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Hudson & Young Blog

How to make your business pitch perfect

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“SEVEN seconds. Then, if you are lucky, another 30 seconds.” That is all the time you have to grab the attention of a potential investor, so make your pitch count.

The national chair of The Executive Connection, Jerry Kleeman, says you can catch someone's attention with a seven-second taste, move in with a 30-second pitch before your full six-minute presentation - as long as you're receiving the right signals.

"As long as you are getting that 'tell me more', you can go into more detail," he says.

Brisbane Angels founder and chair John Mactaggart says the brevity of a pitch works for both parties.

"You're not going to close the deal in the first 30 seconds but you have got to introduce the deal with a lot of enthusiasm," he says.

"Just don't take too much time. If someone says they have half an hour, they have half an hour, no more. Value that person's time."

Investor Kerwin Rae says a pitch is a taste-test - not a buffet.

"A good 'elevator pitch' is about knowing how to plant seeds in short conversations that have people wanting to know more," he says.

"Save the big talk and stories for the next meeting. This is about whetting the appetite and generating interest."

Here are four important things to remember when preparing your presentation:

What's in a pitch?

Your first option should grab attention or qualify interest.

"They really need to cover the issue, their solution and they need to get across the fact that it's a deal (investment deal)," Mactaggart says.

Your six-minute formal pitch is the whole shebang, building on your 30-second pitch.

Explain the problem you are solving, how you will fund your solution, reveal your team and their experience, risks and their management, how much money you are seeking and how you will use it to advance the business. And, of course, outline your time frames and what is in it for investors.

"Most people try to sell us a product like a customer ... We are not going to buy the product - you have to sell us on why other people will buy the product," Mactaggart says.

Investors simply need to know how they will make their money, he says.

Hitting the mark

Even the best pitch can miss if it is aimed at the wrong person, Rae says.

Ask questions to identify a person's interests that might be played upon, but always watch.

"Body language, people leaning in, seeking eye contact, nodding, curiosity, questions people wanting to know more is always a great indicator of hitting the spot," Rae says.

"The key is being able to elicit these responses in two to three minutes and in a way that leaves people saying to themselves 'I need to speak to this person again'."

Practise, practise, practise

The Executive Connection's Kleeman says people need to practise their pitch so it is brief but still powerful.

"It has to be genuine and they have to believe it," he says."But they have to practise - over and over and over and over again until they feel really comfortable with it."

Time and place

Mactaggart says business owners need to recognise that their targets aren't always "on", or open to a pitch.

"If I am giving a talk to a group of entrepreneurs or at some networking event, I'm not there to be pitched at," he says.But don't expect potential investors to tell you where you have gone wrong, he says. "We don't have that much time to go through mentoring."

Find the buisness funds you need

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It is not surprising to see that recent survey found that business owners are increasingly turning to their own resources or friends and family to fund their business.

A CPA Australia survey found 45 per cent of businesses wanted cash, and 40 per cent of those were looking to fund growth - and friends, family and personal resources headed the list for financing options.

But there may be another way for growing businesses.

Big bucks

If you are chasing the big bucks and have your growth plans pegged out, Australia's private equity community just might be interested.

Australian Private Equity and Venture Capital Association Limited chief executive Katherine Woodthorpe says managed funds are looking for tech-based investments with a three to five-year turnaround.

Of course there is a trade-off. The fund is likely to take a 40 per cent stake in your company and demand board seats to both safeguard and contribute to its investment.

But Woodthorpe says businesses need to put more work into their business models to attract funds - and they need to be persistent.

"They should ask why they were rejected and ask whether it is the sales price, the product or the budget," she says.

"So they should ask 'what's wrong with me', and not 'what's wrong with them'."

Big names

Australia still has a limited industry-based venture capital industry but there are three big names solidly in the playing field: Telstra, Optus and Lendlease Ventures.

Lendlease runs a $100 million fund looking for cleantech ventures seeking to commercialise their technology.

Optus and SingTel last week announced the first start-ups for the Innov8 Seed program. It invests up to $250,000 each for companies with mobile and digital offerings - also offering a fast line to SingTel's 445 million mobile customers.

Telstra has similarly aligned its $50 million venture capital division with technologies which offer mobile and digital potential.

Sent from heaven

Finding your wealthy Australian benefactor can be a hit-and-miss affair.

Look for successful entrepreneurs in your field who may have spare cash and knowledge to invest in a new business or informal "matching" services such as the Australian Investment Network or the Australian Small Scale Offerings Board that aim to link investors and entrepreneurs.

Alternatively, you may wish to tap into Australia's growing Angel Investor network.

Chief executive of the Australian Association of Angel Investors, Ruth Drinkwater, says the strength of angels remains their expertise.

Most will look for investments in their geographic area (organisations tend to be city-based and are listed on the AAAI website), moving beyond the boundaries only if there is a strong personal link with the entrepreneur.

But investors are looking for the same thing, she says: a good concept, a good solution, a good product that solves a problem, something that is scalable with customers willing to pay for it.

Even a rejected pitch can be of value, she says.

"A good angel investor will give you good and constructive feedback," she says.

Remember, the consultants at H&Y have years of experience finding investment for our business clients and know what the process is, and what is required. Contact us if you would like to know more.

Seven ideas to help SMEs retain staff

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“The Australian Human Resources Institute says people leave because they are bored in 34 per cent of cases, a lack of promotion (32 per cent), poor pay (27 per cent) and poor work-life balance (25 per cent)”, News Ltd reports.

This leads to the list of seven things SME’s can look at to improve staff retention:

Close to home

Allsop says people may opt for a smaller business, and even take a smaller pay packet, if it saves time commuting.

Less commuting means more time with family and friends - not to mention public transport and car maintenance savings.

Work-life balance

The phrase is overdone but Allsop says there is no doubt employment decisions are made on the basis of people trying to maintain a job, study, lifestyle and family. With more women likely to be in the workforce, and the expectation that the man of the house will contribute to family life, downshifting is not unusual.

Flexibility

Another appealing aspect of the smaller businesses is more flexibility. Smaller businesses mean less protocols, quicker decisions and a greater flexibility with work hours.

Recognition

You may be just a cog in a wheel in a big business but have a very real role to play in a small business, Allsop says.

The onus is then on the business owner to make sure their employees know they are valued - and plan to step back and allow their most capable workers to grow.

The head of business strategy consultancy Acorro, John Downes, says this can be an indicator of loyalty.

He says many of his small business clients hand out movie tickets, shout staff to sporting events and throw barbecues to keep staff happy.

Feel good

It might be environmentally sustainable, socially motivated or philanthropic. Staff might turn their back on a bigger pay packet if they share the passion.

Career paths

Allsop says some smaller businesses offer opportunities for career advancement and potentially a shareholding or ownership of the business - a move also likely to benefit owners looking for a way out.

"Several people within my network sold their businesses to employees or bought their bosses out," he says.

Communicate well

A 2009 survey by the Australian Human Resources Institute found 60 per cent of employers saw improved retention by improving their induction program. And while higher pay was used in 43 per cent of cases to keep good people, it was outweighed by training (54 per cent) and improved employee communications (58 per cent).

Downes says good business leaders communicate the strategy and objectives of the business to their workers.

"Staff need to feel that they are part of the journey, valued to participate in the future of the business, that there is a grand plan (or any plan) and that their faith in the employer is warranted to stick around for," he says.

Aim to retain best workers

Advertisers move online

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The Herald Sun has reported that its own traditional revenue outlook is bleak.

ONLINE consumer spending is expected to be the biggest revenue driver for Australia's media sector over the next five years, overtaking advertising by a factor of three.

PricewaterhouseCoopers' annual Outlook report, released today, forecasts consumer spending will jump from $18.95 billion in 2011 to $24.1 billion in 2016, an annual average growth rate of 4.9 per cent.

Internet businesses, including media companies' online offerings, are expected to be the biggest beneficiaries, almost doubling from $6.4 billion of consumer spending to $10.2 billion.

The sector is also expected to boast an annual growth rate of 12 per cent for its advertising revenue as it grows from $2.6 billion to $4.7 billion.

The report canvasses the broad spectrum of global media, including books, magazines, films, interactive games, music, internet and subscription television.

It comes as advertising revenues are down across traditional media, with Seven West Media embarking on a $444 million capital raising and Network Ten going to investors for $200 million to compensate.

"In the face of sweeping change and uncertainty, the E&M (entertainment and media) industry has spent the past few years seeking effective business and operating models for the new world, through a cycle of constant experimentation, ongoing innovation and targeted analysis of the results," it says. The report says the rise of consumer spending also stresses the need for quality content most at risk if not regulated.

"As the bedrock of advertising and consumer revenues, content cannot be taken for granted," PwC technology, information, communications and entertainment leader David Wiadrowski said.

This is a point often missed by online start-ups. Content is still king, and your users should not be taken for granted.

Employee v Contractor

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MGI Boyd principal Sue Prestney says small businesses often presume people are contractors and not employees - a presumption often pierced by the tax office.

"Contractors are driving them nuts," she says. "People may think they're a contractor if they have an ABN but they may be sitting in the office, accepting instructions and acting as an employee. You still have obligations for payroll tax, workcover and super."

She says businesses should review the people contributing to the business. Common law may declare a person to be an independent contractor but legislation may require superannuation payments be made if their contract is wholly or principally for their labour and they are not paid to achieve a particular result.

A discretion as to working hours may take a person outside the common law definition but super must still be paid.

Prestney says some areas should always ring alarm bells - the use of trusts, times when personal drawings exceed available profits and personal items that may fall within Division 7A requirements. The answer - put yourself to an audit to see how you cope.

The onus is on the employer to get this right, so I you are employing contractors make sure the arangement is structured correctly.

Borrowers chase better loan deals

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Sophie Elsworth suggests that the number of borrowers switching loans is rising, with Australians hungrier than ever for better mortgage deals. Remember H&Y can arrange finance through our licenced broker network. Contact us for more information.

Australian Bankers' Association chief executive Steven Munchenberg says the rate of home loan refinancing is strong, with multiple interest rate falls and increasing competition between banks leading to more borrowers switching.

At 36.6 per cent, refinancing of housing loans as a proportion of new commitments is at a high level,'' he says.

"In the first eight months of 2008 it had reached 33-34 per cent and then fell quite sharply to as low as 24 per cent in September 2009.

"Customer satisfaction with their banks is close to record highs at around 78 per cent, and most Australians choose a bank when deciding to take out a mortgage.''

Latest Australian Bureau of Statistics figures show the average size of a refinanced loan for the year to May is $254,000 compared with the average national mortgage of $315,000.

ME Bank group executive for sales Ian Hendey says he has seen an increase in borrowers refinancing in the past 12 months.

"At ME Bank our refinancing portfolio has increased from 21 per cent to 28 per cent,'' Mr Hendey says.

He says there are several reasons why more Australians take home loans elsewhere.

"The movement in interest rates, lack of clarity and transparency and discontent has seen borrowers looking for alternatives,'' he says. ``And lenders now take the legwork away from consumers.''

When it comes to crunching numbers and working out if refinancing is worth it, Yellow Brick Road executive chairman Mark Bouris says borrowers should use the official cash rate, which sits at 3.5 per cent, as a guide for their home loan rate.

"If you're paying more than 2.75 per cent above the cash rate, refinancing should be a top priority,'' he says.

"A low interest rate is very important but so are the loan features such as an offset account and redraw facility.''

In July last year, a ban on mortgage exit fees was introduced for all new home loans. However, it did not apply to existing home loans.

BEFORE YOU REFINANCE

- Examine the costs.
- Don't just look at the interest rate.
- Before deciding, look at the discharge fees.
- Shop around for the best deal.

Curbing legal conflict costs

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Picture: International Austral

Russell Emmerson writes that disputes are inevitable, costly and can ruin a business.

At their worst, they lock parties in a court battle with costs easily expected to pass $20,000 not to mention lost time and higher stress.

A Federal Government survey shows small businesses are likely to turn to lawyers before cheaper alternatives, and are then dropping serious disputes because of the higher cost.

But businesses can't avoid the impact of disputes nor the potential risk, says national president of the Institute of Arbitrators and Mediators, Rowena McNally.

"If it interferes with your cash flow or ability to run your business, it might close your business," she says.

The article lists four key factors to dispute resolution:

PREPARING THE WAY

The best defence against costly disputes is to make sure your customer and supplier agreements cover dispute resolution, McNally says….

…"Getting the parties around the table with little cost has really helped,"

He says the best mediations bring documents together to crystallise issues before the other party is contacted.

AVOIDING DISPUTES

Think critically before going legal - it may be the matter turns on a lack of communication and isn't in dispute.

"It's not that people aren't being honest, but that they have heard different things and yes, sometimes people are dishonest," McNally says.

"Disputes are really about people. It is normally because one party hasn't communicated enough and they are talking at cross-purposes."….

…Sinkunas says businesses should also look at the anatomy of a dispute jumping in. Sometimes a change of key people means a relationship has broken down or introduced different expectations.

Recognising this may mean the difference between a hiccup and a court case.

THE LAST STEP

A good mediation process should flesh out the key issue at dispute to narrow any potential court action.

But McNally says that might not be the last opportunity to find a resolution.

"Courts are more and more encouraging people to undertake mediation," she says. "Dispute resolution is part and parcel of business just as avoiding disputes is part and parcel of business."

FIGHTING THE GOOD FIGHT

ONE-fifth of small businesses have experienced a dispute in the past five years.

ONE-third of those have dropped a serious dispute because of potential costs more likely for sole traders and those businesses with one employee.

THE smaller a business's turnover, the more likely it is to face a dispute requiring third-party intervention. 

ABOUT 54 per cent of those disputes are with clients or customers. 

ABOUT 65 per cent of disputes relate to payments and 30 per cent to contracts. 

HALF said they had spent $2000 or less on the dispute but most thought other costs were much greater than out-of-pocket expenses.

SOURCE: Small Business Dispute Resolution, Department of Innovation, Industry, Science and Research, 2010.

Tax threat hits trusts

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News Ltd has reported a case that may have an effect on the structure of trusts:

Small business relying on a trust structure should review their constitution or risk losing a tax deduction for superannuation payments.

BDO tax partner Mark Molesworth says a recent Federal Court case, Kelly v Federal Commissioner of Taxation (No. 2), ruled a trust could not claim superannuation contributions as a deduction because they were not considered "employees" and the company had not properly authorised their remuneration.

"While technically correct, the ruling by the Federal Court will no doubt place further administrative burdens on SMEs wanting to pay superannuation contributions on behalf of directors who are not employees," he says.

"If a company or trust pays super contributions on behalf of directors, it should ensure that it has complied with its constitutional requirements."

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