Writing a Business Plan: The Executive Summary (pt 2)

For the second part of this series, I’d like to get into the content of your plan’s summary.  Like I said in the previous blog post, you can (and should) write your summary first and last.

What You Get

By writing the executive summary first, you get your main ideas out on paper. It gives you a general direction to head as you go through the rest of the entire plan. Going back to update the summary when your plan is complete gives you the opportunity to highlight the most important parts of your plan. In the most basic sense, it gives you an overall picture of your plan and how you see it.

Your summary also lets you memorize your most important talking points.  You’ll be able to answer the common questions:
• what is your business?
• what is your product or service? Business-Plan2
• who is your customer? and,
• how much money will you make?
Instead of coming up with partial statements, you’ll be prepared with clear and concise answers.

What To Include

Most important: it’s a summary so keep it to one (1) page. If you have to expand to two pages, it’s not a summary.   It needs to be short while highlighting the important aspects. It’s the hook that gets the reader to at least open the plan and look through it.

First, include the problem and solution that your company provides. You should be able to do this in two or three sentences. This is actually the first part of your elevator pitch, so it should be short. We all know you could write pages worth of the problem, and a book on your solution. That’s not the point. You’ll be tempted to write paragraphs–don’t. Pedantic and overly complex descriptions of the problem and your solution do not benefit you or the reader. That’s why you’re writing the rest of the plan. If your product is complex or may be confused with other available products, you can add that detail here, but it’s usually not necessary in the summary.

Second, include specific market information and define your target market. You should include exact numbers if possible (number of customers and the amount of money in that market and target market). Don’t exaggerate these numbers. Defining your target market can help you immensely, but don’t be afraid to come back and edit this section many times as your plan progresses.

Third, if you have existing sales, include them in the summary. You don’t need to get too wordy because if the reader wants more information, they’ll open the plan. You should show quarterly or yearly revenue and profit/loss numbers. A short explanation could be helpful if you want to reinforce or explain the numbers.

Fourth, you should include highlights of your management team. Names and advanced degrees are okay, but if you can highlight past success that directly relate to your problem/solution, you’ll present a much better and more capable team. I’ve often seen this as the largest section of the summary.

Fifth, you should include the brief summary of your 3-5 year financial projections. This needs to be short, and this will actually have to be completed after you finished the pro forma section of the plan. On your first pass, you can put in your dream numbers as placeholders. That’s always fun. Just don’t forget to come back and update with your actual projections.

And lastly, include your “ask.” Clearly state how much money you need and highlight the places where it will be used. This is a very high-level list, but you can be specific with percentages. For example: “We’re seeking $2 million to bring our product to profitability; 30 percent will be used for product development, 20 percent for salaries, and 50 percent for marketing.” You could also include goals or additional financing details.

That covers most summaries, but if there’s some other important or crucial information, you should include it. This could be competitors, intellectual property, competitive advantages, or research and development progress. But be careful, you want to keep the entire summary short, concise, and compelling.

As for formatting, you can include each topic as a separate paragraph and I nearly always recommend some type of heading (bold text or underlined) to let the reader quickly find parts of your summary. I’ve also seen summaries with “call out” boxes listing the important details and numbers in one or two word descriptions.  Keep it to a single page.

What The Reader Wants

Now that you’ve written the summary that you want, you’ll need to consider what the reader wants. For the most part, people reading your plan want to know one thing: do I need to read any other part of this plan or can I throw it away?

The default answer is to throw it away–they’re looking for any reason to not read the rest of the plan. As soon as they find that reason, they’ll toss it. You want your summary to grab their attention. Either grab their interest, or give them enough information that they could pass on your plan to somebody they know that’s interested in your industry.

Investors tend to stick to specific industries, markets, and deal size. If you make those things clear in the summary, yoSC2forweb1u’re helping them get a clear picture. Putting that information at the end of a long paragraph makes it possible that they’ll miss your important contributions. It’s also likely that your plan will have to get through an intern or assistant before the investor sees it. The summary is the key to the investor’s front door. Don’t include too much or too little, try to make it fit just right. And don’t be afraid to customize the summary for each investor. You should know enough about the investor to know what types of deals interest them.

Steve Cook

Coming next week: The Company Overview