Your Executive Summary will determine whether investors or financiers will take time to read the rest of your business plan or not. Many times clients ask ‘which is the most important part of a business plan’? I do not hesitate to answer that It is the business plan executive summary. In this post, I will argue why I think the executive summary is the most important chapter of any business plan and then provide a few pointers on how to write a good executive summary for your business plan.
Note: By investors/financiers, I am referring to venture capitalists, angel investors, bank managers, etc.
Create excitement and build interest
Your executive summary must create excitement and build interest – if it fails to do so, investors will stop reading your business plan and will not invest in your business. Take my word for it – a poorly written executive summary may easily cause your business plan to be ‘trashed’ – this may seem cruel considering the fact that you have probably taken considerable time, effort (and even money) to write your plan. Furthermore, your business plan may actually represent a viable business opportunity. There are two probable reasons why this may be so:
- Investors are busy people. Venture capitalists for instance, have to read tens of business plans every week. Thus, anything that does not present relevant information quickly and in a clear manner stands to be rejected.
- A good manager cannot write in a poor manner. A poorly written business plan including the executive summary is an indication that you are a poor manager – no one wants to invest in a poor manager.
Proposed structure of the business plan executive summary
Thus, it is extremely important to know how to write a good executive summary for your business plan. While there is no standard format for writing the business plan executive summary, there are several pieces of information that must be conveyed to the potential investor/financier.
In describing this information, I will provide a structure that I usually follow:
1st Paragraph ===> Company name, industry, and purpose of business plan
Industry of operation – This will quickly tell the reader what industry you are in. Investors usually prefer to invest in an industry in which they are familiar with or have expertise in. Stating your industry of operation will immediately inform the investor whether this is a venture that they should pursue or not relative to their interests.
Purpose of your business plan – this is a part many forget to mention. Are you seeking equity funding, debt financing? Is it seed capital (a new startup) or for expansion, etc?
2nd Paragraph ===> Establish the compelling benefits of your new product or service
Remember that the investor is a businessperson seeking an appropriate return on their investment. Why is your product superior than those in the market?
3rd Paragraph ===> Establish the size of the target market & strategy of entry
What is the size of the target market? This shows the investor that you have taken time to research your market. What is the strategy that you will employ to enter this market (business model)?
4th Paragraph ===> Details of the management team
Here, specify the talents of the people who will manage the exploitation of the opportunity. What are their qualifications and experience? Remember that the investor is keen to know the people with whom he/she is entrusting their money with.
5th Paragraph ===> Summary of financial forecasts/projections
This should be in summary form. Briefly mention expected sales revenue, cash flow, and profit and loss projections.
6th Paragraph ===> The ‘Ask and the offer’
This is where you state what you require from the investor and what share of the business you are offering him/her.
Further tips and notes
- Continuous revising – considerable effort and time must be spent on the business plan executive summary. The summary is not a ‘static’ document and should be continually ‘tweaked’ in order to make it compelling, concise, and interesting or to present new ideas as they emerge.
- Not a ‘cut and paste’ job – the executive summary must not be ‘copy-pasted’ from sections of your business plan otherwise the feeling of déjà vu created when reading the document may lead to a negative assessment of the plan by the reader. Keep the executive summary fresh – avoid repetitive phrases or strings of words that are rather annoying and stale.
- Length – from a personal perspective, a 1 page business plan executive summary is ideal. But if it this is not possible, then it should not exceed 2 pages. Many business plan writers will agree with me that achieving a 1 page executive summary is not easy – but is not impossible. It means exercising parsimony and brevity must be. Parsimony in this sense refers to the willingness to avoid using unnecessary words that do not add value to the content of the summary. Brevity, in this context, refers to conciseness – sticking to the use of exact, relevant words only. In other words, your executive summary, just like the rest of your business plan, must be subjected to the painful scalpel of parsimony in order to keep it short and to the point.