betting on you not knowing how to do the math, and mistakenly assuming the specified percentage is the interest rate.

For instance, this client was paying $19,000 in interest in 6 mos. on a $40,000 advance. In no universe, does that equal 25% APR. In other words, if you do the math, the APR was around 120%. Another client came to us, after getting into trouble with a loan with an APR of 67%.

In the Bloomberg example for instance, the APR for that loan was 350%. In comparison, our clients got off easy although it nearly bankrupted them.

Merchant Cash Advance lenders can ruin you

The most damaging way they can affect you is through an obscure law called confessions of judgments.  To obtain funds from these merchant cash advance lenders, you usually sign a clause agreeing to a confession of judgments. What is it? It’s a way to collect a debt without the fuss of a trial. How do they work? Bloomberg has a great graphic.

NEVER use Merchant Cash Advances
Merchant Cash Advance Confession Judgment Process

Within a few days, your bank accounts can be drained. Liens will be put on any of your accounts receivables. Liens can also be put on your personal assets if you signed any personal guarantees for the advance. While not enforceable in all states, it is a well-used tactic in New York State, where these laws are enforceable. Because of this, most of these lenders are based in New York. And, if you read the contract in detail, you will undoubtedly find that the contract states that it will be governed by the laws of New York State. 

As the chart shows, the use of this tactic has skyrocketed since 2014

Never Use a Merchant Cash Advance

Why isn’t anything being done to stop merchant cash advances?

There is action in Congress, but the government process is slow. Plus, it faces an uncertain future in the Trump administration.

Velazquez, chairwoman of the committee [House Small Business Committee], and Roger Marshall, a Republican from Kansas, have introduced a bill that would ban confessions of judgment in business loans. Ohio Democrat Sherrod Brown and Florida Republican Marco Rubio have made a similar proposal in the Senate.

Washington Post

What’s the moral of this sad story?

Get help before your financial situation makes you desperate. Merchant cash advance lenders prey on the hopes of small business owners who are having financial difficulty. We have written several posts that can help us find the right financing for you: How to Take the Pain Out of Getting a Loan”, “Securing a Loan: Top Tips for Small Business”, “Small Business Lending is Booming”, “Best Small Business Loans & How to Qualify for Them”, and “How to Avoid Looking Stupid When Talking to Banks”.

As Shane Heskin put it beautifully in the Washington Post article, small business owners aren’t bankers and lawyers.

“My clients are very good at what they do. They know how to fix a boat. They know how to install a sink,” said Shane Heskin, a lawyer at White & Williams LLP in Philadelphia who represents small-business borrowers. “But that doesn’t mean they know how to read a contract in 8-point font. It doesn’t mean they know the legal ramifications of signing a confession of judgment.”

There are plenty of sources for help.  We cover them in our post “How to Learn about Business for Free,” and we can help you with much more than just that.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

How to Write a Kick-ass Pitch Deck

kick-ass-pitch-deck

Now, in our posts, “3 Golden Rules to Nail a Pitch” and “3 Avoidable Mistakes that can Blow Your Pitch“, we said that a pitch deck of 10 slides is ideal, but what should those slides be?  For a kick-ass pitch deck, here is our recommendation for content:

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

First, start your kick-ass pitch deck with a Story

Importantly, slide 1 of your kick-ass pitch deck needs to tell your story.  Start with your elevator pitch and give it some more depth.  For example, we said that the key elevator pitch showcases that you know your company, your market, and your unique position within it. 

Now, that you have their attention, it’s time to reel them in. Therefore, in a kick-ass pitch deck, we need to build on our elevator pitch and create a story. What’s the need?  What are the challenges?  And, how, with help, we can be the hero or heroine.

Next, explain the Problem & How You Uniquely Solve it.

Therefore, slides 2 & 3 in your kick-ass pitch deck focus on the problem in terms of magnitude and 2 support points.  For instance, $X Billion market for… Ref 1, Ref 2 (credible sources), X Million People who need… , etc. Then, on the next slide, explain how you uniquely solve this problem.

Third, the Business Nuts & Bolts of Your Kick-Ass Pitch Deck

First, slide 4 explains your business model and how it works.  How you acquire leads, convert them to customers, provide your product or service, etc.  What we want to show here is that we are realistic in our model.  How do we stack up vs. comparable models, etc. 

Second, slide 5 shows what traction or proof that you have that the model works.  It may not be profitable, but it needs to show that there is demand, your product or service met it, and customers were satisfied. 

Third, slide 6 shows your financial projections.  Again, like slide 4, they should be realistic.  What is your category share?  Ratio of spending to sales? etc.

Lastly, slide 7 showcases your team.  It highlights why their experience is the right mix of talent to support you now, and you can leverage their experience to deliver your projections.  Investors invest in people, not companies.  It’s important to remember this when building out your team.

Finally, the Ask

The final section of your kick-ass pitch deck focuses on the ask. First, slide 8 should cover the Ask. For instance, how much do you need?  by when?  for what % of the company?

Then, slide 9 covers the valuation and justification for the ask.  Finally, you close with the use of funds.

And there you have it – 10 powerful slides and one a kick-ass pitch deck.  

Live Plan has a similar take on content, for example, but with a few differences.  There are also some great templates for pitch decks. For instance, Improve Presentations offers paid templates while we provide one for free

By using our outline, and a beautifully designed template, you have a great do-it-yourself plan for a kick-ass pitch deck. If you need help, please contact us.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

3 Golden Rules to Nail a Pitch

golder rule nail pitch

It’s amazing how many pitches are wasted. They could have easily been saved by following these three golden rules to nail a pitch.

Unsure of how to take your business from good to great? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

First Golden Rule to Nail a Pitch: Have an elevator pitch that is less than 10 seconds

First, investors are busy.  They hear thousands of pitches every day.  If you can catch their attention in the first 5 seconds, you’ve succeeded at the first golden rule to nail your pitch.  If you can’t communicate the essence of your idea in less than 20, you’re sunk.  For how to write a pitch, see our post “How to Write an Elevator Pitch in less than 10 minutes”.

Have a pitch deck with no more than 10 slides

Second, you have to prove that you’re worth an investors time.  If they are leaning in after the first 2 slides, you’ve nailed the second golden rule to nail your pitch.  If you take more than 15 minutes to get your idea across, say thank you and leave.  Remember this simple fact: The person who does the most talking is losing.

Have a complete business plan ready

Finally, it all goes back to valuing the investor’s time.  He or she doesn’t want to have to work to make sure you have your ducks in a row.  Producing a plan when asked means you’ve just nailed the third golden rule to nail your pitch.  Time is money to you as well, so any lost pitch is money thrown out the window.

Fortunately, you don’t have to do this by yourself.  At ProStrategix, we offer fundraising advice and guidance for those seeking to raise capital.  We also provide some free do it yourself tools. For other free tools and classes, you may want to visit your local chapter of SCORE.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

How to Write an Elevator Pitch is Under 10 Minutes

elevator ptich

A strong elevator pitch is a primary tool when looking to raise funds.  Most entrepreneurs are so passionate about their ideas that it is really very challenging for them to write their elevator pitch succinctly. 

So much is exciting, and everything is important.  However, an investor is only interested in two things: Is the idea unique and differentiated?  Is it feasible?

We offer a simple hack below. Other sources, such as Business News Daily, offer a more elaborate approach. Which every you chose, and effective elevator pitch is critical to the fundraising process.

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Simple Hack to Write an Elevator Pitch

Here is a simple hack to writing an elevator pitch which gets to those two points quickly and clearly.  It’s just two sentences, but they contain all the information a potential investor needs.

[Enter Company Name] is the ONLY [Enter Industry or Competitive Set] that provides [Unique Point of Difference].  That’s because [Support Claim #1] and [Support Claim #2].

That’s it.  Done.  Let’s look at an example of a fictional elevator pitch for an electric car.

An Example of How to Write an Elevator Pitch

Turbo X is the ONLY electric car that provides zero carbon emissions without sacrificing performance.  That’s because our patented engine design, which provides rapid acceleration, and our patented battery, which provides up to 300 miles/charge.

See how succinct that is.  In less than 5 seconds, you’ve conveyed how you are unique and why.  You’ve also proven your knowledge of the key drivers and needs of the category.  It shows your mastery of both.

Key Points: Knowledge of the Category, Company, and Its Unique Place within it.

Of course, it implies that the investor is knowledgeable about the category, but you shouldn’t be giving an elevator pitch to someone who isn’t.  They aren’t likely to invest in industries in which they don’t have experience.

The key to writing such a clear elevator pitch is to know your company, your market, and your unique position within it.  That can be the tricky part.  This requires a solid business model and competitive assessment, but it is well worth the time and investment.  Without it, your elevator pitch will not be as powerful as it should.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

3 Avoidable Mistakes that Can Blow Your Pitch

mistakes that can blow your pitch

The team at ProStrategix has attended countless pitches, and we’ve found that the 3 most avoidable mistakes that can blow your pitch are outlined below.

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Having an elevator pitch that is more than 5-10 seconds

Investors are busy.  They hear thousands of pitches every day.  If you can’t catch their attention in the first 5 seconds, your chances of being heard drop dramatically.  If you can’t communicate the essence of your idea in less than 10-15, you’re sunk. This is the most avoidable mistake that can blow your pitch.

Having a pitch deck with more than 10 slides

As above, investors value their time, and you have to prove that you’re worth it.  If they are not leaning in after the first 2 slides, you’ve likely lost them.  If you take more than 15 minutes to get your idea across, say thank you and leave.  Remember this simple fact: The person who does the most talking is losing. Doing the most talking is an avoidable mistake that can blow your pitch.

Failing to have a complete business plan ready

It all goes back to valuing the investor’s time.  He or she doesn’t want to have to work to make sure you have your ducks in a row.  Failure to produce a plan when asked means you’ve just wasted your pitch.  Time is money to you as well, so any lost pitch is money thrown out the window. This is easiest mistake to avoid so you don’t blow your pitch.

Fortunately, there are people who have been here before and can help. The key is figuring out whom you can trust.  At ProStrategix, we offer fundraising advice and guidance for those seeking to raise capital.  For other tips, you can check out Techstars Entrepreneur’s Toolkit. If you are looking for more hands-on assistance, ProStrategix can help.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.