The Devil is in the Details: Drill Down into Executive Summary

Body of the plan:

Business Description or Company Overview

You should describe your motivation for starting the business as well as the nature of the business. Emphasize the uniqueness of your product or service offering and briefly describe why you believe this concept will be successful.  Demonstrate how a real, profitable business can be built using this plan.

Customer Need/ Problem Statement

Next, the plan must show how your company and product fill a concrete, unmet need in the marketplace. This can be accomplished by illustrating all the characteristics that set your company, as well as the service or commodity you offer, apart from competition. With this, provide a full investigation of end-users and key potential product applications (do your homework!). Describe any patents, copyrights, or trade secrets, as well as barriers to entry – show how your advantages are defensible. Much like the startup story, you should list all the major accomplishments you have achieved to date and any remaining milestones. This shows that you are not only clever, but also diligent and committed. Definitely mention alpha or beta tests (describe how future ones will be conducted, as well as previous results) and ideas or plans for offering upgrades (investors tend to shy away from potentially stagnant single product offerings).

Market Analysis

This is often what separates inventors from entrepreneurs. Investors who fail to understand the market and/or assemble the appropriate management team needed to make good on the opportunity—no matter how good that opportunity is—can hinder successful product commercialization. Take extreme care with this section. As this section will be especially scrutinized, be as specific as possible, and focus on rigorous, verifiable data. Include a thorough analysis of the industry and your potential customers. This should incorporate growth rates, market size, recent technical advances, relevant governmental regulations, and future trends. Research your customer base: give the number of potential customers, purchasing rate per customer, and decision-maker profiles. All this data should lead inevitably to your sales forecast and strategies for pricing, sales, and distribution. End by mentioning the percentage of the target market you plan to capture.

Management & Ownership

Keep in mind; you want your audience to invest in you and your team, not just your idea and your company plan. Investors will look closely at your management team’s experience and talents in areas such as technology development, marketing, sales, manufacturing, and finance. You must therefore introduce your team and describe in detail what they bring to the company in a management and ownership section (members’ detailed résumés should be appended to the plan). The typical startup management team consists of no more that a few founders with varied backgrounds and an idea. Again, you should point out any gaps in the team and discuss how you will fill them. If you avoid this step, you risk making crafty investors even more apprehensive. Also, many VCs have access to networks of proven management talent that can fill any crucial positions. You should list your board of directors, advisors, or any other key outside industry professionals or technology experts who lend your company guidance or credibility (here, you can potentially take further advantage of your investor’s networks).

Competition

We’re getting there. The next step is a discussion of competition. Even if you manage to be the first-to-market company, you still have to explain how the market’s need was previously met and why your offering is necessary to compete against this pre-existing solution. As for concrete adversaries, investors will, of course, be very interested in how you intend to succeed. So, you must mention all forms of competition, listing product-relative strengths and weaknesses. You must present projections of what you anticipate the competition will do in response to your offering. Also, if possible, include any direct comparisons, such as price, quality, warranties, product updates, features, or distribution strategies (don’t forget to document your sources, too).

Marketing Plan or Market Strategy

Begin to get into the concrete details of what you have in store with your market plan. This is needed primarily to show that your target market can be developed and penetrated (not just how). Your projections will drive the rest of the plan by estimating rates of operations and required financing growth. First, we deal with pricing. The intended strategy behind service/commodity pricing is to provide the investor with an idea of how to evaluate your overall strategy. So, explain your decisions about image, competition, gross margins, and discount structure for each of your distribution channels or means of promotion; and, again, be sure to include consideration of future development.

Next, we deal with the distribution channels. These should be very clearly defined and must identify either how the product will reach the end user (in the case of commodities), or how the end user can access the service. For commodities, direct sales (including mail order, direct contact salespeople, and telemarketing), original equipment manufacturers (OEM) in the case of integrating the product into other manufacturers’ products or distributors /wholesalers /retailers can be used. The strategic and financial advantages or disadvantages of each of these methods and, potentially, their compatibility must be explored thoroughly in the plan. Include a projected schedule of prices, with the appropriate discounts and commissions as part of sales estimates; remember these estimates must provide support for your decisions.

Lastly, we must deal with promotion. This section should include product sheets, potential advertising plans, Internet strategy, tradeshow schedules, and any other possible promotional venues. You have to convince the audience that you have the expertise to get your product to market. A rigorous promotional strategy will set you apart from the competition, and you should not be afraid of explaining the thought processes behind your decisions.

Business Economic Model

Finally, we come to the operations section of the plan. In this section you should describe the location and size of your facilities. As always, explain your decisions—include factors such as availability of labor, accessibility of materials, proximity to distribution channels, and tax considerations. Discuss your equipment and facilities. If you anticipate increases in production demand, include your plans for financing and expansion. Will your operations facility provide the necessary support for, say, international distribution? Also, address any outsourcing you plan to do in order to eliminate the need for expansion. Remember, your audience will be scrutinizing your plan for any inconsistencies. So, include budgets and timetables for product development. You will need to keep your plans as flexible as they are efficient. Address any and all of the big questions like how your facility plans allow for expansion in accordance with your sales growth projections, how you can supply necessary materials, and whether there is an educated workforce available. And whatever you do, make sure everything here is in accordance with your market strategy! Most investors would like to see detailed financial statements with five-year projections. Your business must show a steady growth and positive trends. It may not be a bad idea to hire a professional accountant to build the business financial analysis for you which basically includes the income statement, balance sheet, cash flow estimates, graphs and charts that visually depict the companies growth as well as a list of financial assumptions that you have made to arrive at the economic model. Investors can identify the inconsistencies in your financial projections and it also enables them to notice the amount of research you have conducted.

Things to remember

Keep it brief! Try to keep the executive summary fewer than three pages and the body of the plan under ten pages. Include all the key business and financing issues and decisions, while saving all the thick financial information for internal plans or later meetings. Mention early what type of business the company is and what your objectives are (though this may seem obvious, many entrepreneurs assume too much and fail to mention these things until far into the plan). Also, state concisely the strategy and tactics you intend to employ in order to reach your goals. With this, cite how much money the company will need over time, and what the funds will be used for. Provide a clear explanation of investors’ exit strategy. Avoid overly technical jargon in descriptions of product, processes, operations, etc.   Be realistic in your estimates of the market, your company, and other potentials; use concrete and specific terms, numbers, and details, and cite the sources of your information. Don’t be afraid of discussing risks – avoiding potential gaps can damage your credibility. Your internal budgets should be clearly summarized and properly structured for the benefit of outside party audiences. Lastly, be prepared with extra copies and enclose your documents in simple, but stylish covers.

How to Write an Executive Summary

Executive Summary

Let’s begin by discussing the most important part of the plan: the executive summary. This should present the plan in the form of a clear and concise document (5-6 pages) that captures the essence of the idea and sparks the interest necessary to engage the audience. It must grab the reader in a confident, yet concise, manner in order to convince him or her to continue reading the proposal attentively. As such, it should be written after the rest of the plan; this will insure that it is well targeted and contains only the most vital and provocative information. It is just a fact of life that fewer than five percent of all business plans get reviewed past the executive summary, and it is usually because it is lacks clarity or it simply is not convincing. Thus, you’ve got to be noticed. You have to call attention to the growth and profit potential of your idea and to the relevant experience you and your team possess. Another important note on executive summaries is it’s targeting. After all, before you can even hope to convince an investor, you must make sure that the executive summary must be aimed such that the investor’s preferences are appropriately considered. Naturally, our purpose with the executive summary is to inform: concisely and quickly.

Executive Summary Outline:

Corporate Mission

One of the most powerful ways to capture the attention of the investor is to create a mission statement, your vision, and philosophy that govern the organization. Such a statement should capture the essence of your business, the idea you want to pursue and why. As before, make it brief. The investor needs to know what product you offer, the market you intend to target, what you’ve done so far about it, and what you intend to do in the future.

Customer Needs

Define the problem or need in the marketplace that you are trying to satisfy? Why do you believe that your idea will resolve an inherent inefficiency in the market? Be factual and conduct research to validate your point.

Value Proposition

In this section describe how you will solve the problem or customer need. Explain the value being created by your business and state the benefits the target market will receive once implemented.

Market Research

Next, you should use recent market data and analysts’ estimates to describe your intended market. Note what percent of the market you plan to capture and name your largest, most renowned customers who have purchased your product or have given you letters of intent. 

Management & Ownership

List your key players: management and technical advisors. You’ve got to emphasize everyone’s relevant, proven track record by mentioning his or her age, qualifications, and work history. Also, you should list any key open spots and note how you intend to fill them.

Service Offerings or Product Differentiation

As for your product, provide a short description of the services or commodities you intend to offer by discussing why they are unique. Mention direct or indirect competition, as well as any barriers to entry that potentially inhibit further competition. Space permitting, you might want to mention future product development plans, such as upgrades, product line extensions, etc. This will illustrate your idea’s adaptability.

Competition

Conduct a detailed analysis of the players already in the market and those potential new entrants. You do not want to be surprised by the fact that the idea you believed to be singularly unique was actually already introduced or is in process by a number of competitors. Get a firm handle on your competition. Understand their product ranges, price points and segment of market share they command. Just as in a battle, know your enemy’s strengths and weaknesses to devise a strategy that will make you victorious in battle and successful in a business endeavor.

Marketing Strategy

Discuss who will buy your product and why, and note contemporary distribution and selling strategies while explaining which ones you will use (and, of course, mention why yours are the best). What are the channels of marketing you wish to employ in order to create brand awareness. After all even the best ideas may be utterly useless if no one is aware of their existence.

Business Model

Pull it all together by stating the amount of money you require and how you intend to use it.  Summarize your key financial projections through break-even. Make sure to list projected revenues, net income, assets and liabilities; and it couldn’t hurt to mention additional rounds of funding.

CFO Inspirational Quote – Wayne Dwyer

There is no scarcity of opportunity to make a living at what you love; there’s only scarcity of resolve to make it happen. – Wayne Dyer

Starting a Business – Essential Reader Entrepreneurship 101

Lessons in Entrepreneurship

When we pursue our dreams, we feel empowered. This power, in turn, connects us to others who share the same dreams. It gives us the strength to overcome great challenges. It inspires us to spread the joy of our dreams to other people. Ultimately, the power borne of a dream is a creative force, capable of producing revolutionary ideas. – Honda

1. Managing Growth for SMBs
2. Starting a business: Steps to Financial Freedom & Self Employment
3. Are you Startup, Small Business, an Entrepreneur – Ready for Success?
4. Integrated Approach for SMB, Small Business, Startups, Entrepreneurs
5. Small Business Funding, How to fund a startup, Due Diligence (I)
6. Small Business Funding, How to fund a startup, Due Diligence (II)
7. Small Business Funding, How to fund a startup, Due Diligence (III)
8. Writing a Business Plan
9. What is an Executive Summary?

Quote by Kahlil Gibran – Inspiration

 

Your living is determined not so much by what life brings to you as by the attitude you bring to life; not so much by what happens to you as by the way your mind looks at what happens.

Kahlil Gibran

Success Quote: Abraham Lincoln

 

Always bear in mind that your own resolution to succeed is more important than any other. – Abraham Lincoln

Writing a Business Plan

 

It is now more than ever that business entities should evaluate their operational effectiveness.  Writing or updating a business plan is the best way to achieve that objective.

Here’s the tricky part: there are two distinct philosophies on how to pitch to a Venture Capitalist (VC). One is the traditional Business Plan, whereas the other calls the entrepreneur to forget convention and phrase the plan in the form of a continuing startup story. Both methods will be explored here because experimenting with both is an excellent exercise. First, we’ll deal with the non-traditional story:

Startup Story

The problem is that idea-bombarded, time-bereft venture capitalists find it difficult to sift through business plans, like in the old days. So, by putting together an eight-point startup story, many entrepreneurs are able to get their attention with simple, plausible steps. VCs want big market ideas and are captivated by clear, well-articulated stories of success waiting to happen. They love to see confidence, so brag about your accomplishments! Let them know how positive you feel about your idea and get them to feel the same way. But remember, often times, less is more. Keep it brief: four to five sentences per point; include the numbers, but save them for the end. So how do we get the message across?

Here are the eight points: First, the business. It’s pretty simple. What’s your idea in terms of business; tell them what specific customer need you are trying to satisfy and explain why satisfying that need is a great business idea. Next, define ‘customer”. Define their profile/potential numbers, and talk about their needs or the market circumstances that led to your idea. The next step is the solution. What else? Your idea: enthusiastically expound upon how your idea will draw millions of customers and how your ingenious market strategy will make you a winner. To draw off skepticism, you must address alternatives. Here’s where you assess the difference between your value proposition, what your business actually offers its customers, and every other individual alternative to your business (including your business being completely ignored by the public). Then, don’t be shy about what you’ve done already: your accomplishments. Talk about your business partnerships and how they were formed, your first customers, etc. any impressive head start that you can claim. Next, tell them about yourself, the entrepreneur. What’s your role in all of this? What’s your background in regard to the formulation of the idea? Now begin to talk about the company, itself. Where is it? Talk about things like equity, who do you want on your board, when was it founded, how can you be contacted, and so on. Finally, end with the numbers. Review key cash, staffing, and customer profile and product expectations over the short term. Now remember, listen to feedback. Interact with VCs; you should be constantly updating and modifying your story.  For more detail on form, see the venture capitalist section of the Funding chapter.

Business Plan

One of the best ways to conduct due diligence is to write an actual business plan. Think of it as the “final draft” of your due diligence. I know that writing a plan is not one of the easiest endeavors one can undertake, however it will certainly help you focus, streamline your mission and provide clear definition for your ideas. Before you take a second mortgage out on your home and invest all your savings into your pet project, you definitely want to know if it has any chance of success. So, whether or not, you use your business plan to pitch to VCs (Venture Capitalists) and other investors, it still serves as an important step: a rigorous, systematic finalization of due diligence.

Why is writing a Business Plan critical to success?

A good business plan acts as a road map. It has the power to convince investors that the management team you put together has the ability and experience necessary to launch a successful business. Additionally, it also provides would-be investors with measurable operating and financial objectives. Building confidence in this direct way is key to obtaining the necessary funds to create a successful venture.

Inspirational Quote – Buddhism; Buddha

As entrepreneurs we are often times faced with a  deluge of bad news, when it rains it pours, the road seems endless and it appears as if there is no light at the end of the tunnel.  Self doubt and pessimistic thoughts infringe upon the mind.

I remind myself of what Gautum Buddhha (Siddhartha) had said to his disciples:

“It’s always darkest before the dawn”

STAY THE COURSE

BE POSITIVE

Small Business Funding, How to fund a startup, Due Diligence (III)

Each and every Startup must conduct the Due Diligence phase before meeting VCs  for Venture Funding.  This stage primarily evaluates the viability of the business concept for the investor or an entrepreneur. This largely overlooked, or at the very least underrated task is of utmost importance in the lifecycle of a deal. Before we go investing often-scarce resources on a venture, we must make sure that it can achieve a sustainable competitive advantage in the marketplace. Most entrepreneurs would like to get to market before the competition and so in their haste make a tactical mistake of sacrificing due diligence. It’s that run fast or die mentality again. The reality is that one must not only get to market as expeditiously as possible but also allocate sufficient time to researching the business issues. Otherwise failure is eminent. That having been said, the process of due diligence, which involves a great deal of probing and the asking of thought provoking questions, comprises of the following nine steps:

7. Business economics and financials

 Investors are always looking for 5-year financial projections.  This will enable them to see the revenue growth, predict cash flow requirements and questions the assumptions in the model.  The entrepreneur must take this exercise seriously since the economic viability of the idea is tested here. It is advisable to hire an experienced accountant. One must build a comprehensive model of your business here; a virtual experiment. Any business model must include a detailed cost-revenue structure detailing all assumptions. Revenue, costs of selling, general, administration and marketing.  Double-check your figures! Remember that this may take a while, but you have to do it before meeting with the investors.

8. Funding needs.

Okay, now that you have your business model in place, you should have some idea of how much funding you’ll need. Traditionally, a financial analysis will allow you to validate the business and economic model.  By listing the startup’s key initiatives and objectives for the short and longer term, the entrepreneur can estimate the capital needs.  Armed with the Financial Analysis, the entrepreneur can determine the amount of money required to fund the operation and successfully execute the idea. You’ll probably want to sit down with your business strategist, along with some industry colleagues of yours and prepare a time-line comprising of funding and spending phases for your business. Think of it in terms of six to nine months of spending, then raising additional capital. These stages will be elaborated upon in the Funding chapters.

9. Exit Strategy

A comprehensive business plan must contain a section on an exit strategy for the startup.  This strategy must be well thought out and incorporated into the business model.  An exit strategy enables the entrepreneur to envision where they would like to take the startup.  Depending upon the business mission the exit strategy for a startup may range from achieving revenue targets to capturing a segment of the market or even being acquired by a competitor.  Most startups plan to expand operations and sustain a competitive edge by raising additional capital in the form of an Initial Public Offering (IPO).

Even though it is extremely hard for an entrepreneur to hand over the reigns of the organization to another, one must plan to take the idea to the next level and step away gracefully.  Keep in mind that you probably don’t want to see your idea stagnate by getting stuck with it in a static revenue loop. Another difficult issue, which goes back to Organizational Structure, is the determining of your own level of competency. Remember, you want to do what’s best for your startup, so when should you hand over the reigns to someone more qualified?

Inspirational Quote: Be Yourself -Never Stop Fighting,

To be nobody-but-yourself – in a world which is doing its best, night and day, to make you somebody else – means to fight the hardest battle which any human being can fight; and never stop fighting.

e.e. Cummings