The $1 Million Elevator Ride
Posted on July 26, 2012
It’s not always the pitch that matters. Sometimes you need to know when to shut up and listen.
Everyone’s heard of an “elevator pitch”–that terrifying opportunity to pitch your future between floors. It’s a funny thing, though: Sometimes, even when you think you should be talking, it’s really better to be listening.
I learned that in the best way possible–but even so, it wasn’t an easy lesson to grasp. Here’s the story.
I’d spotted the feature speaker from the tech seminar heading for the Las Vegas hotel elevator. I nudged my way between gaggles of attendees, and barely made it into the lift before the doors closed.
My elevator partner, a leading venture capitalist, and I were alone. I immediately thrust out a hand, introduced myself, and launched into my pitch: “We are a virtual company developing a new generation of vertical market software for the broadcast industry…” blah-blah-blah.
After 10 seconds, he cut me off with a hand on my shoulder. “Hold on,” he said. “I’m not going to invest. However, I am going to give you some advice.”
The elevator stopped at the mezzanine, and a group of conference attendees forced us to the back of the car. Our shoulders touched.
He continued, “First, I’ve got a question. Are you planning to run it or sell it?”
Even though the company was barely a year old, we’d settled on a long-term plan. “We’re going to sell,” I told him.
The elevator stopped to let off the group.
“That’s what I thought,” he said. “Virtual companies are great to run but difficult to sell. Buyer comes shopping, what’s he going to get? A handful of employment contracts. Put some bricks and mortar around it; populate it with some bodies. People want to see what they’re buying, even if half of it is only window-dressing. There’s a reason people dress up their windows.”
The doors closed. “You’ll need to keep your books clean, too,” he said. “No personal cars or vacations should muddy the accounts. Who does your books?”
I gave him the name of our small-town accountant.
“Probably a nice guy,” said my instant mentor. “But when the buyer shows up, they’ll take 20% off the top just because they don’t know how accurate your financials are. You’re going to want an annual audit from one of the Big Five accounting firms. It’ll cost a lot but save a lot more in the long run.”
The elevator stopped again. “My floor,” he said, reaching out for my hand even as he stepped for the door. “Nice to meet you.”
The doors closed again, but the car didn’t move. I realized I’d forgotten to push the button for my own floor.
Lacking pen and paper, I was frantically trying to build a mnemonic to remember what he’d said: “walls, Big Five, no cars.”
For the next couple of weeks, I wrangled with what he’d told me. It would mean a drastic change in the way we’d planned to build our business
But in the end, we rented office space, shelved plans for leasing personal cars, and relocated two of our three distant employees. We fired our two-person accounting firm and signed on with Price Waterhouse.
Nineteen months later, when the acquisition team landed in our conference room, the gray-haired CEO of Cumulus Media looked around our offices and took in our team–all wearing crisp white logo shirts–and nodded. I slid our latest PW audit across the table to his due-diligence guy, and, amazingly, just 90 seconds later, the numbers man tossed the report across the table to his boss and said, “This is fine.”
The CEO and I settled on a seven-figure deal 20 minutes later, during a walk across our parking lot. “I like what I see,” he told me. I thought: window-dressing.
Two years later, I ran into my elevator advisor at another conference. As luck would have it, we had been seated at the same lunch table.
I told him what had happened. “As I figure it, my advice saved you about a million bucks,” he replied. “When do I get my commission?”
We both laughed, although I felt he might only be halfway kidding. And the truth is, though his financial advice had certainly been spot on, the lasting lesson hadn’t really been about cars or accountants.
Only later in my career did I come to appreciate the real benefit of that ride. His willingness to cut me off and tell me what I needed to hear taught me that I’m often much better off looking for opportunities to “catch” new ideas, rather than pitch my own.