Executive Summary
How To Write An Executive Summary
Your executive summary is your pitch. You've heard of and probably even given an “elevator pitch.” Write your business plan’s executive summary like it’s an elevator pitch that you've had the time to edit to perfection. It should introduce you, your business and your product, but the purpose of writing an executive summary is also to deliver a hard sell. Convince your reader here that you have a great idea they should invest their time and/or money in. Write it last. Even though the executive summary is at the beginning of a finished business plan, many experienced entrepreneurs (including me) choose to write the executive summary after they've written everything else. Ideally the executive summary is short—just a page or two—and highlights the points you've made elsewhere in your business plan, so if you save it for the end, it will be quick and easy.
What Should An Executive Summary Include?
In a standard business plan with a standard executive summary, the first paragraph of your executive summary should generally include your business’s name, its location, what product or service you sell and the purpose of your plan.Basically, the first paragraph is an introduction to what you—and your business plan—are all about. Another paragraph should highlight important points, such as projected sales and profits, unit sales, profitability and keys to success. Include the news you don’t want anyone to miss. This is a good place to put a highlights chart—a bar chart that shows sales, gross margin and profits (before interest and taxes) for the next three years. You should also cite and explain those numbers in the text.
For An Investor-Ready Business Plan
1. PROBLEM
The most important thing is to identify a problem that is worth solving. If your product or service doesn’t solve a problem that potential customers have, you don’t have a viable business. Simple as that. The problem you solve doesn’t need to be earth-shattering—”there are no good ice cream shops in Portland” is a perfectly valid problem to solve with a business—but you need to identify it.
2. SOLUTION
Once you’ve clearly defined the problem you’re solving, you need to explain your solution. A clear problem statement will help you focus your solution on solving that one problem, and not stretch the solution to solve multiple potential problems. Try to describe your product or service and how it functions as a solution in just a few sentences or bullet points.
3. TARGET MARKET
It’s always tempting to define a target market that’s as large as possible, but that does not make for a credible pitch. For example, if you want to open an ice cream shop in Portland, you might think your target market is “everyone in Portland who eats ice cream”. But what’s the personality of your business? Is your ice cream shop a kid-friendly place with lots of candy toppings and funny flavor names and maybe even a playground? Is it an artisan place with locally-produced ingredients and intriguing flavors like Raspberry-Habanero Sorbet? For the first ice cream shop, your target market is Portland-area families with young kids; for the second, your target market is Portland-area foodies. Next you’ll need to do a little research to estimate how many people are in each target market segment you’re after. If you live in the US, the US Census site is an invaluable resource for this. The SBA site also has a great collection of links for market research. After you have some population data, try and estimate what an average person in each group currently spends each year on their current solution to the problem you are solving. Now, just multiply the number of people in your target market segment by how much they currently spend and you will have a realistic “market size” number or your target market. These numbers are critical and are part of any good pitch.
4. COMPETITION
Every business has competition. Even if no one has come up with a solution similar to what you have come up with, your potential customers are solving the problem they have with some alternative. For example, the competitors to the first cars weren’t other cars but horses and walking. As you think about your competition and existing alternatives, think about what advantages your solution offers over the competition. Are you faster, cheaper, better? Why would a potential customer choose your solution over someone else’s?
5. TEAM
No matter how great or unique your solution is, if you don’t have the right people on board, you won’t be able to see it to fruition. Why is your team the right team? Explain how you and your business partner(s) are each uniquely qualified to execute your vision for this business, and why you are the right team to bring this business to success. If you don’t have your entire team in place, that’s not a mark against you. The more important thing is to understand that you have gaps in your management team and that you need to find and hire the right people. Address any gaps you think you have, and explain your plan for filling them.
6. FINANCIAL SUMMARY
Where does your revenue come from, and what are your expenses? If your business plan is developed enough that you have a detailed sales forecast and expense budget included, reference the numbers you have (and direct the reader to the correct page of your business plan’s financial summary in case they want to see more). If you don’t know your industry very well yet and are still assembling a detailed financial summary for your business plan, that’s okay—for a pitch, a detailed forecast and budget aren’t necessarily required. Explain your business model and detail how your business will earn revenue and what your expenses will be in operation.
7. MILESTONES
Talking about upcoming milestones in your pitch makes your business a reality. Tell your reader about your upcoming goals and when you plan to achieve them. If you have already accomplished notable milestones, you should mention those. For example, if you are opening an ice cream shop, investors will want to know about your plans to sign a lease, design the interior and open for business. Or if you’ve invented a new medical device, prospective investors will want to know where you are in the clinical trial process. What steps have been accomplished and what’s the projected schedule for final approvals from the FDA?
How Long Should An Executive Summary Be?
Never waste words in an executive summary. Experts differ on how long an executive summary should be—some insist that it takes just a page or two, others recommend a more detailed summary, taking as much as ten pages, covering enough information to substitute for the plan itself—but although 50+ page business plans used to be common, investors and lenders these days expect a concise, focused plan. The best length for an executive summary is a single page. Emphasize the main points of your plan and keep it brief. You are luring your readers in to read more of the plan, not explaining every detail of your business. A helpful exercise in writing concisely is to try to make every point you want to make—such as the seven key elements of a pitch—in three sentences or fewer. Don’t confuse an executive summary with the summary memo. The executive summary is the first chapter in a business plan. The summary memo is a separate document, normally only 5–10 pages at most, which is used to substitute for the business plan with people who aren’t ready to see the whole plan yet.
