1. Define the problem

The most important thing is to identify a problem that is worth solving. If your product or service does not solve a problem that potential customers have, you do not have a viable business.

Now, you do not have to be solving a massive problem where the solution will change the world. That is great if you are tackling such a problem, but for most businesses, that is not the reality. Problems can be simple and that is okay. As long as you, as an entrepreneur, are solving a problem that customers have, you can build a business.

Try and distill your customer’s problem down to its simplest form. Ideally you should be able to describe the problem you are solving in one or two sentences, or potentially a few bullet points. In the long run, your company may solve multiple customer problems, but initially you will be more successful if you just focus on one core problem.

  1. Describe your solution

Too many entrepreneurs start their elevator pitch by describing their solution – a product or service that they think the market needs. They skip step 1 and do not identify the problem they are solving. As a smart entrepreneur, you can avoid this mistake by first making sure that you are solving a real problem that customers actually have before you define your solution.

Once you have clearly defined the problem you are solving, you need to explain your solution. A clear problem statement will help you focus your solution on solving that one problem, and not stretch the solution to solve multiple potential problems.

Again, try and distill your solution description down to as few words as possible. You should be able to describe your solution at a high level in just a few sentences or bullet points.

  1. Know your target market

As you define the problem you are solving, you should naturally be thinking about the potential customers who have this problem. In the Target Market section of your elevator pitch, you will define exactly who has the problem you are solving and figure out how many potential customers you will be trying to sell to. You should try and divide your target market into segments smaller groups of people whom you expect to market.

It is always tempting to define a target market that is as large as possible, but that does not make for a credible pitch. For example, if you have a new shoe company, it would be tempting to say that your target market is “everyone.” After all, everyone has feet and everyone needs shoes, do they not?

But, realistically, your new shoe company is probably targeting a specific group of people, such as athletes. Within this group of athletes, you might segment the market into additional groups such as runners, walkers, hikers, and so on. Once you have created a good list of target market segments, you will need to do a little research and estimation to figure out how many people are in each segment.

  1. Describe the competition

Every business has competition. Even if no one has come up with a solution similar to what you have come up with, your potential customers are solving the problem they have with some alternative.

For example, the competitors to the first cars weren’t other cars. The competition was horses and walking. As you think about your competition and existing alternatives, think about what advantages your solution offers over the competition. Are you faster, cheaper, or better? Why would a potential customer choose your solution over someone else’s? Describing your key differentiators from your competition is a great exercise and ensures that you are building a unique solution that customers will hopefully choose over other alternatives.

  1. Who is on your team?

As great as your idea is, only the right team will be able to effectively execute and build a great company.

In the “team” portion of your elevator pitch, you should talk about why you and your business partners are the right team to execute your vision and why your team’s skill set is precisely what is needed to lead your company to success. People often say that a company’s leadership team is more important than the idea and this is often true. No matter how great or unique your solution is, if you do not have the right people on board, you won’t be able to see it to fruition.

  1. Financial summary

For a great pitch, you do not necessarily have to show a detailed five-year forecast. What is more important is that you understand your business model.

“Business model” may sound like something complex, but fortunately it is not. All you need to know is who pays your bills and what kinds of expenses you will have.

For example, if you are starting an online news site, the customers that pay the bills are your advertisers. Your costs will be writers, graphic designers and web hosting. As you learn more about your industry, it is certainly helpful to put together a sales forecast and expense budget. You will want to ensure that you can build a profitable company based on your assumptions. But, for your elevator pitch, a detailed forecast is not necessarily required.

There are certainly other components you can include in your pitch, but these are really the “must-have” pieces, whether it is written down in a pitch deck presentation or literally delivered as a speech in an actual elevator.