Executive Summary 101:
More than Just a Summary
By: Adam Hoeksema
August 2010
www.theexecutiveplan.com
www.theexecutiveplan.com
Welcome! I wanted to start by giving you a little
bit of background on my experience.
As a
freshman in college I entered a business plan
competition. I had no idea what I was doing, but I
read a lot of material about business planning and
I took my amateur idea and made a business plan
out of it. I am not sure if the judges felt sorry for
me, but they sent me forward from the executive
summary round to the business plan round. After
writing and submitting a 40 page business plan, I
ended up being one of five finalists. The finalists
presented and to my surprise I won The Best
Undergraduate Award.
This launched my “career” as a consultant. While I was still a full-time college student, for the
next three years I had the opportunity to write numerous business plans, feasibility studies,
marketing plans, and sales and distribution plans. My clients included:
• Student Owned Businesses – One student that I assisted leveraged his business to be
accepted as an MBA student at Harvard University
• Local Governments – Economic growth council business plan
• Universities – Business plans and feasibility studies for new programs
• Non-profit Organizations – Business plans and feasibility studies for new revenue generating
programs
I had so much fun working with these small and big businesses as we tried to find creative new
ways to do business. After graduation I was able to secure the perfect job at a technology
based business incubator. This allowed me to assist exciting technology-based businesses each
and every day.
Over the years I have become a believer that the Executive Summary is the key to success in so
many areas of business. When you need a loan, investors, a grant, maybe internal funding from
your corporation, or even when you are attracting new clients, a powerful executive summary
of your business is absolutely essential.
So lets get started!
Adam Hoeksema
Founder – ExecutivePlan
www.theexecutiveplan.com
You have 2 pages. Two pages to compel your readers to ask
for more. The reader will then be able to dig into your
business plan, loan application, or funding request to find
those answers. A successful Executive Summary is so much
more than a summary – in fact, if you are starting with the
intent to summarize your document you are setting yourself
up for failure.
Have you ever walked out of a movie saying, “Wow that was
nothing like the movie preview. I thought it would be much
different.” Clearly the movie preview was effective because
you went to see the movie. A great movie trailer leaves you
curious. You want to know more. They don't give away all
the secrets or all the twists in the movie. In the same way,
your executive summary should do just enough to leave the
reader curious. It should not be a “summary” of the entire
business or project. If a reader determines that in two pages
they have a good understanding of your entire document,
they have no incentive to read on or ask more questions.
There are dozens of reasons you may need to write an executive summary, but for the sake of
simplicity this report will cover three of the most common reasons for writing an executive
summary. Loan applications. Attracting Investors. Business Plan Competitions.
Before I discuss the unique characteristics that your executive summary should possess for
each of these three cases, I want to borrow from famous author, speaker, and venture capitalist
Guy Kawasaki's blog article “The Art of the Executive Summary”. The article is written by
Kawasaki's colleague, Bill Reichert. He provides an incredible generic summary and outline for
your executive summary. Let me explain this outline in my own words. The main sections are
as follows:
• The Grab
• Big Problem
• Unique Solution
• Market Potential
• Unique Selling Proposition
• Management Team
• Financial Projections
• Request
www.theexecutiveplan.com
The Grab – This section does not actually have a title, but it is probably the most important part
of your entire executive summary. In two or three sentences you should tell the reader why your
business is special. Maybe you have Michael Jordan as a customer and he has promoted your
product on twitter for free. Maybe you just signed a partnership with Google. Maybe you were
just awarded a patent, or maybe you just made your first big sale. Whatever it may be, ask
yourself “so what.” If it sounds reasonable to say “so what,” then you didn't do an adequate
job. Obviously if you just signed a partnership agreement with Google no one would say “so
what” so grab their attention.
Big Problem – The first ingredient of a good business idea is a Big Problem, so explain the Big
Problem that your product addresses. For instance, there is too much traffic in Chicago and
everyone hates traffic. Everyone in the room should be saying “yeah I hate that.”
Unique Solution – The big problem is the easy part. Now you have to convince the reader that
you have come up with a unique solution to the big problem. If you have these two ingredients
you have a good business idea. Maybe you developed a new traffic control system that will save
one minute for every person in Chicago each day during their commute. One minute each day is
valuable when you are talking about a couple million people.
Market Potential – Elaborate on the big problem by providing stats for your industry. How much
is spent annually on similar products or services and how fast is it growing. Maybe you operate
an in-home health care company. With all of the health concerns brought about by aging Baby
Boomers, you have a large market potential with a rapidly growing market.
Unique Selling Proposition – This is where you elaborate on your unique solution. What
specifically gives your product or service an advantage over the competition? Maybe your home
health care service actually sends doctors to the home instead of just nurse practitioners, or
maybe you guarantee same day visits so that you don't have to schedule ahead of time. Just
point out why you are special.
Management Team – Depending on what industry you are in, this can be one of the most
important parts of your executive summary. Regardless, your investors or bankers are putting
trust in the team, not the idea.
Ideas are easy to come by, but executing on those ideas
can only be accomplished through a strong team. Quickly show why your team has the
experience and knowledge to execute your business plan.
Financial Projections -
Based on your market, your business model, and your historical
performance, you need to develop a bottom-up financial forecast. If your plan is for a group of
investors, don't spend too much time on this section because they know that you have no idea
how much money you might make. Investors typically won't make a go / no-go decision based
on your financial projections. They will essentially make their own financial projections. That
being said, you should have some sort of graph or table with current sales and projected sales
going forward for at least three years.
www.theexecutiveplan.com
Request – Now it is time to request either an investment, loan, grant or sales contract
depending on the purpose of the executive summary. You should restate why your company
provides value. Remind the reader of the big pain that you are solving and your market
potential. Finally reemphasize your team and its ability to get the job done. Ask for the dollar
amount that you need to reach the next major milestone for your business. Don't disclose how
much equity you are willing to give up or what interest rate you are willing to pay. This should
be done later through face to face negotiation.
I recommend that you start by writing your executive summary following this exact
outline. This will give you a great base to start from each time you need to write an executive
summary for a new audience. For each new audience, you will need to analyze their specific
needs and consider what they are looking for from your executive summary.
Now let's look at how you should re-position your executive summary for each of three
different audiences: Bankers, Investors, and Business Plan Competition Judges.
Loan Applications
If you are a small business owner or a small
business consultant you have undoubtedly applied
for or at least considered applying for a small
business loan. With the economy inching its way to
a recovery,
lending to small businesses is still
unbelievably low. Due to the increased demands for
small business loans and the lack of banks supplying
these loans, competition is at an all-time high. Your
loan application must stand out from the crowd on
all fronts in order to be considered for a loan.
Audience Analysis - Bankers
Bankers. Do you ever wonder why you see so many
bankers out on the golf
course on Friday
afternoons? It is because they are not reading your
entire 40 page business plan. In all likelihood they
took 15 minutes to look at your loan application,
maybe a bit more or less depending on the size of
your loan request. They are not digging into the
details of your business plan so if you want to stand
a chance at securing a small business loan you need
to have a short and powerful executive summary.
www.theexecutiveplan.com
Bankers will also want to see that you have some “skin in the game”, which means that you
have invested your own time, sweat, and capital into the business.
Because bankers can be picky in these economic times, they will also probably want to see
some level of positive earnings and earnings growth.
They will want see that you have some working capital already. If you are currently running on
fumes and have no working capital for your business, it may be a difficult sell for most bankers.
They will also want to see how well you manage the resources that you do have. If you can
show that you have leveraged a $10,000 initial investment to create a profitable, thriving small
business, you will have demonstrated your ability to manage the loan resources they may give
you.
Last but certainly not least, bankers are concerned with collateral. They simply want to make
sure that if your business does not go as planned and ends up bankrupt or defaulting on the
loan, they will still be able to recoup their loan investment. This is difficult for many small
business owners, but by allowing bankers access to your assets as collateral you are
significantly improving your chances of securing a loan.
So to recap, your banker is probably looking for:
1. A short, power packed executive summary
2. Loan applicants with skin in the game
3. Positive earnings and earnings growth
4. Current working capital
5. Positive resource management track record
6. Collateral
In this scenario you may use your financial projection segment to note the 5 key financial issues
that bankers are primarily concerned with. For instance, you may want to show a small table
with the basics of your balance sheet:
Then simply state that your balance sheet demonstrates your access to working capital and
your fixed assets can serve as collateral.
Balance Sheet
Current Assets
$300,000.00
Fixed Assets
$1,000,000.00
Current Liabilities
$150,000.00
Long Term Liabilities
$300,000.00
Owner's Equity
$850,000.00
www.theexecutiveplan.com
Bankers understand a balance sheet so you don't need to waste your time or theirs by explaining
it.
Just state what they want to hear. This is just one way that you can edit your executive
summary to improve your chances of securing a small business loan to take your business to the
next level.
I don't want to assume that you know where to look for these investors. Below I have provided
you with the best resources for finding angel investors
Directory of active angel investors - http://www.angelcapitalassociation.org/
Education and angel investor directories - http://www.angelcapitaleducation.org/
Angel investors are typically for earlier stage companies, and as the company shows promise
venture capitalists may step in to further capitalize the business. A venture capital firm is
essentially interested in one thing: exit strategy. A venture capitalist wants to know how to invest
in your business and then exit as quickly as possible with the highest possible return.
The Top 100 Venture Capital Firms for Early Stage Start-ups - http://tinyurl.com/2evfnw5
The Top 100 Venture Capital Firms for Later Stage Companies - http://tinyurl.com/2754yqd
Attracting Investors
You have sucked your friends and family
dry asking for investments in your small
business, and now you need another
round of financing. It may be time for
you to look into attracting an angel
investor or maybe even a venture
capitalist to infuse new life into your
business
in the form of a capital
investment. Before we dive into the art
of
crafting an effective executive
summary
for
attracting
potential
investors, I have a couple of resources
for you.
www.theexecutiveplan.com
Again we start with an audience analysis. Investors are a diverse group. For instance, you may find
an angel investor that is a doctor with more money than they know what to do with, but little
understanding of business. You may also find an angel investor that made a good living in your
industry niche that is looking to help other entrepreneurs in their specific area of expertise. Finally
you may find angel investor groups that are looking to invest in various industries and even have a
process
set
up
for
identifying
investments
that
they
are
interested
in.
When it comes to venture capitalists, I don’t want to say they are all the same, but you will find far
less diversity between venture capital firms than you will between angel investors. Investors have a
very different mindset than bankers. Primarily an investor is not concerned with collateral because
if you go bankrupt they are simply out of luck.
Investors understand they are taking a risk by
investing
in
a
small
business
and
are
not
as
concerned with
your
collateral.
So from the perspective of your executive summary, investors want to see a few things.
To
demonstrate this I will compare investors to sharks. The following section identifies the three things
that an investor and a shark seek:
1. Blood = The Grab – Initially blood in the water will attract a shark. Similarly, what is often called
“The Grab” will attract investors through your executive summary. The Grab is the first paragraph or
couple sentences that entice the investor. Maybe it is the big account you just landed, or the new
advertising campaign with a famous actor as your spokesperson. The Grab should get investors to
raise their eyebrows and think maybe this is worth looking into.
2. Easy Prey = Easy Business Model – Sharks are looking for easy prey. For instance, they don't often
mess with a dolphin or a whale because they are just too difficult to make use of. Similarly investors
are looking for an easy to understand and easy to implement business model. There are complicated
business models that are successful, but the average investor just wants to make money the easiest
way they know how.
3. Meat = Sound Financials – A small fish might interest a shark and be easy prey, but ultimately a
shark wants some meat. Investors also want some meat, or sound financial projections. A seasoned
investor will take your financial projections with a grain of salt, because it is difficult to predict what
will happen tomorrow, let alone what will happen 3 to 5 years from now. Investors will concentrate
on whether your assumptions are logical and well thought out. They want to determine your
competence level, not your ability to predict the future.
So keep these three things in mind when you are fishing for sharks or fishing for investors. Now to
look at a specific example of something you can do to improve your executive summary before
presenting to investors, consider the following: A reader wants to get a basic understanding of your
business model from your executive summary. They need enough detail to understand how the
business makes money, but don’t overload them with details.
Now that you know where to find these potential investors, let’s look at how you can actually get
their attention.
Audience Analysis-Investors
www.theexecutiveplan.com
Think about Google, probably one of the most difficult
and diverse business models in the world, but if Google
were seeking investors they would probably say, “we
make money by bringing the right information, to the
right people, at the right time” That is in a nutshell how
Google’s
primary
advertising
business
makes
money. That one line gets to the point of the business
model, it is easy to understand, and it is somewhat
intriguing to the reader who might want to know more.
Try to breakdown your business model into a one
sentence statement that describes how you make
money. Keeping it simple is what investors want to see
these days.
So as you write your executive summary for a potential investor keep in mind that all investors
want:
1. A Compelling Grab
2. An Easy Business Model
3. Sound Financial Projections
Now that we have looked at the executive summary from both a banker’s and investor’s point
of view it is time to move on to the final group of potential readers for your executive summary.
I have personally participated in a business plan competition while I was a freshman in
college.
I actually won the Best Undergraduate Award and a bit of start-up money for my
idea. Let me tell you that my idea was nothing special, but I successfully positioned my
executive summary in the first round, my business plan in the second round, and my 15 minute
PowerPoint presentation in the final round to sway the judges in my favor. I truly believe that
the positioning and presentation of my idea were far more important than my business idea
itself.
First I want to point out a couple of great resources for you if you are interested in entering a
business plan competition:
http://www.bizplancompetitions.com/ - Find all the legitimate business plan competitions
throughout the United States. This website provides a wonderful calendar that notes all of the
competition deadlines.
http://istart.org/ - This is a new site that actually allows business plan competition
administrators to organize and run the competition through the tools provided on the website.
Additionally, you can find business plans from various competitions around the world and
discover businesses that may be looking for investment.
Business Plan Competitions
www.theexecutiveplan.com
So back to the task at hand, if you are considering entering a business plan competition, you
must master your executive summary first. In most competitions your executive summary will
be the first stage of the competition. Typically business plan competitions have two or three
rounds, and the executive summary round is used to weed out the wannabes from the
legitimate contenders before you get a chance to actually present your business plan or a short
elevator pitch in front of a panel of judges. So again we need to start by analyzing your
audience.
Business plan competitions are difficult because a good competition organizer will bring
together judges from varying backgrounds, ages, genders etc. This will probably keep you from
targeting your executive summary toward one group of people, instead you have to take what
you have been given. Most competitions will have a set of guidelines. They may even publish a
judging
criteria
for
you
so
that
you
know what
aspects
to
focus
on.
How can you ensure that your executive summary stands out in a business plan competition?
1. Quotes from Experts
2. Disclosure of Client lists
3. Disclosure of other Credible Investors
Quotes from industry experts can give your business credibility. Maybe you are developing a
medical device to assist the elderly in getting in and out of bed, and you have a quote from a
distinguished doctor or maybe the CEO of a large nursing home chain that gives credibility to
your claim that there is a need for this type of device.
If they provide you these details you should
start there because you can rest assured that
there will always be a few people on the
judging panel
that will
go down the
published judging criteria list and score you
directly from that. So there is no sense in
costing yourself points before you even start
because you did not follow the judging
outline.
You should also understand that many of the
judges will probably throw the criteria out
the window and judge based on their own
perceptions.
You need to spice up your
executive summary
in a business plan
competition - especially if they provide a
specific
criteria
for
judging.
Audience Analysis - Business Plan Competition Judges
www.theexecutiveplan.com
Listing a major client or a couple of well-known clients in
your industry is also a great way to stand out. Using the
medical device example, maybe you have developed a
prototype that a nursing home chain with 10,000 beds is
currently using on a test basis for just a few of their
residents. Again, disclosing this client gives your product or
service credibility in the eyes of the judges and will
immediately
ease
concerns
they may
have
had.
Finally, if you already have acquired an investor or investors
for your business, the judges will look at the plan with a
more positive outlook simply because someone else
believed in you enough to hand over some cash. I did say
credible investor though, so if you say that your rich uncle in
California gave you $15,000 to develop your prototype, that
is almost meaningless. However, if a wealthy doctor that
works with the elderly gave you $15,000 to develop a
prototype, now you are starting to raise some eyebrows.
So again, in a business plan competition and with any
executive summary you need to establish credibility
early.
You can accomplish this task by quoting industry
experts, naming clients, or disclosing other current investors
in your business.
Recap
Your executive summary is so much more than just a summary. It is your one chance to make a
powerful first impression. It is your chance to intrigue the reader. My suggestion for you is to
write one business plan and then write a number of executive summaries that are used for
various situations, because as we saw above, bankers, investors, and competition judges will
undoubtedly have varying expectations from your executive summary and business plan.
I hope this guide provided you with the additional insight and tips you need to craft a powerful
executive summary.
There are a number of additional resources for you on my website
www.theexecutiveplan.com, also make sure to follow me on Twitter @ExecutivePlan. I truly
hope that something I mentioned will positively impact your business, and I look forward to
interacting with you through comments on my website, on Twitter, or even personal emails at
adam.hoeksema@gmail.com Thanks for reading!
– ExecutivePlan
www.theexecutiveplan.com