The art of persuasion takes skill and attention to detail. Dr Rob Yeung looks at how entrepreneurs win over investors and asks what lessons we could learn
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This article was first published in the October 2019 International edition of Accounting and Business magazine.
How would you persuade someone to support an untested idea? Perhaps you want to propose a project to your line manager that has never been done before; or maybe you want to convince customers or other stakeholders that a promising but unproven solution could reap benefits.
A recent investigation looking at business pitches by real entrepreneurs provides us with insight into how all of us might more effectively sell our ideas. Researchers led by Ruben van Werven at Cass Business School noticed that most of the entrepreneurs in their study began their pitches by arguing that ‘our target customers experience a problem and need a solution’. For example, the CEO of a food start-up noted that many hardworking professionals have unhealthy eating habits and that 60% of people living in urban areas reported lacking the time or energy to cook during the week. In other words, the CEO was claiming that these potential customers had a problem that needed solving.
Most entrepreneurs next explained how ‘our product provides benefits to our customers’. Typically, this step involved describing features of their product and how they would specifically tackle the identified problem. For instance, the chief executive of an e-learning business claimed that weekly digests and book summaries sent out by his company would boost customers’ learning and retention of new information.
A frequent third step involved claiming that ‘our venture operates in an environment that is conducive to success’. This frequently involved making statements about the size of the potential market. As an illustration, the CEO of a health business claimed that the healthcare market in Brazil was expected to reach US$350bn by a certain year. Most entrepreneurs made at least several claims about the size of their target markets – they also often referred to the fast growth of those markets in further attempts to appeal to investors.
In order to prove that they had made at least some progress, most entrepreneurs then presented quantitative data about actual customers or other interested stakeholders. For instance, one CEO mentioned having 3,000 potential customers on a waiting list. Providing numbers is intended to send a clear message – that the product is not merely an idea existing only in the mind of the entrepreneur but a genuinely viable proposition.
Most entrepreneurs also claimed that ‘our team is well equipped with skills and experience’. This often involved describing the team’s past proficiency with the problem or product being pitched. In essence, persuading someone to take a chance on you requires that you can prove that you genuinely have the insight and capabilities to deliver on your promises.
Finally, most of the entrepreneurs ended their presentations by asking their audiences for investment. For non-entrepreneurs, this stage would be about making very clear the immediate actions and next steps you expect from your audience in order to turn your idea or proposal into reality.
Still further techniques have been identified elsewhere. For instance, Annaleena Parhankangas of the University of Illinois at Chicago and Michael Ehrlich at the New Jersey Institute of Technology found that moderate amounts of ‘blasting’ – making audiences aware of the weaknesses of rivals – helped firms to raise more funding. For example, entrepreneurs might point to the inexperience or liquidity problems of competitors. The researchers found that a degree of blasting helped entrepreneurs to communicate their own distinctive merits and raise more investment; however, blasting beyond an optimum point actually made entrepreneurs less likeable and reduced their chances of securing funding.
These techniques were identified in entrepreneurial settings and not every one may apply in other situations. For example, making claims about the size and rate of growth of a target market may be more appropriate when pitching to investors than internal customers. There are also many other rhetorical devices and methods of persuasion. However, the wider point is that many of these methods should serve as prompts for issues that may need discussion when trying to win over audiences.
Dr Rob Yeung is an organisational psychologist at leadership consulting firm Talentspace.
CPD technical article
"Making claims about the size and rate of growth of a target market may be more appropriate when pitching to investors than internal customers"