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Executive Summary:  Business Plan Basics

The executive summary is potentially the most important section of your business plan.
It is normally the first section of your business plan that investors will read, and could be the last if it is poorly written.
An executive summary should briefly describe the company, the product or service, and the unique opportunity your company is offering.
It should also provide a short description of your key management team members and an outline of the investment you are seeking.
Don't forget to tell the reader why you need the money and how and when they can expect to be paid back!

A good executive summary is essentially a condensed but powerful summary of your entire business plan.
It creates a first impression in your reader's mind of both you and your business.
Use clear and concise language - although this applies to your entire business plan, it is especially important in your executive summary.
Use words that command attention, and that get your reader excited about the opportunity you are presenting.

The following excerpt is from David Gumprt's book, "How to Really Create a Successful Business Plan".
His insight clarifies the importance of a powerfully written executive summary:

Certainly the most significant part of any business plan is its executive summary. 
What is an executive summary?

Probably the best way to begin defining it is to explain what it isn't.

The executive summary is not an abstract of the business plan.
The executive summary is not an introduction to the business plan.
The executive summary is not a preface.
The executive summary is not a random collection of highlights.

Rather, the executive summary is the business plan in miniature.
The executive summary should stand alone, almost as a kind of business plan within the business plan.
It should be logical, clear, interesting - and exciting. A reader should be able to read through it in four or five minutes and understand what makes your business tick.
After reading your executive summary, a reader should be prompted to say, "So that's what those people are up to."

Limit the length of your executive summary to no more than 2 to 3 pages and stick to the facts.
Investors are searching for evidence that justifies the soundness of your opportunity, and that gets them excited about what you intend to achieve.
If your executive summary is clear and concise, you are one step closer to impressing your reader, and on your way to a terrific business plan.


Executive Summary:  Mistakes to Avoid

Here are several common mistakes that can make your executive summary less effective:
  • Lacking a specific focus
  • Too long and wordy, and failing to get to the point
  • Trying to be all inclusive (it should be a powerful summary)
  • Failing to demonstrate a special or unique opportunity
  • Failing to outline the terms of the investment sought
  • Failing to generate enthusiasm in the reader

Some suggestions to combat these problems:

  • Limit your executive summary to a maximum of 3 pages (at the very most)
  • If possible, attempt to present your executive summary on 1 or 2 pages
  • Focus on the opportunity you are presenting your investor and explain why it is special
  • Make certain that the opinions and claims in your executive summary are fully supported in the other sections' of your business plan
  • Attempt to use only concrete facts and figures that explain your business concept, market niche and financial projections
  • Don't forget to include the details of your investment (the amount you need, what you will spend it on, and the return you offer your investor)
  • Keep your reader in mind - why are they reading the plan and what response/action to you hope to generate?


Executive Summary:  Newsletter

The Executive Summary

In the previous Newsletter we addressed the importance of including a solid and realistic exit strategy in your business plan.
A well-written exit strategy increases your chances of cashing in with investors because it addresses one of their most important issues - how they will ultimately cash out.
However, most potential investors will never even bother reading your exit strategy if you can't grab their attention from the start and excite them about your business.
How do you do it?

Simple. Write a brilliant executive summary.

Never forget that capital sources are always buried under a desk full of business plans and financing proposals.
With this many funding requests, the time dedicated to making an initial judgment about a business plan is limited.
Investors normally remedy this backlog of business plans by simply reviewing the executive summary to determine if any further investigation is warranted.
To some degree, the executive summary resembles a resume, allowing the reader to quickly decide which business plans will receive serious consideration.

Your business plan may be outstanding.
It may look wonderful and include colorful graphs and charts.
And it may be very impressive and compelling if it was read from cover to cover.
But, to the surprise of many entrepreneurs, the executive summary is often the only part of your business plan that an investor ever reads.
Essentially, you have five minutes to grab the attention of your reader with a concise description of your opportunity and motivate them to read further.
Following the tips listed below and avoiding bothersome pitfalls will help keep your business plan from landing on the bottom of the pile, or even worse, in the trash.

Your executive summary should:

  • Provide a clear, concise and compelling summary of your business
  • Outline your unique advantages for achieving success
  • Demonstrate why your business concept will work
  • Simply and clearly demonstrate management's objectives
  • Incorporate powerful key sentences from other parts of your plan
  • Be written in a positive and confident tone
  • Be brief - able to be read in less than 5 minutes
  • Stand alone as a type of "mini" business plan within your business plan

A successful executive summary presents the highlights of your basic business concept and opportunity.
Which highlights should be included?

A good executive summary should demonstrate:

  • A business concept that makes sense
  • A clear plan for success
  • A capable management team
  • A clear, specific, and definable market
  • Significant competitive advantages
  • A solid and believable summary of the financial projections
  • An excellent chance for investors/lenders to receive a healthy return

The format and organization of your executive summary will vary based upon which issues are most important for your particular business.
But regardless of the format, every executive summary should include the following areas or subsections:

The Concept and Opportunity
It should immediately grab the attention of your reader.
This is often best achieved by explaining why your business is different or unique.
Clarify your business advantages, how you can break into your market first, the benefit of your proprietary product, or how research supports a significant customer demand for your product or service.

Essentially, what differences or characteristics will lead to success?

The Product or Service Description
Describe your product or service in terms of its benefit to your potential customers.
How does it work? What is it used for?

Where is it sold?

How much does it cost?

How does the customer benefit?

Remember to limit yourself to highlights in this section.

Be brief.

The Market
Who is your customer?

How large is your market?

Who are the competitors?

Why are you better?

What are your market share projections?

Your reader must be convinced that potential customers will have the want, need, and ability to purchase your product.
Don't try to avoid the fact that you have competitors. Instead, explain how you can gain market share with your business advantages.

The Management Team
Describe the principals of your business and how they will lead to your success.
Is it clear your team is well-rounded with the experience, expertise and capabilities to achieve the goals outlined in your business plan?

Does your board of directors or advisors bring credibility and experience to the table?

Fair warning - management weaknesses will ensure that readers will go no further.

The Finance Requirements
How much money has been invested to date?

What are your earning projections for the next three years?

What amounts are currently required?

What will the funds be used for?

From whom do you expect to receive your investment?

What specific return do you offer an investor?

What is the exit strategy, in terms of both time and return?

Now that we've outlined the issues to address in your executive summary, lets consider the things you should avoid.
What areas would lead a reader to the conclusion that you have a poorly written executive summary? If you:

  • Fail to identify your special or unique opportunity
  • Fail to clearly demonstrate what your venture is all about
  • Fail to identify what management will accomplish and how
  • Make general and unsubstantiated claims
  • Use wordy and unorganized language

At what point in the writing process is it best to write your executive summary?

There are three schools of thought.
The first says prepare it before you write the rest of the business plan.
The second says write it before, then again afterward to combine the best of both.
The third says prepare the executive summary only after the rest of the plan is complete.

Which approach is correct?

It's really a personal decision, but it has been our experience that preparing the executive summary when the rest of the business plan is complete is fairly effective.
This allows us to summarize the plan after all the information has been laid on the table with the hindsight of compiling the entire plan.
We normally pick key sentences that highlight the product benefits, market opportunities, and strategic advantages.
Think of it as 20/20 hindsight.

Remember to review your executive summary many times and ask yourself whether it grabs the reader's attention.

Will they be excited about your business?

Will they want to read the rest of the business plan?

If the answers to these questions are no, rewrite it.
Show it to a friend or business associate and ask them to be critical.
Many times after someone reads your executive summary they will say "It's great, but what about...".
If you find yourself explaining important information to someone after they have read your executive summary, then it is likely that that information should be included in the document.


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