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 like 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 do have their place – they are a very useful way to logically sort through the teams 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 in my view it goes beyond that, it’s like the headline in a newspaper, it’s the “pitch for the pitch” – it’s 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 get’s read and it’s certainly the only part you will get to forward in the first instance 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 the process of 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 want 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 readers 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 up front!
Try and make it stand out and be exciting…(just like headlines!)
I: Interest – This quickly builds on the first statement developing the readers 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, 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.
- As a way 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 a compelling 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 to 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 not 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 backup! If you say the market is $X big then have details 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 and 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 going forward. This is the best approach to gain trust and then eventually $$ investment.
You may want to write the full plan first and then come back to the summary in the end so that you can get all the core facts ready in advance. If you want some further details on business plans and how to craft some of the “parts” I suggest you read some of my other posts here:
Watch this: http://ecorner.stanford.edu/authorMaterialInfo.html?mid=1920 (superb video from Ron Conway)