Like most people I hate writing business plans, I want to get on with the business at hand rather than keep writing and re-writing lots of words about what I plan to do!
This must also be true for many investors too, as they don’t enjoy reading them, they prefer a pitch or PowerPoint! However, they DO want to see a plan eventually to decide to invest or not.
Business plans have their place–they are a very useful way to logically sort through the team’s thoughts and to have one cohesive document that summarizes the intent of the business and in that regard, they are very important.
In addition, once you have some interest in your business idea you do need to commit it to paper for the deeper dive people will want to give it once you have their interest. Indeed, many investors still not even think about interacting with you until they have some form of “paper” document to read first.
This is where the “killer” executive summary comes in… it’s like your “elevator pitch”, you can’t get through all the apathy and lack of interest in the business plan unless you can get people to be excited about reading it.
What is an Executive Summary, anyway?
In theory, it’s a very punchy overview of the business plan in condensed form. However it goes beyond that, it’s like the headline in a newspaper, it’s the “pitch for the pitch”–its job is to sell the reader to keep reading, just like a headline.
The executive summary is often your initial face to a potential investor, so it is critically important that you create the right first impression. So you need to think of the summary as being your one and only opportunity to engage, enthuse, and move the investor to action. To make them WANT to read past the first page and to talk to the team further about the business.
Often this is the ONLY part of the business plan that gets read, and it’s certainly the only part you will get to forward to potential investors.
As a result, it had better be “killer” otherwise you stand no chance at all of getting into the tiny % of startups that get to stand in front of investors and actually raise funds. Only 3 out of the 60-100 plans seen by the Band of Angels per month get to pitch. The first pass in weeding out the startups is the plan!
What should I include?
OK, so now we know that this is a critical document, and it is also a sales document, not a dry summary. Therefore, the first stage in the process is to understand the sales process it wants to achieve, and the outcome required.
The sales process should follow the age-old A:I:D:A process. This means:
A: Attention – The very first line of your summary had better be hard-hitting and get the reader’s attention (like the headline in a newspaper) or you will lose the impetus. So consider very carefully what’s so exciting about your startup and put that first. This could be your “elevator pitch” in writing. Make the statements direct and specific, not abstract and conceptual. Do you have some world-class advisors, big-name companies as trial users, a brand name founder, investor, or advisory board member…put these details upfront!
Try to make it stand out and be exciting…(just like headlines!)
I: Interest–This quickly builds on the first statement developing the reader’s interest in your idea. Here you tell the reader in “plain English” what the idea is, what the “massive pain” that exists in the market is and how you plan to solve it with your idea. Keep this simple and easy to understand. Make it clear that the problem you are fixing is big (i.e. there is a large market opportunity, pref. of $1bn if you are pitching VC) and that there is an immediate need from the market (i.e. someone has a big headache and you have come up with the aspirin, not a vitamin) and how you plan to win against the competition.
You will also need to include the basics of the full plan like the team (highlight what each team member brings to the idea specifically i.e. one is a technical expert, one has worked in this market on knows it intimately, etc), go to market strategy, value proposition, competitors, market details (what’s your segment), your sustainable competitive advantage, your business model, financial summary, the money required and for what purpose, SWOT analysis, etc.
D: Desire – Now I know that you have a good idea (and understand what you do), you need to build up my desire to move forward to learn more. In the summary, you can now tell me a little about how talented the team is and how successful you have been in the past, or how you have special knowledge and skills that will make you the one to “back”. You can add any customer successes, feedback from research, or “proof” that this going to be a huge opportunity. Finally, you can also add any investors that have backed you to date, and any money raised. I would even let the investor know that you have done such a good job that there isn’t much time to invest before all the money you need has been provided by others unless they engage now…!
A: Action–This is the desired outcome from the investor after reading the summary! See next.
When you have finished, you should have a 1-2 page document max that explains in condensed form why you have a great opportunity and why the investor should act NOW.
What is the outcome required?
This depends on how the summary is being used, for example, if this is designed to get the interest of the “network” and have a friend get you into a VC or investor then that should be the focus of the summary – as a way to get an intro. If it’s being sent to an investor directly, then it needs a slightly different approach and if it’s for a bank or other type of institution again, it needs a different approach. I used to have 3+ versions for these interactions.
- To get into an investor via a third party: In this case, there is an extra and critical component and that’s the intro letter. Again, this is designed to get people to engage and move to action! In this case, you need to write an interesting mini-summary with your elevator pitch that can be “forwarded on” by your network. The summary itself can be in your own format.
- Directly to an angel group, investor, or VC: In this case, you will probably need to format the summary in a special way that the recipient requires. Check the website of the Angel group or VC and ensure you deliver what they need in the form they need it. DO remember however that originality and getting attention will be key to standing out from the rest. Use the content already created but format how they want it.
- For the bank or a supplier: In this case, when trying to get people to back you or support you but not necessarily invest directly, you need to take a slightly different approach. Perhaps you don’t want to give the same level of detail for suppliers (not giving away any secret sauce) or in the case of the banks more financial info, as they prefer facts and figures.
In all these approaches, you need to consider the “audience” and write accordingly. It’s no good just sending out a generic summary to everyone, you are selling and need to focus on the needs and wants of the person reading the document if you wish to persuade them to deliver the desired outcome.
What not to include
NEVER come across as arrogant and overconfident–I know this is a sales document, but it needs to be based on
FACTS and no B.S. Make sure you don’t fall into the traps outlined in my other posts about what not to include in your plan.
Never, ever, ever make any claim you cannot back up! If you say the market is $X big, then have details as to how you came up with the number. If you have a customer, then you had better be prepared for a reference call to them. The same goes for connections and contacts. If you say a big named person is a backer, you can bet the investor will contact them….NEVER be afraid of being open and honest. Do not use complex jargon, too many adjectives, long sentences, “waffle” and things that don’t concisely convey your message.
Try to focus your efforts on building credibility by showing a balanced approach to the risks and rewards of the idea and any problems/issues you see in the future. This is the best approach to gain trust and then eventually $$ investment.