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Chapter Five

Executive Summary And Business Strategy

“What is conceived well is expressed clearly,and the word to say it will arrive with ease.”– Nicolas Boileau

Executive Summary

This is a section that must be included in your plan. It is the first and most read section of any business plan and needs to be given great emphasis.

Your executive summary is a summary of your business that answers all the key questions (why, who, what, when, where, how). Though it is the first section of the plan, write it last. If you try to write your executive summary first, it will likely be the hardest thing you ever write. If you write it at the end, after you’ve thoroughly thought through your unique products and systems, built your team of mentors and advisors, researched your market and competition, planned your financial needs and potential earnings and analyzed your business’ strengths and weaknesses, it will come much more easily.

What information does an executive summary include? The basics. Include the name and type of business (including its legal structure) and required investment or loan information (the amount and purpose of money you are requesting and your repayment plan – principal and interest). If the plan will be going to a lender or potential investor, be as specific as you can about the money aspects of your plan, including how you will use the money.

Even a business plan has room for dreams. Don’t be afraid to include a sentence or two about why you want to (or why you wanted to) start your business. After all, “why?” is one of your key questions. This is often best answered with your mission statement and a brief description of the motivation behind your mission.

Remember to keep your executive summary short, for it is sure to be read…

Maria and Paul

Maria had an excellent idea for a new business opportunity. She and a group of colleagues had advanced engineering degrees and were involved in nanotechnology research and development. Nanotechonology is the art of manipulating materials on an atomic or molecular scale to build microscopic devices. It is considered “the next big thing” by many venture capitalists. Nearly $10 billion a year was being invested into nanotech due to its promise.

Marie’s group, now incorporated under the name NanoNow, Inc., had developed a patented technique whereby nanoparticles were added to an automobile’s gas tank. Their unique fuel additive worked as an oxidation catalyst to help the fuel burn cleaner. Their company name NanoNow, stood for Nanotech New Oxidation Winner. Of course, everyone wanted cleaner burning fuel for less polluted air and for the better of the environment. But even more beneficial for Maria and her colleagues was that venture investors were currently quite interested in nanotech. Just like biotech and the internet in previous years, simply by mentioning nanotech doors were opening.

Maria was in charge of writing the business plan. NanoNow was seeking to raise $50 million in a first round of funding to begin commercializing their patented technology. The plan discussed the market, their competitors and their unique patented position in the industry. It was a 300 page well supported and convincing scientific argument for investing in NanoNow.

Paul was a business consultant who helped entrepreneurs shape their business plans. While he liked all the work Marie had put in on such a detailed business plan, he also knew that not only is brevity the soul of wit, it also defines the soul of many venture capitalists. They want the brevity of a hot business area times dollars invested to equal huge quick gains. Demonstrating that magic, vault-opening equation in 30 or even 300 pages was one task. But condensing the equation into a one page Executive Summary was an art.

Paul knew that the venture investors didn’t have time for a long and detailed narrative. Their assistants could wade through all that. Instead, they wanted one persuasive page, which after reading, they could snap their fingers and bark, “Check it out.’

This is why Paul was so focused on getting Maria and her group to write an effective Executive Summary. One page meant the difference between $50 million or continued polluted air. It was an important page. But Maria and company were engineers. They weren’t used to brief persuasion. Everything had to be proven and re-proven. Maria said she couldn’t possibly summarize and persuade in one page.

Paul had seen it before. Many of his clients could write a brief and winning Executive Summary in their sleep. But for engineers and other technical types it was nearly an impossible task. They just weren’t trained to write that way. As a result, Paul had a previously utilized solution to the problem. He hired a copywriter to write the Executive Summary. The copywriter was used to writing short, persuasive copy. He knew which buttons to push and where in the copy to push them. He was the expert they needed.

As it turned out, with a persuasive one pager for the venture guys and voluminous material for the underlings to check out, NanoNow was funded. Maria and her colleagues went on to great technical and financial heights without ever fully appreciating how influential the art of an Executive Summary was to their success.

Again, it is important to remember that an Executive Summary should do what it says: Summarize the business plan. It should be very short (one page is ideal), and should highlight the most important sections of the plan. Beware, it may be the hardest thing you write during the planning process. Condensing 30 to 40 pages (or in Maria’s case many more) down to their very essence takes an intense understanding of the subject matter and considerable writing skill. It is best left until you have written all other parts of the plan and have come to a thorough understanding of all the subjects. Your plan should be well conceived before you start writing the summary.

If you are using your business plan to attract funding, you might think of the plan as a resume for your business. Your business plan sets out all the reasons why someone would want to give you money. And just as an employer has to look at dozens, sometimes hundreds of resumes in a short period of time in order to narrow down the prospects to that hopeful few who will be called back for an interview, so do potential investors need to sift through piles and piles of business plans in order to find that hopeful few who will get a closer reading and even an interview. The timeline for potential investors is similarly short. Some investment decision-makers must go through as many as one hundred plans a week. Obviously they can’t do that without getting good at quickly separating the wheat from the chaff. You need to be able to summarize all the essentials in a way that will entice readers and back up that enticement with confidence. This, in a nutshell, is the job of your executive summary.

One way to compose the executive summary is to summarize each section of the plan in no more than a paragraph per section. If you find you can’t do that, your plan (or particular sections) may not be sufficiently focused or you may not thoroughly understand the components you have put into the plan.

Try to make your executive summary a concise selling tool. Leave out sections that do not show the company in its best light – such as the weakness portion of the Strengths and Weaknesses subsection. Your executive summary may be one section or you might want to break it down into briefer subsections. If tables or bullet lists will save you space without losing clarity, consider using them.

Timelines

Writing a business plan can take as little or as much time as you let it. There is no right amount of time other than exactly how long it takes you to get it done. Try to work with advisors and mentors to set goals for each section. Have them hold you accountable to get them done as an added incentive to stay on track. The reality, however, is that if you have to be held accountable by others to get the sections done you should ask if you have true entrepreneurial spirit.

If you need someone to push you along to write a plan, ask yourself who will be there to push you along when you’re in the midst of a crisis. Listen closely to your inner voice while you write your plan. Indicators like how well you commit to meeting deadlines for timelines can tell you just how willing you are to do what needs to be done to creating a winning business. The determination to write a plan needs to be amplified 100 times to succeed in business. The fuel for that amplification must come directly from your passion and no one else. That is how you join the ranks of the elusive 5% of businesses that succeed.

Strategy

Your business plan is a long-term planning document and it will cover a lot of ground. In this section you will paint a picture with words that brings to life how you will get your business started and how you will continuously grow and improve it for the next three to five years. Equally important, preparing your business plan will help you figure out how you define success and what steps you will need to take in order to reach that definition.

Build a strategy for tackling the process of writing a business plan. Here are some tips for business plan preparation:

* Start with the words. The words drive the numbers.

* Beware of technical jargon. Keep the tone conversational.

* Be concise and clear. Short, crisp sentences add authority. Bullet lists are friendly.

* Work on the sections you find hardest first.

* Include mentors, advisors, family and partners in goal setting.

* Don’t be afraid to hire professionals, but don’t delegate decision making.

* Always be realistic (but positive) about your business.

* Be honest, especially when it comes to shortcomings and risks.

* Use a spell-checker and grammar checker. Your plan will be judged not only by the ideas it presents, but also by its presentation and accuracy. Don’t let your business acumen come into question just because your grasp of language isn’t what it could be.

* Only include what’s relevant. Don’t do your thinking in your plan; do it before.

* Remember that the final goal is not a completed business plan, nor is it the acquisition of funding. Rather, the final goal is the realization of your business goals as set out in your plan.

* Embrace the fact that your business plan will never be finished. A business is an ever-changing entity and your plan is no different.

* Keep the key words – who, what, when, where, why, how – at the forefront of your thoughts as well as the forefront of your text. Answer each of the key questions in the first paragraph of each section. The rest of each section will be simple expansion.

* Intimately know the basics of your business strategy before you start writing.

* Start gathering information before you need it – market information, competition facts, etc.

* Only include relevant financial and operational details.

* Don’t make grandiose promises or representations to yourself or others (especially potential investors).

* Allow more room for detail on those sections particularly relevant to your business.

* Let your specific needs and goals dictate the structure of your plan.

* Use charts wherever you can to save space if doing so does not eliminate important detail.

* Work on making your document as visually pleasing as possible.

Looking Forward

When you project the future, you will need to take into consideration where you want your business to be. Be specific but recognize you are making an educated guess. This is where a team of experienced advisors and mentors can add great credibility to your plan. Ask yourself key questions. What will your workforce look like? What will your costs and income be? What expansions and new technologies will you have introduced? What will your loan balances be? Will you have investors? Who will be your customers? What will your market share be? What will your advertising and/or marketing look like and how will it be used? What will your role be in the business?

In addition, you will need to understand the industry, your market, the political climate, economic trends and every other aspect of an intricately woven web of relationships and challenges. You can help yourself and your business by staying abreast of world, national, state and local issues.

You don’t have to be a mind reader to forecast trends. Simply staying aware and doing some consistent study will put you ahead of the game.

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Rich Dad Tips

• Savvy investors know that every projection in a five year business plan is a guess. History is a great indicator of the future, so make sure you benchmark similar companies to ensure the investor or lender that you have a firm grasp on industry dynamics.

• Comparing your projected financials to others in the industry in the appendix of the plan is another useful tool.

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There is another large issue that arises when you provide forward looking projections. You shouldn’t be overly optimistic or overly certain of success, especially when seeking to raise money. Looking into the future is necessary, but you shouldn’t use a far off date to claim that certain profit levels and grand milestones will be reached. Those kind of positive representations, especially when written into your plan, become potential and problematic misrepresentations, especially when investor monies and attorneys are involved. There is no guarantee of success in any business. Forward looking statements as to profits and performance must be made cautiously and conditionally. The SEC (the Securities and Exchange Commission, the U.S. government agency which regulates the sale of stock) has an entire set of guidelines for forward-looking statements. They suggest using conditional language such as ‘we believe that…’ instead of ‘we guarantee that…’ and ‘it is our opinion that…’ instead of ‘it is certain that…’ While the less than 100% positive conditional language may sound wimpy, there are two important points to consider. First, sophisticated investors are used to reading this kind of wording. It is not going to dissuade them from investing. In fact, by failing to use conditional language they’ll wonder if you really know what you are doing. After all, why wouldn’t a prudent business person use the SEC’s suggested language if it could help them avoid a lawsuit? Remember, it is your responsibility to seek legal advice with any claims or assertions in your business plan to protect yourself from liability issues.

Secondly, let’s remember what we are doing here. We are talking about the future. There are no guarantees or certainties. By using conditioned language you are giving yourself the necessary flexibility to account for the many changes that lie ahead. Don’t lock your plan, or yourself, in to a fixed view of what lies ahead. Reserve the right to get smarter in the future!

Finding Expert Advice

In a perfect world, you would have the time and expertise to prepare your business plan completely with yourself and your closest advisors. When you prepare your own plan, you are so intimately familiar with it that its use becomes a natural outgrowth of the preparation process. However, few of us have the management, organizational, writing and editing, planning, layout and design, marketing and financial expertise it takes to prepare an effective plan. And even those who might have the expertise likely don’t have the time.

There are a variety of experts from whom you should solicit help in the preparation process. You might want to consider engaging the counsel of retired executives in your field, peers in noncompetitive business, entrepreneur groups, your attorney, your CPA, friendly sophisticated investors or lenders, management consultants, marketing/PR experts, a business coach, a writer/editor, a graphic designer, and a printer. Some companies specialize in business plan preparation and offer all the needed expertise under one roof.

Never completely hand off the job. It is your business. It will be your plan. You are the one who will be using the plan. Meet with your experts and planners at set times throughout the process, so that you stay up-to-date. Don’t go through the expense and time of having others prepare a plan that you cannot or will not use.

Want to know if you are involved enough in the planning process? A simple test is to write your own executive summary and mission statement. (You may want to do this prior to the planning process, as well as at the end.) Then let your planners or experts do the same and compare. This way you can be sure you not only understand your plan, but that your planners or experts understand your business as well.