The executive summary the most important part of your business plan, and perhaps the only one that will get read so make it perfect!
The executive summary has only one objective : get the investor to read the rest of your business plan.
Ok but how?
Get in the reader's shoes
His inbox is probably full of business plans and he needs to get to the bottom of it.
He is therefore very likely to scan through each business plan in less than 2 minutes, and to select only the most promising projects.
How to make your executive summary stand out?
First on the form. Make the text easy to read by using short paragraphs rather than long blocks of text. And keep it short: 1 (ideal) or 2 (maximum) pages.
Then on the content itself: go straight to the point. Introduce in a couple of paragraphs : the idea, the team, the market, the potential in terms of profitability, and the funding requirements. Don't try to cover everything in too much details: keep it high level and the investor will read the rest of the plan to get the details if he is interested.
The introduction of the executive summary
The investor (or the banker) will start by checking that the project matches its investment criteria:
- the idea and the funding requirements match his investment stage: seed, series A, growth, or LBO
- the sector is not over allocated in its portfolio: investors have diversification criteria imposed by their investors, banks by the their credit committee
- the market is big enough: especially important for equity investors
- the team has the right skill-set
The introduction of your executive summary must touch briefly on all of the points above before covering them in more details in the body of the executive summary.
Created in 2011, ABC Ltd offers through its website www.abc.com an A/B testing solution and generated a turnover of £1m in 2012. The objective of this business plan is to seek a financing of £20 to grow the company's market share in the A/B testing market valued at around £2.3bn en 2012. The company is led by 3 seasoned entrepreneurs and employs 2 other people.
The body of executive summary
The rest of executive summary must follow a progression. Start with the business description and the team, then the market and your financial highlights, and finally the funding requirements.
Try to introduce the company in a couple of sentences (legal structure, location, shareholders and management team), its activity, and the main milestones to date.
The aim is to build interest from the reader of your plan by showing that you have the right team to carry this project and some traction around the product. If you have some skill gaps within the team you need to address this concern by showing how you are going to fill the gap (recruitment, external advisor).
The reader now knows:
- in what he will be investing
- along which shareholders
- and who will lead the project
The next step is to give a brief overview of the market:
- Customers: who are they? How many are they? What is the estimated value of the market?
- Need: why will customers buy your products?
- Competition: who are your competitors? What sets you apart?
- Strategy: what is your market positioning? How are you going to access the market?
If you are writing your business plan for a bank, try to reassure by showing that there is a real need for your product and that you are going to generate revenues quickly. If your business plan is for an equity investor, you also need to emphasize on the market size and demonstrate that there is the potential to establish a large business.
Here you need to present your key historical and forecasted financials, along with the main assumptions underlying your forecast.
Which figure should I mention? This really depends on both your sector and stage. As a minimum, try to show:
- That you are profitable: your EBITDA is positive
- That you generate cash: your operating cash flow is positive
- That you are growing: your revenues, EBITDA, and operating cash flow are growing regularly
Depending on your sector you might also want to include a few Key Performance Indicators (KPIs). For example the number of active users for a software company.
Finish the executive summary by stating the funding requirements and the use of proceeds. If needed, detail the offer (% of equity on offer, ideal length of the loan, etc.).
If you are trying to raise equity and already received binding offers from a few investors, mention it here as this will reinforce the attractiveness of your project.
That's it, now you know how to write a great executive summary! Don't hesitate to share your thoughts or questions using the comment box below.
This article is part of our series on how to write a business plan.