How to Write a Business Plan: Executive Summary
The executive summary is probably the most read part of your business plan. Another name for this section could be management summary or just summary. This section should embody the important parts of your business plan such as the problem statement, company information, target market, pricing strategy, financial highlights, and funding request.
What is an Executive Summary for a Business Plan?
The executive summary is a summarized version of your business plan. This section should be no longer than one page. The main objective of this section is to succinctly describe the totality of your business. The main challenge for this section is identifying the most important parts of your business plan and re-summarizing the information into a short document. The two most important parts of this section is the problem statement and the funding requests.
Why is an Executive Summary important?
The executive summary is probably the most important part of your business plan. This is important for several reasons. First, most people do not read past the executive summary. Investors often make a determination as to whether they will investment a company are not based solely on the executive summary. A second reason this is a critical portion of the document is because it will highlight the most important parts of your business. After reading this document, investors should come away with a broad understanding of your company and a vision for how and why it will be successful.
What needs to be in the Executive Summary?
There are specific aspects of the business plan that need to be represented in the executive summary. We already covered the two most important, which were the problem statement and funding requests. Other important components in the executive summary should include a brief business description, management experience, target market, pricing strategy and location where the company will operate.
When to write the Executive Summary?
The executive summary should be written last. Once the full business plan is complete, going through the document and point out important aspects of your business plan is usually one of the easiest parts. However, if the executive summary is not carefully crafted, then important decision-making pieces of information may be left out. This would lead to an investor passing on your opportunity.
How to write the Executive Summary?
The executive summary is the first section that a business owner should present to an interested party. When I write my executive summaries, they are always an abbreviated version of the business plan. By doing this, essentially, a business owner has two documents. The first document may be considered an executive summary. This will briefly explain, in broad terms, what the company is about, the product or service that it offers, differentiated services provided, financial outlook, and funds needed to start operations or grow the company.
The company and product section should briefly summarize the company and the product or service that is being offered. This section should definitely be abbreviated from the company summary and product description part of the business plan.
Business Plan Writing Tip:
When I write this section, I will always copy and paste my company summary and product description under the heading for the executive summary. Next, I literally just start deleting lines to reduce the content to approximately a paragraph.
For the second paragraph, I will summarize the rest of the company description section, such as competitive advantage, hours of operation, number of employees, and any other critical pieces of information that I want to show upfront about the company.
ABC Retail is a limited liability company located in Orlando, Florida. Our firm offers gadgets and thing-a-mam-boppers online and in our retail store. Our retail operation service specializes in same-day delivery to customers within our delivery area and same day shipping for our online customers.
Our firm utilizes the best value pricing model to ensure a competitive price is offered to our customers. Our hours of operation are from 8:00 AM to 10 PM, seven days a week. Our staff size is four, including the owner. An important key to success in sustaining our business is to continually engage our target market through innovative advertising messages.
In the example above, in the first paragraph, the location of the establishment, products, or services offered, and differentiating factors are always discussed. This immediately helps to show the type of business and how it is different from other similar companies in the area.
As for the second paragraph, this is always a summary of the rest of the information in the company description. I like include the hours of operation, staff size, and how the company will sustain operations in the long term.
The target market, as noted earlier in the book, is a demographic or group of individuals that may frequently use our products or services.
Business Plan Writing Tip:
For this section, I just simply note the target market and eliminate any additional information as to why the selection was made.
Our primary target market will be young blue color works, specifically females between the ages of 25 to 35.
The sample shows the type of worker, age bracket, and gender of our target market and nothing more.
The financial highlights section of the executive summary should stay focused on how the business will perform, financially, over the next 12-months. Because of this limited focus, popular inclusions in the financial highlight summary section would be related to first-year annual profits, expenses aligned with these prophets, and net profits expected.
Business Plan Writing Tip:
I like to keep this section to approximately four lines. Further, I always first introduce the revenues and then the cost aligned with the revenues. With this done, I finished the paragraph with net profits and the profit margin ratio. The succinct financial summary shows investor or loan officer the company’s potential profits in short order.
The financial projections are based on market research and empirical examination of the local retail store industry. For the next year, we project revenues of approximately $456,793. The estimated expense costs will be $217,330. After taxes, we estimate a net profit of $239,463. This leads to a profit margin of approximately 52.4%.
The summarized version of the financial summary is definitely short and sweet. The most important aspects of the financial statements are included in the short paragraph. Further, the structure of the financial summary almost tells a story. First, it starts with revenues, then shows the costs involved with the revenues. Once the costs are deducted, then the profits are shown. Finally, a real quick ratio was presented, as well.
Differing from the other sections in the executive summary, the funding section should be almost identical to the funding section in the business plan, with the exception of the cost breakdown. Not surprisingly, investors want to know how much money the business needs and how the they will be repaid. There is no skimping on details here.
Business Plan Writing Tip:
The section should be written in terms similar to, or identical to, the funding section of the business plan, as noted above.
To start operations, funding of $1,500,000 in debt or equity from a bank or investor is required. Debt funding is expected to have a term of 15 to 20 years with an interest rate between 8% to 10%. Principle and interest payments will be made monthly, using profits from the business. For investors, a negotiated percentage of ownership in the company will be offered. In addition, after the second year of profitability, investors will be compensated through semi-annually dividend payments from business cash flows.
Not much need for analysis. Just copy and paste and ignore the startup cost. You are now ready to go.