Every entrepreneur needs a convincing “elevator pitch,” so named because it is the pitch you give if you happen to step into an elevator with the investor of your dreams. The elevator pitch is a well-rehearsed snapshot that conveys the essence of your business plan in 30-60 seconds. It’s the pitch you will give over and over, on flights, at conventions, out networking, in chance meetings with strangers, and at the beginning of every meeting you have – essentially, whenever you need to introduce yourself and your business.

What are you trying to accomplish?

In the case of people who can directly help you – say, potential investors, or strategic partners – you want them to give you their card and invite you to call or meet so they can learn more.

In the case of everybody else, you want to pique their curiosity and get them to remember enough about your venture so they share your story with their network – which hopefully includes somebody who can help you directly. You want your elevator pitch to go viral, person-to-person.

Just what goes into your elevator pitch?

• Problem-Solution Combo: Start by expressing the problem you solve, in a way your audience can relate. For a company like Dropbox, it might be: “Isn’t it a royal pain to keep the files on your home and work computers and mobile devices synchronized and backed up all the time? Our software works in the background and takes care of that for you in the cloud, like magic.” Make the listener want to hear more. Focus on benefits and don’t get technical.
• Business Model: Explain, in one or two sentences, who your customers are and how you plan to make money. For example, “We target iPhone users, mostly in the 15-25 demo. We offer a limited free version; the full, unlocked, advertising-free version is $4.99.” Don’t make it more complicated than it needs to be.
• Competitive Advantage: What factors make your product better than alternatives and substitutes? For example, “Clinical trials show equal efficacy compared to the current market leading drug, but with significantly reduced toxicity and risk of stomach bleeding.”
• Market Potential: Explain the size of the addressable market, how it is growing or changing, and how much of the market you think you can capture. For example: “The U.S. market for municipal wastewater purification equipment is now $200 million, and growing at 15% as aging infrastructure needs to be replaced. Within 5 years, we believe our superior cost-benefit profile will make us the market leader, resulting in $125 million in revenue.”
• Traction: Describe recent accomplishments that illustrate the kind of momentum you’ve generated. For example, “In the past quarter, we’ve filled the remaining two roles in our co-founding team, and we’ve installed an alpha version of our software at 5 test customer sites including the marketing analytics division at Wells Fargo.”
• Call to Action: Finish your elevator pitch with a specific request, depending on your audience. Maybe you simply want feedback. Or maybe you want to schedule time to give a product demo, or a referral to an investor. Keep it simple: “If you’re interested in learning more, I’d love to stop by at your office in the next week or two to give you a live demo. Would that work for you?”

The elevator pitch is the central thesis of your business, and everything revolves around it. You won’t get it right overnight, and you’ll likely need to let it evolve over time.
Here are some tips for zeroing in on the right pitch:

• No more than 200 words: Your elevator pitch should be 30-60 seconds long.
• Avoid jargon: Use language your mother can understand and proudly repeat to her friends.
• Create variations: Try different versions on people and see what they think sounds best. You’ll also need to create variations based on your audience and your desired action.
• Act on feedback: If you get the same requests for clarification repeatedly, you obviously need to change your pitch.
• Don’t rush your delivery: If you try to speed-talk, your audience won’t understand a word you say. Speak slowly and deliberately, and use brief pauses to let key ideas sink in.
• Practice: You need to be able to deliver your pitch naturally, easily, with conviction and enthusiasm, without having it sound rehearsed. Practice in front of a mirror, with an audio recorder, with a web cam, or with the video recorder on your phone or digital camera.
• Be consistent: Once you settle on your message, your elevator pitch, the first few paragraphs of your business plan, your pitch deck, and the About Us page of your website all need to convey the same message, using similar language.

People DO, in fact, judge books by their covers. Your elevator pitch is the cover for your business, so make sure you make a great first impression.

I have been writing about business etiquette for years. I guess it has been important to me because I put so much value in first impressions. First impressions aside, it is imperative in today’s competitive global arena to have sound business etiquette skills and none are more important these days than the etiquette that you use on the telephone, in emails, in conference calls and webinars, and even in social media. Indeed, etiquette is an essential requirement in order for you to distinguish yourself, develop and maintain business relationships, strengthen your business presence, project a positive, confident, professional image, and thrive in every situation with confidence.

In everything you do, your manners have a direct impact on your professional and social success. According to Tamiko Zablith, Founder and Director of Minding Manners™, a London based consultancy, “in today’s increasingly global society, etiquette is the essential ‘soft-skill’ that often determines who becomes a leader, and who gets left behind.”

In your email, telephone and social media exchanges you have the opportunity to set yourself apart by knowing the correct way to:

• Leave a telephone message
• Conduct yourself on a telephone call
• Originate and respond to emails
• Participate in a virtual group discussion
• Communicate in social media

Since this is a blog post and not a 3 volume anthology, let’s just cover a few of the absolute essentials.

• Telephone Messages: Speak slowly and clearly; never leave a message without leaving a number; keep your message very brief; please remember to use please and thank you; suggest several good times for a call back; oh, I almost forgot, tell the listener who is calling. If you receive a telephone message from someone who might be trying to sell you something that you do not need, have the courage and courtesy to call them back and in 30 seconds or less tell them that in order to save them time, you do not require their services or products and that they would be better served spending time on another prospect.
• General Telephone Conduct: Answer with your name and company name so the caller knows they have dialed the correct number. For example, “Good morning, this is Jimmy Lewin of Cayenne Consulting.” Speak slowly and clearly. Return all calls within a business day. It is not necessary to provide an excuse for a tardy return of a call. Just return the call. Treat all callers with consideration, dignity and respect.
• Business Emails: This may come as a surprise to 60% of people who use emails in business…business emails are for business! The transmission of jokes, spam and personal notes and comments and, oh yes, smiley faces are for another type of email…personal email. Emails should always be professional, brief as possible, polite and direct. Never assume a specific audience because once you click on “Send,” well, I think you know what I’m about to say. Every email that you originate or respond to should be proof read. Emails are not SMS messages. Silly typos make a lasting impression. PROOF READ!
• Conference Calls: If you are the originator of the call, be certain that every participant is introduced or introduces themselves, their company and, if possible why they are participating. Have an agenda that everyone knows in advance. Get down to business immediately. The two most talked about topics on a conference call are the weather and sports. Forget about it! If you are a professional, then please conduct yourself accordingly. Aggressive, rude behavior is the hallmark of the non-professional. Be certain that everyone has the opportunity to contribute. That is why you invited them to participate in the first place. If someone seems to be dominating the conversation, it is ok to remind them that that there are other participants to be heard from.
• Social Media: There is no such thing as privacy. Be a professional and re-read all of the essentials above.

So, you’ve just read the preceding 600 or so words and you are, right about now saying to yourself, I know this. Great, now would be an excellent time to start doing it.

Mentoring can be one of the most effective ways to avoid common entrepreneurial mistakes. However, entrepreneurs often find it difficult to find a suitable mentor, or don’t know how to make the mentoring relationship pay dividends. Like any other relationship, both sides need to work at making the relationship effective.

Many entrepreneurs view a mentor as an older and more experienced person who takes a personal interest in providing guidance and advice. They don’t think about the relationship requiring a reciprocal investment on their part, both in nurturing the relationship, and truly listening – without being defensive – to the advice being offered.

In the book, Earn What You’re Really Worth, author Brian Tracy provides excellent advice on how mentoring, as well as other personal development activities, can contribute to your value and earning potential.

Here are some tips on how to find and utilize the right mentor, adapted specifically for entrepreneurs:

• Set clear objectives: Decide exactly what you want to gain from your mentor before you start thinking of the ideal person to work with. A successful financial executive probably isn’t the right mentor for building and executing a great marketing strategy. If you don’t have an objective, you won’t know when you arrive.
• Lead the discussions: Your mentor should not be driving your business, or expected to provide critical feedback on actions taken or missed. It’s up to you to create an agenda so that you can uncover specific insights, while leaving room open for discussion of broader or related issues.
• Work continually to solidify the guidance: The very best mentors are the most interested in helping someone who is willing to learn and grow quickly. That doesn’t mean you should accept all guidance blindly. Don’t resist because you’re uncomfortable implementing new ideas. Make an honest effort to understand and implement action items.
• Don’t monopolize your mentor: Remember, the best mentors are busy people, and they will react poorly to someone trying to take up a lot of their time. The best approach is to ask for small focused blocks of time, maybe just ten minutes, in private, and be prepared with real issues to discuss.
• Always remember the difference between a mentor, a friend, and a coach. Expect a mentor to tell you what you need to hear, not like a friend who may tell you what you want to hear. A business coach is focused on helping you with generic skills, whereas a mentor’s aim is to teach you based on specific situations. The same person can’t be all of these.
• Keep your mentor regularly informed of progress: There is nothing that makes a potential mentor more open to helping you than your making it clear that you are following through, and the help is doing you some good. Set up a regular reporting system.
• Keep the relationship positive and productive: If a mentor proves to be unresponsive or on a different wavelength, bow out of the relationship. Powerful mentors are usually in a position that can hurt you as well as help you, so don’t waste their time or antagonize them.

When you seek out a mentor, you must look for someone who genuinely cares about you as a person and who really wants you and your venture to succeed. That emotional involvement and genuine concern for you are the keys to real mentor contributions.

Some people will say that you need to make all your own mistakes in order to learn. Yet there is plenty of evidence that the fastest way to business success is by standing on the shoulders of those who have already spent years learning how to succeed. If you can’t make a mentor relationship work, you should worry about the rest of your business as well.

Business networking is one of the most effective ways for a startup founder to find mentors, investors, and even key executive candidates. The prospect of where and how to network, however, may seem daunting if you are an introvert, or if you have never networked before.

There are established protocols for the process of building business contacts, just like there are for building and maintaining other social relationships. Here are a few important steps to take:

• Get introductions from your existing contacts: Start with the people you know who can attest to the quality of your work so that they can recommend you to others. Their initial introduction may lead to other contacts that will pay dividends.
• Post your profile on LinkedIn, join Twitter, and engage in relevant discussions: There may be other networks that will also benefit you, depending on your circumstances and location, including sites such as Ryze, Plaxo, and Facebook. Others, such as MySpace, are not likely to help you.
• Join and participate in local networking groups: Business groups like TiE – The Indus Entrepreneurs and EO – Entrepreneurs Organization are places to meet people so that you can both offer and receive assistance. Remember it helps to build mutually beneficial relationships in the business community. In addition to business organizations, the local Chamber of Commerce offers networking resources as you begin the process.
• Volunteer to help out with entrepreneur activities at your local university: All universities love and need to get help from people with business experience for coaching and judging activities in their Entrepreneurship and MBA programs. Your investment in time may allow for you to meet or be connected to many people who can help you.
• Attend an investment conference: Conferences are full of potential investors who are actively soliciting new opportunities. Hand out your business card with confidence at breaks, lunches, mixers, or scheduled activities.
• Join a local investment group: If you can meet the SEC “accredited investor” criteria ($1M net worth or $200K annual income, although these standards will change with the recent passage of the JOBS Act), this is a great way for potential investors to view you as a as peer. In addition, you will see how the process really works from a variety of perspectives, which will offer you the best preparation you could have for your own approach later. In most cases, these groups don’t require that you invest in others as a prerequisite for membership.

Many initial steps to building a professional network may seem self-evident but there are also several key things to avoid as well:

• Don’t do all of the talking. Networking is about listening and understanding other people’s needs. Think of how you can help the other person. You will get your chance.
• Avoid cold calls and email blasts of your resume and business plan to potential investors.
• Do not monopolize the time of an important investor at a social gathering or share too much information about your personal life.
• Don’t forget to follow through on your promises. If you tell somebody you’ll be in touch to schedule a meeting over coffee, or that you’ll introduce her to another person in your network who may be helpful, be sure to follow through.
• Don’t let your network grow cold. A business network is like friendships – you must constantly work at keeping your relationships warm.

Although networking may seem daunting to introverts, it also offers them a unique opportunity to focus more on listening than on talking. Most successful investors will probably remember you better if you are able to listen carefully and ask thoughtful questions of them. Nevertheless, it is important to have your elevator pitch honed so that you can talk about your business easily when asked. Enthusiasm and having fun are just as important as observing networking etiquette.

Entrepreneurial creativity can’t thrive in a vacuum. It needs data and knowledge, and constant exposure to new ideas and perspectives. If you spend 100% of your time focusing only on your narrow niche, you’re likely to miss opportunities that are hiding in plain sight.

I find that podcasts are a great way to expand my mind, especially while engaging in otherwise idle activities: driving, hiking, running, or working out on the elliptical, for example.

I’ve discovered some favorites over the years. They’re all available for free via iTunes. If you’re not an Apple product user, most of these podcasts have their own websites where you can listen online or download in MP3 format (but iTunes is far more convenient because you can easily sync content and keep track of which episodes you’ve already listened to).

Here are my picks for the Top Ten Podcasts for Entrepreneurs:

• Stanford eCorner’s Entrepreneurial Thought Leaders: This is a weekly, hour-long deep-dive into entrepreneurial topics in the form of interviews with insightful business leaders. Highlights include Reid Hoffman of LinkedIn on “Live Life in Permanent Beta,” Guy Kawasaki on “Creating Enchantment,” Steve Jurvetson of Draper Fisher Jurvetson on “Innovation in a Disruptive Environment,” and Eric Ries on “Evangelizing for the Lean Startup.”
• HBR IdeaCast: The Harvard Business Review’s IdeaCast consists of weekly interviews, mostly under 15 minutes, with leading executives and researchers covering all aspects of business and management.
• NPR’s Planet Money: This twice-weekly podcast covers an amazing array of micro- and macro-economic issues, both domestic and international, in ways accessible to all listeners. Each episode begins with a brief “economic indicator” – a number currently making headlines, with a description of its relevance. It then takes a deep-dive into the day’s topic. Some episodes, such as those dealing with the toxic debt securities at the heart of the financial crisis, form a story line that spans many months. Others examine the economics of various industries, explore policy issues that may seal the fate of the European debt crisis, or explain the historical origins of the practice of tipping service providers from an economic perspective. Most episodes are about 20 minutes in length.
• Freakonomics Radio: Economists Steven Levitt and Stephen Dubner explore “the hidden side of everything.” For example, do more expensive wines actually taste better, or does price influence perception? And would adding a lottery feature to savings accounts increase savings rates?
• LSAT Logic in Everyday Life: This series by the Princeton Review applies critical thinking skills to everyday topics ranging from politics to advertising to conventional wisdom. Arm yourself with the tools needed to expose fallacies and other logical flaws in arguments.
• Arming the Donkeys: Dan Ariely, professor of behavioral economics at Duke University, has informal chats with researchers on everything from the perils of procrastination to why bonuses backfire. Most episodes are under 10 minutes.
• NPR’s Science Friday: Host Ira Flatow covers the latest news in science, technology, health, and the environment, with interviews of scientists, authors, and policymakers. Most 50-minute episode cover 3-4 topics each. Older episodes and related materials are available on the Science Friday website.
• Wall Street Journal on Small Business: Brief weekly summaries of business news relevant to small businesses, including some high-level tips. The coverage is often superficial, but sound bites can sometimes be a good catalyst to take your thinking in new directions.
• The Public Speaker’s Quick and Dirty Tips for Improving Your Communication Skills: Practical tips for improving all aspects of your communication, from casual speech, to public addresses, to email, to marketing copy. These are critical skills for success in any area of business, and these podcasts are a great investment of your time. If you like this one, you’ll also like Grammar Girl’s Quick and Dirty Tips for Better Writing – another essential for people who communicate for a living.
• TED Radio Hour: Host Alison Stewart interviews TED speakers covering new inventions, fresh approaches to old problems, and new ways to think and create. This series launched in April 2012, and is likely to become one of my favorites.

So step away from your computer for a while, plug in your earbuds, and go get some fresh air while you fill your mind with some new knowledge. I guarantee these podcasts will make you a better entrepreneur.

If you have some favorite podcasts that I might have missed, please share them in the Comments section below. Happy listening!

After working with numerous mobile app startups, a common pattern has surfaced. The founder is hard at work with developers, designing the app back-to-front and front-to-back, deciding on pricing, deciding on marketing, and so forth. But all these important decisions are being made in a vacuum. No one knows for sure who will really be interested in the app, what’s the optimal user interface, and what, if anything, people will pay for the app.

So, my task is to slow the team down and go to work on some rough prototypes or essentially anything we can get in front of potential users. In contrast to the old way of doing concept testing, what we can do today on the net is amazingly easy, quick, and cheap. There are plenty of tools out there that allow one to develop a minimum viable prototype, or better yet, several prototypes that can then be used for quick comparison testing. These prototypes essentially allow you to get a sense of what look and feel will be most appropriate, and a great way to show the potential functionality of the app without the app actually working yet.

And then there is price testing. Will the app attract enough demand at $1.99, $0.99, or perhaps a freemium model? Try out different pricing strategies with a set of friends, through a rough web page, or using one of the many free online survey tools like SurveyMonkey.

Startup entrepreneurs often think they must come up with all the answers themselves, when in fact the answers to all of these types of product questions should come from target market customers. We can put a bunch of the smartest Cayenne consultants in a room and come up with great product strategy recommendations. But, without knowing what the prospective user would really value, we are simply second guessing. When clients inevitably ask me what I think about a particular product feature or price, my answer is always: “What do I know? I’m not your target market. Let’s go find out.”

And think of this “go out and ask” approach from the point of view of potential investors. Rather than being put in the position of convincing/selling investors that your vision of the product is perfect, you can take the higher ground of educating investors on what customers have already told you they want and what they are willing to pay. The old saying “data always trumps opinion” plays out again, and your business plan will be much more credible because of it.

Prototype testing is not a one-time event, especially with mobile apps. The market is changing so fast that it’s best to think about testing on an ongoing basis. The team should be constantly evaluating new features and more improved user interfaces. If you don’t, your competitors will. A great example is how USA Today is constantly making changes to its market leading iPhone/Pad app. They are constantly tinkering with the user interface with the goal of maximizing end user value. In my opinion, their commitment to ongoing testing has put the USA Today app in a whole different league from their competitors. You can do the same.

I should also mention that many business-oriented software entrepreneurs don’t believe they can do this type of prototype development themselves. The common refrain is “I’ll have to ask my developer to do these prototypes.” I’m convinced that the best business software entrepreneur gets their hands just a little dirty with some easy prototyping tools such as Ruby on Rails. That will be the topic of a future post.

Any investor will tell you that great business ideas are “dime-a-dozen.” Lots of people have great ideas all the time. Most investors feel that a “great” entrepreneur with a “so-so” idea is much more fundable than a “so-so” entrepreneur with a “great” idea. It’s fine to be a thinker or visionary, but you’ll never build a successful business if you can’t Get It Done and execute.

Professor Sean Wise, who has worked with over 15,000 entrepreneurs (including many with the popular TV shows Dragon’s Den and Shark Tank), says that no matter how great the opportunity and idea, in the end it is only the execution that produces companies and generates wealth.

In his book HOT or NOT: How to know if your Business Idea will Fly or Fail, Wise discusses not only the elements of a good idea and a good pitch, but also the attributes that distinguish entrepreneurs who can deliver from the grandiose idea people:

1. Active evangelism: The entrepreneur gets out and actively shares the idea with the people who can help turn the idea into a business, including potential employees, investors, customers, suppliers, friends, and peers. In contract, idea people are often secretive and paranoid that someone else will steal it.
2. Open to feedback, and welcoming of skeptical views: Get It Done entrepreneurs always welcome the hard questions and challenge the fundamental questions behind their ideas. They don’t always associate with “yes” people who just tell them what they want to hear.
3. Sets and tracks performance metrics: A business has too many moving parts for any one person to be able to manage without a good project management framework. Get It Done entrepreneurs find ways to translate long-term goals into measurable daily action items, and make sure everyone is “rowing in the same direction.”
4. Ties rewards to performance: Effective business people establish accountability for achieving key metrics. They don’t hire friends for the sake of friendship, or just pay people for showing up and looking busy. A proper reward structure is a powerful tool for motivating the team to help you achieve success.
5. Ties organizational structure to strategy: Forget the “traditional” organizational structure. Build your organizational structure around the value chain so that key roles support your ultimate goal: happy paying customers. Startups don’t need a VP of HR, or a full-time CFO. You need people who can talk to and understand what customers want, and a team who can deliver on those needs.
6. Willing to question assumptions and adapt: Most startups pivot at least a few times. The odds of version 1.0 of your business plan being correct are very low. Your business plan needs to be a living document that adapts to new information, new challenges, and new opportunities. Be agile. Let your competitors blindly stay the course and fail.
7. Sets a strong example: The leader instills values, passion, and work ethic into the company through example. If the leader can’t keep commitments, neither will the business. Investors are good at spotting and avoiding difficult personalities.

Of course, entrepreneur screening, like opportunity screening, is highly subjective. We all have preconceptions that can fool us into making bad decisions about both people and ideas. The most successful entrepreneurs and investors objectively consider information that refutes their beliefs, rather than seeking out data which might support their confirmation bias.

Successful implementation requires an understanding of the “big picture,” of course, but the devil is in the details. Yet Get It Done leadership is definitely not about micro-managing people or doing it all yourself. It is about “owning” the process and leading others by example.

We all know entrepreneurs who claim that their idea is “the next Google” or is “bigger than Facebook.” Maybe you’re one of them. But it only matters if you can acquire the execution skills needed to turn your idea into a viable business.

We all agree about the increasing need to maximize sales. Typically entrepreneurs and sales professionals think this means more emphasis on the selling process. Instead, it really means spending more time viewing the buying process from your customer’s perspective. In a recent book Slow Down, Sell Faster!, author Kevin Davis explained that the largest single mistake sales professionals make is that they try to close the sale too early. They arrive at the end of their “pitch” just as the customer is beginning to recognize they have a need! They leave the scene just as the prospective customer begins assessing solutions by looking at your competition. Obviously not good to give up as soon as you’ve activated their need.

Assuming you are serious about competing with big companies for customers, and realize that a fast sales pitch doesn’t mean more sales, here are some tips from Kevin that every entrepreneur needs to understand, even before attempting their very first sale:

1. Understand how your customers buy. “What are the steps in your customer’s buying process?” When the product is simple, and there is no competition, buyers can make a quick decision. But these days, that is rarely the case. Thus most customers need to do some research and learn more first. You need to think about a purchase from the customer’s viewpoint, and be there for her.
2. Define the steps of your sales process in customer terms. Understanding buying is where selling should start. Get very clear and specific about the steps customers take as they move through their buying process. Replace your “sales process” labels with “customer actions,” which then become the objectives for you when you call or meet with customers.
3. Manage the pipeline based on where customers are in their buying process. What should matter to you is not where you are in YOUR sales process, but where the customer is in THEIR buying process. Ask yourself: “What actions has the customer taken thus far?” And, “What action should they take next, and by when?” The answers to these questions provide you with a better understanding of the true status of the sales opportunity.
4. Map out who will be involved in the buying decision, and what step they are at in the buying process. If the buying decision is complex, you need to determine what factors are working for you in the sale, what factors are working against you, and what you can do to put yourself in a better position to win. Don’t get ahead of your customer.
5. Focus on the most influential decision makers. Often the real purchase decision is not made by the person you are interacting with. Find the C-level executives behind the scenes, or the key influencers, or the personal connections that can override simple price and benefit arguments.
6. Provide coaching early in the sales process; avoid last minute interventions. We’ve all heard the complaint about the sales manager “riding in on a white horse” to save the day and close a deal on behalf of the salesperson. The end result of this white-horse ride is often three-fold: white knuckles for the salesperson, a bigger discount for the customer, and lower profit for the company! What kind of win is that?

Speed is important in getting to multiple decision makers quickly, identifying what is important to each player, and knowing where each player is in the buying process. After that, it’s time to slow down and stay in sync with each customer’s buying process. People hate feeling rushed, and you don’t want the buyer to resent your efforts.

Customer focus has nothing to do with your selling or service process, whether the customers are individual consumers, or large corporate buyers negotiating a complex transaction. The key is to put yourself in their shoes, and lead them through their own process. Customers want to buy from leaders, not pushers. What a novel way to exceed your customer’s expectations!

Rookie internet entrepreneurs often make the mistake of overestimating advertising revenue in their financial projections. If challenged, the founder usually cites the Facebook business model (free service to users, revenue from ads), but forgets that Facebook has had several hundred million in funding, and has been profitable only in the last couple of years.

The most challenging time is your first years, when your site is relatively unknown, and your page views are low. Until you get a million page-views per month, your revenue will be negligible, and advertisers won’t be interested in your site. Don’t count on that to fund your startup.

Content is a tough business. It can be very successful like it now is for Facebook, but entrepreneurs usually underestimate how long it will take for page-views to ramp. They might see early traction due to early promotions, or special advertiser deals, but then reality sets in.

To better understand these realities, let’s clarify some terminology. Unless you live in this world every day, you are probably as confused as I was by the different advertising models, so let me outline the common ones:

1. Pay per click (PPC). In this most popular model, advertisers pay each time a user clicks on an ad and is redirected to the advertiser website. Advertisers do not pay for each ad view, but only when the ad is clicked on. For advertisers, this is called cost per click (CPC).
2. Pay per view (PPV, PPI or PPM). With this model, you get paid for each ad view or page-view (same as impression). For advertisers, this is cost per impression (CPI), or cost per mille (CPM) per thousand impressions. Advertisers normally prefer CPC, since they don’t like to pay when you ignore their ad.
3. Pay per action (PPA or PPL). This advertising model was added a few years ago to mitigate the risks of click fraud. Here the advertiser pays only if a customer has been delivered to a website and takes a further action (conversion), such as buying a product or filling out a web form. The advertiser side is called cost per action (CPA) or cost per lead (CPL).

Now back to the revenue realities. If a startup wants to get the attention of investors, it needs to show large growth, like $50 million in revenue in five years. Today, without highly specialized targeting, the rule-of-thumb expectation should be no more than $1 in advertising revenue per thousand page-views.

To get to $50 million in revenue you would need 50 billion page views in a year, or just over 4 billion per month. Facebook is far above this range now, now with over 1 trillion page views, but only the top 10 sites in the US are in the right ballpark. The top 10 all took several years to get there, and all are well beyond startup stage.

It doesn’t matter that the ads themselves come in a myriad of shapes and sizes – banner, panel, floating, expanding, wallpaper, trick banner, pop-up, pop-under, or even video. Costs and payments vary by size, level of targeting, and volume. A current trend to increase revenue is to make advertisements more interactive, but the basic numbers haven’t changed much.

The bottom line is that any online advertising revenue you project in the first couple of years for your startup will be heavily discounted by any savvy investor, and will likely cause your business plan to be rejected. Face reality.

Investors know that during this early period, you will likely be spending more heavily than you expect to build page-views, rather than collecting revenue from the millions of users you won’t have yet.