By biztree
When you’re trying to sell an idea to a potential investor, you’ll need to craft a pitch-perfect executive summary. Here’s how to write one that will get your business plan read and your foot in the door.
Whether you’ve put together a business plan or an investment proposal, you’re going to need an executive summary to preface your report. The summary should include the major details of your report, but it’s important not to bore the reader with minutiae. Save the analysis, charts, numbers, and glowing reviews for the report itself. This is the time to grab your reader’s attention and let the person know what it is you do and why he or she should read the rest of your business plan or proposal.
The executive summary is also an important way for you, as the entrepreneur, to determine which aspects of your company have the clearest selling points, and which aspects may require a bit more explanation.
Akira Hirai, founder, and CEO of Phoenix-based Cayenne Consulting, a firm that helps entrepreneurs develop business plans and financial forecasts, says the process of distilling the essence of your business down to a page forces you to think hard, decide what’s important, and discard things that aren’t essential to the storyline. “By doing this,” he says, “you develop a better vision of what your business is all about, and you become better at telling your story.”
How to Write an Executive Summary: Why Write It?
Investors, lenders, executives, managers, and CEOs are busy. Always. That means the executive summary is an essential gateway for your business plan to get read. Think about it this way: If you had an endless list of things to do, and someone handed you an 80-page document and said, “Read this!” you’d probably first want to know why.
When you’re writing your business plan, your goal is to get your foot in the door and face time with the investor. “Assuming that your business is a good fit for the investor, a strong executive summary will get you invited in for a meeting,” Hirai says. “A poor executive summary will leave you standing in the cold.”
Dig Deeper: How to Write a Great Business Plan
The Five-Paragraph Formula for an Effective Executive Summary
An effective executive summary can be broken down into five key paragraphs.
Paragraph 1: Provide an overview of your business.
As mentioned, you can get your readers thinking along the track you’d like them to by including a quote or statistic in the first paragraph of your executive summary. This first paragraph is also where you should provide the name and nature of your business, and relevant insights about your industry.
Paragraph 2: Discuss target market, competition, and marketing strategy.
Your second paragraph should include a clear and concise definition of your target market, and the need or pain point your business will aim to solve.
Next, outline the competitive landscape of your industry, and the advantage that your particular business possesses.
Your marketing strategy should hinge on the three primary ways that you plan on reaching your target market. Focusing on just the three strongest points of your marketing strategy will maintain precision, and get your readers excited to explore the rest of your plan.
Paragraph 3: Provide an overview of operational highlights.
The third paragraph of your executive summary should provide operational highlights such as where your company offices will be located, whether or not you will incorporate or remain a sole proprietor, or whether you will serve as a brick and mortar or online business.
Paragraph 4: Show forecasting.
Here you should make sales forecasting projections for one and two years after your business plan has been implemented. Calculate your break-even point, and inform your audience of when your project to turn a profit.
Paragraph 5: Detail your investment needs.
If your business requires financing, this is where you should go into detail about the investment needs of your business. The number you include here should be clear and should align with your projections from the previous paragraph.
How to Write an Executive Summary: The First Paragraph
Just as a movie might begin with a fight scene or a magazine article open with a funny anecdote, you’ll need a strong hook for your executive summary.
“The most important part of an executive summary is the first paragraph that clearly explains what the company does,” according to Dave Lavinsky, President of Growthink, a Los Angeles-based company that helps entrepreneurs develop business plans and raise capital. “Most business plans start with a story that tries to create excitement, and this doesn’t always work.”
One way to think about it, says Hirai, is that your executive summary needs an executive summary. The first paragraph needs to compel the reader to read the rest of the summary. Perhaps you have a compelling aha! moment, so you might start with that. If you’ve identified a problem in the marketplace that isn’t being adequately serviced, you might start with that.
How to Write an Executive Summary: The Nuts and Bolts
There is no set structure for an executive summary, but there are guidelines you must follow to ensure your business plan or investment proposal gets the attention it deserves. First, think about your core strengths. Use bullet points to present your ideas, and make sure you always use concise language.
Ask yourself what’s unique and exciting about your company. After you’ve explained what your company does, it’s time to sell why you believe you’re uniquely qualified to succeed.
Lavinsky recommends addressing these questions when putting together your executive summary:
• Do you have a unique partnership?
• Do you already have customers and traction?
• Do you have patents or technology?
• Is your marketing plan special in some way?
Depending on your audience, you can also try a more rigid approach to the executive summary. After the first paragraph, Bonjour says one effective structure is to summarize each section in the same order in which the items are presented within the full business plan. To make the structure as relevant as possible for the reader, typically an investor or a lender, he suggests considering these categories:
• A Company Description Summary
• The Problem
• Your Solution
• Why Now
After describing the elements above, the executive summary should also have a brief financial summary. For your financials, Bonjour suggests including the valuation of the deal, so that the reader knows right away what the risks are, and what the returns can be.
How to Write an Executive Summary: Strictly Professional or Humorous? What’s the Tone?
This depends on who your readers are. Do your research. If you’re presenting your plan to investors, make sure the language of the executive summary caters to their backgrounds. For example, if you know your investor has a degree in chemical engineering, your language might differ from that in the executive summary presented to an investor who studied philosophy.
In other words, “use language that will resonate with your target audience,” says Hirai. Don’t be afraid to change your executive summary when you present it to different investors. Consider creating different versions for each audience, he says, but ensure that it’s always kept professional, crisp, and free of any embarrassing errors. Another good tip he gives is to use personal pronouns (e.g., “we” and “our”) over general nouns (e.g., “the company”). Your reader will feel a stronger personal connection with you, your brand, and your idea if you can relate to the reader in the first person.
How to Write an Executive Summary: The Length
Remember, every executive summary is–and should be–unique. Depending on the size of the business plan or investment proposal you’re sending, the executive summary’s length will vary. However, the general consensus is that an executive summary should be between one and four pages long.
Think logically. A two-page summary can be printed on the front and back of a single page, which can feel like a professional brochure. And if you can’t tell the essence of your story in a page or two, says Hirai, then you probably haven’t thought things through well enough.
Echoing this thought, Bonjour asserts that “you can cheat a bit by using smaller fonts, widening your margins, shrinking images and tables, but ultimately you need to summarize everything contained within the executive summary. After all, it is called a ‘summary’ for a reason.”
How to Write an Executive Summary: What to Avoid
“The reason most business entrepreneurs get executive summaries wrong is that they believe the goal of the executive summary is to get the investors to give them a check,” says Lavinsky. “The goal of the executive summary is to get the investor to read the business plan or to meet with you.”
With that in mind, clear your vocabulary of any superlatives, clichés, or claims that can’t be backed up, he adds. Avoid using terms like “the best,” “groundbreaking,” “cutting-edge,” and “world-class.” “Investors see those words day in and day out,” he says, “and eventually they lose meaning.”
How to Write an Executive Summary: Is It Any Good?
The most important element of any executive summary is a clear, concise, and relevant explanation of what your company does. Obviously, you should devote a good portion of your time to reading and rereading the summary. But there are some tricks. Lavinsky shares his litmus test: Have a fifth grader or any noninvestor read your executive summary, even just the first paragraph. Then ask the person to explain to you what your company does. If he or she can explain it with ease, you’re good. If you hear crickets, you’ll need to rework them.
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