Every entrepreneur has to present a business plan to outsiders at some point if he or she is seeking a loan or investment in the company. Obtaining venture capital funding, angel investment, or even bank loans for a business is increasingly difficult in a tough economy. You don’t want a poor pitch to impede you ability to score financing for your business. In fact, it’s imperative to have a pitch and presentation that showcases your idea, your potential, your market and your ability to provide investors with a return on their investment.

The business pitch is different than the business plan. But you need to have your plan drafted before you can fine-tune your pitch. “People misunderstand that the pitch is a different medium than the plan,” says Tim Berry, president and founder of Palo Alto Software, maker of Business Plan Pro software, who blogs at bplans.com. “They misunderstand that somehow plan is going to sell the business. The plan is the screenplay for the business. You have to have it before you can put together your pitch. The pitch is a summary of the plan.”

The following pages will cover how to prepare your pitch, how to choose potential investors, and some basics for delivering the best presentation possible.

Prepare Your Pitch and Presentation

A business pitch consists of an effort to convince others that your idea for a business is a good one. The pitch involves summing up your business plan — going over your product/service offerings, your market, your leadership, and why you will succeed. Informally, you may have done this a thousand times already. “It can be as simple as your reality check in a one-person business, or agreeing with a spouse or significant other, your team members or your boss,” Berry says.

The more formal process of pitching and presenting is usually before an audience of venture capitalists, angel investors, or bank loan officers in an effort to secure a loan or investment in your company. Usually, an entrepreneur starts off by asking for a certain amount of money, and the value proposition for the investor — such as what percentage of equity in the business that investment would buy. Most of the time, an entrepreneur would make a formal presentation — often with a slideshow — to help illustrate a pitch. The formal presentation is typically followed by a question and answer session. Investors often mull over the details and, if they make an offer, will perform due diligence on the financials before turning over any funds.
Know Your Business Plan. The first rule of thumb is to write a business plan and to know that plan inside and out before pitching and presenting to outside investors. The written business plan is often the way to get in the door with investors. If they like your plan, they may invite you to pitch and present. You may get only one chance to present to this group. Don’t blow it by seeming ill-informed or being unable to answer questions.

“It’s crazy to think you can jump into this process without having thought through the details that come up in a business plan,” Berry says. “You’re not going to cover those details in many encounters with investors, but you need to know your plan backwards and forwards, inside out before you start, whether you show it to investors in early meetings or not. There is no room for filling in the details later. You are supposed to have them ready to go from the first encounter.”

Venture capitalists, for example, may have 100 or so business plans piled on their desk at any given time. They only listen to formal pitches and presentations from a handful. Your business plan needs to include the necessary components — the business concept, market, management team, financial projections, marketing plan, etc. You should have a hand in drafting the plan if you are the presenter so that you are intimately familiar with all the details. The goal of the business plan is to convince investors that you are worth the risk of investment.

Your pitch and presentation need to build on that theme.”It really has to pop them,” says Linda Pinson, author of Automate Your Business Plan for Windows® and Anatomy of a Business Plan, who runs a publishing and software business Out of Your Mind and Into the Marketplace. Pinson also was selected by the U.S. Small Business Administration to write its government business plan publication. “It’s got to say to that VC ‘What’s in this for me?’ It’s got to have an overview of what you’re asking and what you’re trading for it. Is this a business that looks like it will have fast and sustainable growth and get the returns to the investor that he or she is looking for?”
Determine How Much Funding to Request. The reason an entrepreneur makes a pitch is most often to request funding. But just how much to ask for is often key.

“Match your financing goals to reality,” Berry says. “Don’t think you’re going to get millions in venture capital unless you have a good track record with previous startups, a very strong potential business, and a realistic exit strategy. If you’re looking for a few hundred thousand dollars, look into angel investors, seed money investors and/or seed money funds. Understand which investors want high-growth and high-risk strategies, and which will accept lower growth and lower risk.”

Many of the decisions by investors are based more than financials. “A lot is based on the personal confidence they have in you. It’s not just numbers on a piece of paper,” Pinson says. “Today is a very difficult time for investment capital.” One way to prove to investors that you are investment-worthy is to show that you are investing in the business, too, by putting up your own capital and being willing to trade some equity for their financing.
Prepare Your Message. A pitch needs to be prepared in a variety of formats to take advantage of not only the formal pitch and presentation meeting but the informal chance meeting in an airplane or elevator.

Here are a few types of pitches:

• E-mail message and elevator pitch. Every entrepreneur should have a short, concise speech ready whether they step onto an elevator or prepare to travel on an airplane. You never know who is going to be sharing the ride with you. “It’s the 60-second or two- or three-minute pitch where one person in a seat tells the other person about their business,” Berry says. The key words to keep in mind while crafting this message are: quick, powerful, and condensed. You won’t have the investor’s attention for long so condense this message. Berry suggests a one-page e-mail and/or a 60-second elevator speech are sufficient.

• Summary memo. This is a lengthier treatment of your elevator pitch. It consists of a 2-5 page memo summarizing the need or want you fill as a business offering, your target market, differentiation, growth prospects, management team, and your financing plan, Berry says. It’s important to emphasize how much money you need from investors, how much of your company ownership you’re prepared to give in exchange, and how you’re going to turn that back into money for them, including when and how much, he says.

• Pitch presentation. This is your more formal pitch presentation that you make to investors. Cover the same elements included in your summary memo and in the executive summary of your business plan. Plan on 20 minutes maximum with no more than 10 slides, and use pictures and diagrams, not bullet points, Berry says. “Don’t ever read bullet points in a presentation.”

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