Your Executive summary is the snapshot of your entire business plan, which gives readers and potential investors a brief yet dynamic description of the key components of your business plan. Hence, Since your executive summary is the most important part of your business plan, you will want to make sure that it’s clear, concise and as strong as possible.
Considering the power of a strong first impression, because it’s the first thing people read in your plan. sequel to the above, this is where you want to wow people, sparks interest in them and make them think.
Moreover, a first-time reader is able to read the executive summary by itself and know what your business is all about. your executive summary should be stand-alone and should not refer to other parts of your business plan.
As a rule of thumb, always make sure your executive summary is between one to two pages in length and has the willpower to motivate readers to continue reading the rest of the business plan in more detail.
Here’s a suggested format for an executive summary:
1. What’s the business idea, what problem does it solve, what kind of product or services do you give and how does it fit into the marketplace?
Here, you briefly describe your company detailing what you do and where.
Describe the problem your business has identified in the market and how you intend to solve it.
Every business is solving a problem for its customers and filling a need in the market.
You should also include a one-sentence overview of your business that sums up what you are doing. These should be a tagline but is often more effective if the sentence describes what your company actually does. This is also known as your value proposition.
From this section, the investor is convinced of the uniqueness of your business and gain a clear idea of the market in which your company will run.
Also, state your legal form of the business as well as the goals of the business via a mission statement that clearly states the business’ purpose and values. Include a vision statement as well as where you see the business in five to ten years. Read more
2. Who is Your Target market, who are your competitors, what is your marketing plan? and what are your competitive advantages/strategies?
Here you will offer a short description of who your ideal customers are, how many of them are there and how do you intend to reach them.
How is your target market solving their problem today?
Are there alternatives or substitutes in the market? If yes, who is rendering such services?
Every business has some form of competition and it’s critical to give an overview of your executive summary.
It is important to show the reader that you have investigated the competition. Identify the direct and indirect competitors, with analysis of their pricing and promotional strategies, as well as their competitive advantage.
Based on this analysis, you can name key obstacles for your business, the added services you might offer, competitive challenges, as well as opportunities ahead. Briefly describe the competitive outlook and dynamics of the relevant market in which you will use. Read more
3. How will you get your product or services across to your customers/clients and do you have a formidable team to work with?
Here, you will briefly outline the processes you will use to deliver your products and services to the marketplace. This can include manufacturing, transportation, logistics, travel, printing, consulting, after-sales service, and so on and include a brief description of the organizational structure and the cost and capital requirements for operation.
Also, Investors put an enormous amount of weight on the team—even more than on the idea—because even a great idea needs great execution to become a reality. Be sure to convince your potential investors that you have a team that can deliver on your business premises. Read more
4. What is the cost implication, and how much funds are you seeking?
Clearly, state the capital needed to start or expand your business. Have a very clear idea of how much money you will need to run your business for the first full year. If possible, summarize how much money is invested in the business to date.
Describe why you need the funds and why the opportunity is exciting. Keep in mind that one of the most common causes of new business failures is under-capitalization.
Investors and loan officers want to know when they will get their money back, so be sure to explain how and when they will recoup their investment or when you will repay the loan.
If the loan for first capital is based on security instead of equity, you should also specify the source of collateral. Read More
Never you forget that risks are a part of any business, especially a new one. In this section, it is important to show potential investors and loan officers you have taken into consideration the risk involved with starting or expanding your venture.
Illustrate the market, pricing, product, and management risks as well as how you plan to overcome these risks.
Convey to the investor that the company and product/service truly fills an unmet need in the marketplace. Describe and quantify the opportunity and where you fit.
Explain why you are in business along with the reasons why you will be able to take advantage of this opportunity. Be sure to answer the following questions that are usually asked by potential investors:
Have you considered all the possible risks involved?
Does your business have a contingency plan in place for all the risks mentioned?
What makes this opportunity unique?
What are the financial risks for your business? How will these risks be minimized?
What is the worst-case scenario? How will your business handle it? Read more
6. What will the return be to the investor? Over what length of time?
In your executive summary, consider the following:
Most Venture entrepreneurs seek annual compound rates of return in 35 to 50 percent per annum. They rarely want to go longer than three to five years to cash out. So, you will need to state what your exit strategy is.
Probably you got money from close relatives to add to your business capital, never forget that someday they will come asking for returns without prior notice because they are not interested in timing and returns.
In our world today, Bankers look for free cash flow to pay back the principal and interest on their loan. They also look closely at management experience and marketing. They may ask for collateral. But by law they have to be conservative, that is, risk-averse, so they are not great candidates for risky financing.
Angel investors look for moderate rates of return, usually above the prime rate, plus some capital appreciation. They sometimes want to be involved at a hands-on level. Read more
Lastly, don’t forget yourself: It’s a rare company that doesn’t have any investment for the entrepreneur or entrepreneurs who started it.
7. What will be the model for sharing the ownership dividend?
As a start-up business, it is always better from the onset to decide how the company shareholder will eventually own their profit when the company starts making profits.
Spell out who owns what. If you have many equity investors coupled with a pile of creditors, this can get pretty complicated.
For the summary section of your plan, a basic description such as “Ownership of the company will be divided so that the four original partners owns 25 percent” will suffice.
If you have to negotiate details of exactly what any equity investors will get, there’s time to do that later. For now, you just want to give people an idea of how the ownership will be divided. Read more
8. Milestones and traction
The last key element of an executive summary that investors will want to see is the progress that you’ve made so far and future milestones that you intend to hit.
If you can show that your potential customers are already interested in—or perhaps already buying—your product or service, this is great to highlight. Read more
Making your Executive Summary Count!
The summary performs a host of jobs. First and foremost, it should grab the reader’s attention.
It has to briefly hit the high points of your plan.
It should point readers to questions requiring detailed responses to the full-length sections of your plan where they can get answers.
It should ease the task of anybody whose job it is to read it, and it should make that task enjoyable by presenting an interesting and compelling account of your company.
It is a place to put your best foot forward, to take up your business advantages and moderate the disadvantage.
Note, highlighting the positive doesn’t mean exaggeration or deceitful. If there’s a really important, unusual risk factor in your plan—such as that one certain big customer has to make a huge order for the plan to work—then you’ll want to mention that in your summary.
Paint a convincing portrait of an opportunity so compelling that only a dullard wouldn’t recognize it and want to take part in it.
The key to the executive summary is to pick out the best aspects of every part of your plan. So, extract the essence of each key part, and offer your readers a highlight reel of your business.
Now your Turn
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