How to Write a Business Plan – Ch.1: Executive Summary  

Advice on How to Write an Executive Summary

business plan how toThe life of an entrepreneur certainly has its rewarding moments. The day that you decided to “stop playing it safe” and follow your dreams, the first team meeting with your employees, there are many happy milestones to reflect on. One of these milestones, however, may carry a bit more stress than joy and exuberance – writing your business plan.

Some entrepreneurs are more gifted than others in the wordsmith department, but no matter what your writing abilities are you can make it happen. Writing your business plan should be much more pleasure than pain because this is a chance to sell your dream to potential investors. This document is all of the ideas, strategies and projections in your head spilled out on paper in a structured outline. And remember: your business plan is effective for the company, too. It will make you focus deeper on obvious goals and bring to light some aspects of your company you may have overlooked.

The staff of Entrepreneur Media, Inc. recently shared an amazing compilation titled The Ultimate Guide to Writing a Business Plan. This seven step guide on how to write the individual components of a business plan is very well-written and we felt our audience needed be informed. Learning all seven at once may be a bit overwhelming, so we will break them up into a seven blog series for easier consumption.

Without further ado, let’s get started!

Chapter One: How to Write an Executive Summary

For most business plan structures, the Executive Summary is the part of your business plan people will see first. It may only be a couple of pages in length, but the subject matter is of critical importance. The Entrepreneur staff thinks “the summary is the most important part of your whole plan” and we have to agree.

Most of us are familiar with CliffsNotes so start off your executive summary preparation with this format in mind. Your executive summary must be jam-packed with all of the best and most important information from the entire business plan. It must summarize all of the points you think will make people buy into your idea/strategy/goal and invest in your company. The best executive summaries are written so well they can sell investors on the spot. The rest of the business plan is just there to be used as a reference.

There is no one “correct” format to follow. You can find a dozen articles on writing an executive summary and they will all offer a slightly different approach. The Entrepreneur Team is right on par with their advice so we will break it down and share it with you. This format is a wise approach, and while we can’t tell you what is right and what is wrong, we can tell you this is good model to follow:

Section 1: Explain the business idea, the problem it solves and how it fits in the marketplace.

Right off the bat you need to win over your potential investors with your idea. Why is it easier? Why is it faster? Why is it cheaper? Who is it for? The opening one or two paragraphs has to act like a hook sinking into the cheek of an investor. If you don’t have the right bait, your business plan and potential investment will be underwater permanently.

Section 2: Reveal the cost and how much funding you are seeking.

Again, don’t beat around the bush, here. The readers want to know the numbers and why you need capital, so give them what they want. They also want to know where the money is going, so give them a general idea to satisfy their interest. For example, if you plan on hiring more employees or opening a new location, this is information an investor wants to know. Let them know how you plan on using their investment and how their investment will make the both of you money in the future

Section 3: ROI and the timetable for ROI.

The Entrepreneur team provided excellent explanations for the expectations of each type of investor. Here are some thoughts straight from their executive summary article:

business plan roi– Friends and family want to get their money back someday but are not very interested in timing and returns.
– Bankers look for free cash flow to pay back the principal and interest of their loan. They also look closely at management experience and marketing. They may ask for collateral. 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.
– Venture capitalists seek annual compound rates of return in the area of 35 to 50 percent per annum. They seldom want to go longer than three to five years to cash out. They always want to know what the exit strategy is.

Section 4: The best closing points for your specific business/product.

Not all businesses are the same, so not all executive summaries and business plans will be the same. If you think your investors will be more interested in learning about the percentage of ownership being offered, discuss that. If you think a better way to reel them in is to discuss your competitive advantages and strategies, discuss that. You must remember that the executive summary is just that – a summary. Everything will still be included in the overall document, but this particular section highlights the principal elements of your future success.

Try and discuss two of the five following topics in your last section: division of ownership, management team, competitive advantages and strategies, marketing plan and exit strategy.

Once you have finished and you begin to proofread and edit, make sure you have plenty of positivity and optimism throughout the document.

We hope you enjoyed our first installment of this seven blog series. Our intent was to give all of you a better grasp on the best approach to a winning executive summary, and in a sense, this blog is the executive summary of the entire business plan blog series. You now know what to expect for the next six blogs so we hope we did our job and piqued your interest. Stay tuned for the next installment – Ch.2: Management Section.

Thank you for reading and please leave your questions and comments below!

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