Sunday, July 27, 2008

Writing an Executive Summary!

By Tim Berry,

The executive summary section of a business plan is a summary of the highlights of your business plan. Even though the topic appears first in the printed document, most business plan developers leave the writing of the executive summary until the end. This summary is the doorway to the rest of the plan. Get it right or your target readers will not go further than the executive summary.

What should an executive summary include?
For a standard business plan, the first paragraph of the executive summary should generally include:

Business name
Business location
What product or service you sell
Purpose of the plan
Another paragraph should highlight important points, such as projected sales and profits, unit sales, profitability and keys to success. Include the news you don’t want anyone to miss. This is a good place to put a highlights chart, a bar chart that shows sales, gross margin, and profits before interest and taxes for the next three years. You should also cite and explain those numbers in the text.

Different plans require different summaries
An internal plan, such as an operations plan, annual plan, or strategic plan, doesn’t have to be as formal with its executive summary. Make the purpose of the plan clear, and make sure the highlights are covered, but you don’t necessarily need to repeat the location, product/service description, or other details.

Never waste words in a summary.

If you’re looking for investment, say so in your executive summary, and specify the investment amount required and the percent of equity ownership offered in return. You should probably also add some highlights of your management team and your competitive edge.

If you’re looking for a loan, say so in the executive summary, and specify the amount required. Leave loan details out of the summary.

How long should an executive summary be?
Experts differ on how long an executive summary should be. Some insist that it takes just a page or two, others recommend a more detailed summary, taking as much as ten pages, covering enough information to substitute for the plan itself. Although 50+ page business plans used to be common, investors and lenders these days expect a concise, focused plan.

The best length for an executive summary is a single page. Emphasize the main points of your plan and keep it brief. You are luring them in to read more of the plan, not explaining every detail.

Don’t confuse an executive summary with the summary memo. The executive summary is the first chapter in a business plan. A summary memo is a separate document, normally only 5-10 pages at most, which is used to substitute for the plan with people who aren’t ready to see the whole plan.

A Standard Business Plan Outline

by Tim Berry,

As I write here about business plan outlines, please remember that your plan should be only as big as what you need to run your business. While everybody should have planning to help run a business, not everyone needs to develop a complete formal business plan suitable for submitting to a potential investor, or bank, or venture contest. So don’t include outline points just because they are on a big list somewhere, or on this list, unless you’re developing a standard business plan that you’ll be showing to somebody else who expects a standard business plan.

And in that case, if you do need a standard plan, then there are predictable contents of a standard business plan. For example, a business plan normally starts with an Executive Summary, which should be concise and interesting. People almost always expect to see sections covering the Company, the Market, the Product, the Management Team, Strategy, Implementation and Financial Analysis.

If you have the main components, the order doesn’t matter that much, but here’s the order I suggest.

Executive Summary: Write this last. It’s just a page or two of highlights.
Company Description: Legal establishment, history, start-up plans, etc.
Product or Service: Describe what you’re selling. Focus on customer benefits.
Market Analysis: You need to know your market, customer needs, where they are, how to reach them, etc.
Strategy and Implementation: Be specific. Include management responsibilities with dates and budgets. Make sure you can track results.
Web Plan Summary: For e-commerce, include discussion of website, development costs, operations, sales and marketing strategies.
Management Team: Describe the organization and the key management team members.
Financial Analysis: Make sure to include at the very least your projected Profit and Loss and Cash Flow tables.
I don’t recommend developing the plan in the same order you present it as a finished document. For example, although the Executive Summary obviously comes as the first section of a business plan, I recommend writing it after everything else is done. It will appear first, but you write it last.

Standard Tables and Charts

There are also some business tables and charts that are normally expected in a standard business plan.

Cash flow is the single most important numerical analysis in a plan, and should never be missing. Most plans will also have Sales Forecast and Profit and Loss statements. I believe they should also have separate Personnel listings, projected Balance sheet, projected Business Ratios, and Market Analysis tables.

I also believe that every plan should include bar charts and pie charts to illustrate the numbers.

Expanded Plan Outline
1.0 Executive Summary
1.1 Objectives
1.2 Mission
1.3 Keys to Success

2.0 Company Summary
2.1 Company Ownership
2.2 Company History (for ongoing companies) or
Start-up Plan (for new companies)
2.3 Company Locations and Facilities

3.0 Products and Services
3.1 Product and Service Description
3.2 Competitive Comparison
3.3 Sales Literature
3.4 Sourcing and Fulfillment
3.5 Technology
3.6 Future Products and Services

4.0 Market Analysis Summary
4.1 Market Segmentation
4.2 Target Market Segment Strategy
4.2.1 Market Needs
4.2.2 Market Trends
4.2.3 Market Growth
4.3 Industry Analysis
4.3.1 Industry Participants
4.3.2 Distribution Patterns
4.3.3 Competition and Buying Patterns
4.3.4 Main Competitors

5.0 Strategy and Implementation Summary
5.1 Strategy Pyramids
5.2 Value Proposition
5.3 Competitive Edge
5.4 Marketing Strategy
5.4.1 Positioning Statements
5.4.2 Pricing Strategy
5.4.3 Promotion Strategy
5.4.4 Distribution Patterns
5.4.5 Marketing Programs
5.5 Sales Strategy
5.5.1 Sales Forecast
5.5.2 Sales Programs
5.6 Strategic Alliances
5.7 Milestones

6.0 Web Plan Summary
6.1 Website Marketing Strategy
6.2 Development Requirements

7.0 Management Summary
7.1 Organizational Structure
7.2 Management Team
7.3 Management Team Gaps
7.4 Personnel Plan

8.0 Financial Plan
8.1 Important Assumptions
8.2 Key Financial Indicators
8.3 Break-even Analysis
8.4 Projected Profit and Loss
8.5 Projected Cash Flow
8.6 Projected Balance Sheet
8.7 Business Ratios
8.8 Long-term Plan