The Role of an Executive Summary
There is little doubt that when seeking funding, a well written business plan is a must. However, you will also need an equally well written executive summary. When “shopping” for funding, you approach potential investors with the executive summary and not the actual business plan.
The executive summary is just that: a high level summary of the business plan. Once there is preliminary interest in your business concept from potential investors, you would proceed to share the business plan. In some case, an interim step might be the delivery of a one-to-one or group presentation via a “pitch” deck. The pitch deck is a graphical representation of your written executive summary.
Typical sections of an executive summary include:
A brief description of the business, the need, the potential and the uses of the funding sought. Highlight anything with a “wow” factor. The purpose of the introduction is to catch a potential investor’s initial interest. Sophisticated investors are routinely inundated with proposals and pressed for time, which is why your executive summary is such an important first step.
Quantify the overall size of the market in which your company will operate. In relation to this market, detail what percent of the market your venture aims to acquire. Investors want to see a healthy, growing target market and a sound strategy for gaining market traction.
The purpose of any business is to solve a problem. Clearly state what is the problem that your business hopes to solve. Detail why this market problem necessitates the solution you are proposing.
This is likely the most important part of your executive summary. Guide your potential investors through your solution to the problem at hand. Be as direct and detailed as possible. Be sure to highlight any aspects of your business that will result in a first mover’s advantage; competitive differentiation or intellectual property.
Explain how you will monetize the problem via your solution. Explain the components of your solution and how you will charge for your products and/or services.
Demand Generation and Customer Acquisition
Show potential investors your plan for acquiring customers via demand generation activities. Explain why the activities/tactics make sense and how much it will cost to acquire a customer.
A solid founding team is critical to the success in raising money. Potential investors are looking for decisiveness, passion, leadership, proactivity, adaptability, reliability and great communication skills. If at all possible, round out the founding team with a strong board of directors. Ideally, directors should be successful individuals that have relevant experience in your target market.
At a minimum, present a five year profit and loss statement, with business valuation estimates at the end of each year. Explain the uses of the capital sought and detail any information that helps to explain the financial projects.
Business Growth, Extension and Exit
The exit plan is critical. Investors want an exit event in order to realize the gain on their efforts and capital. Going into your business, you should have a good idea of who would want to buy the business in the future. Finally, past what’s already included in the financial projections, show potential investors any future business extensions. For instance, these could include international expansion, additional products or new customer segments that could be served.