Step 1: Before you speak, make sure the story is relevant to the audience.
Is he/she unacquainted with all or most of the characters? Does this story involve personal history, or jokes that the audience isn't privy to? If yes, don't tell the story. If no, be prepared to introduce those characters up front...
STEP 2: Introduce the characters, and conflict.
Eg. Do you remember Jim, the pirate you cheated on me with? He's dead now.
STEP 3: Wait for a response, verbal or physical.
If none comes, stop the story. He/She isn't listening. If they say "Yes," or grab a sword, continue...
STEP 4: Set the stage: When/where did the story take place?
Eg. I was walking through Eastman Park last Saturday Evening, and I came to the fork at the dog park, when...
STEP 5: Action!
Eg. Someone grabbed me from behind, and tried to crack my head into a tree. I turned, and there he was, like the deranged hero of a romance novel.
STEP 6: Involve the audience.
Eg. He said he loved you, and I was standing in the way. He didn't realize you were using him for his family connections. You lied to both of us!
STEP 7: The big reveal.
Eg. So... he's not really dead. In fact, we decided to team up, and now we're best friends. He's going to appoint me the U.S. Ambassador to Monaco, and you may or may not have iocane powder in your coffee.
Enjoy this article? Read Alex's series, "The Art of Y":
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The Art of Y: 'JewDate', Finding Farce in eLove
The Art of Y: Redefining the Music Industry
The Art of Y: An Interview With Fashion Designer Catherine Litke