Monday, September 21, 2009

Business Plan help: writing the executive summary

Today, with many organisations, especially those with much at stake preferring to opt for professional business plan service firms for business plan help, the art of writing a good executive summary for a business plan has largely been lost. With banks and business investors in countries such as South Africa, the US and a number of others, requiring a business plan before funding or business finance is considered, its easy to see why. So how do you write an effective and professional executive summary for your business plan?

The executive summary is the most important section of your business plan. It is normally the first section of your business plan that investors will read, and could be the last if it is badly written. An executive summary should describe the company, the product or service, and the unique opportunity your company is offering. It should also provide a short description of your management team and a summary of the investment you are seeking. Don't forget to tell the reader why you need the money and how and when they can expect to be paid back!

It creates a first impression (remember what your Mum said about first impressions!) in the Angel’s mind of both you and your business. Use clear and concise language and words that command attention, and excite your Angel.
Be honest. It is often tempting to exaggerate or Gild the Lily, but you WILL get found out eventually and Angels will not be happy. Angels like the truth. Your summary should promote trust and if "just one little white lie" creeps out, Angels start to look for the others. Now you are on the back-foot.

The executive summary is neither an introduction nor an abstract; it IS the business plan in miniature. It should stand alone and be interesting, concise and clear. It should take no more than 5 minutes to read and when finished the Angel should be able to say "So that’s what these people are up to"

Here are several common mistakes that can make your executive summary less effective:
Too wordy, and failing to get to the point. Angels are busy.
Trying to be all inclusive (it should be a summary)
Failing to show a unique or exciting opportunity
Failing to summarise the investment sought
Failing to generate interest in the reader

Some suggestions to combat these problems:
> Limit your executive summary to a maximum of 3 pages; 1-2 pages would be best
> Focus on the opportunity and explain why it is special
> Make certain that the opinions and claims in your executive summary are fully backed up by the other sections of your business plan.
> Use only concrete facts and figures that explain your business concept, market niche and financial projections.

Don't forget to include the details of your investment (the amount you need, what you will spend it on, and the return you offer your Angel)
Keep the Angel Investor in mind - why are they reading the plan and what response are you hoping to generate?

A good executive summary should demonstrate:

  • A business opportunity that makes sense

  • A clear plan for success

  • A capable management team

  • A clear, specific, and definable market

  • Significant competitive advantages

  • A solid and believable summary of the financial projections

  • An excellent chance for Angels to receive a healthy return

  • The outline of your executive summary will vary based upon your particular business. But regardless of the format, every executive summary should include the following areas:

    The Opportunity
    It should immediately grab the attention of your Angel. This is often best achieved by explaining why your business is different or unique. Clarify your business advantages, how you can break into your market first, the benefit of your proprietary product, or how research supports a significant customer demand for your product or service. Essentially, what differences or characteristics will lead to success?

    The Product or Service Description
    Describe your product or service in terms of its benefit to your potential customers. How does it work? What is it used for? Where is it sold? How much does it cost? How does the customer benefit? Remember to limit yourself to highlights in this section. Be brief.

    The Market
    Who is your customer? How large is your market? Who are the competitors? Why are you better? What are your market share projections? Your reader must be convinced that potential customers will have the want, need, and ability to purchase your product. Don't try to avoid the fact that you have competitors. Instead, explain how you can gain market share with your business advantages.

    The Management Team
    Describe the management and how they will lead to your success. Is it clear your team is well-rounded with the experience, expertise and capabilities to achieve the goals outlined in your business plan? Does your board of directors or advisors bring credibility and experience to the table? Be warned – management weaknesses will ensure that Business Angels will go no further.

    The Finance Requirements
    How much money has been invested to date? What are your earning projections for the next three years? What amounts are currently required? What will the funds be used for? From whom do you expect to receive your investment? What specific return do you offer an investor? What is the exit strategy, in terms of both time and return?
    At what point in the writing process is it best to write your executive summary? There are three schools of thought. The first says prepare it before you write the rest of the business plan. The second says write it before, then again afterward to combine the best of both. The third says prepare the executive summary only after the rest of the plan is complete.

    Which approach is correct? It's really a personal decision, but it has been our experience that preparing the executive summary when the rest of the business plan is complete is fairly effective. This allows us to summarize the plan after all the information has been laid on the table with the hindsight of compiling the entire plan.

    Remember to review your executive summary many times and ask yourself whether it grabs the reader's attention. Will they be excited about your business? Will they want to read the rest of the business plan? If the answers to these questions are no, rewrite it. Show it to a friend or business associate and ask them to be critical. Many times after someone reads your executive summary they will say "It's great, but what about…?"

    Most business plans are only given any concideration once the executive summary has been read and created enough interest for the business finance provider or investor found what they were looking for within the executive summary. Best of luck with your business plans and for business plan help, don’t be afraid to ask or seek help.

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