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.

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