Let’s take a couple of real-world cases. First, the executive summary for a formal business plan, which will be used in a venture competition or as a tool for seeking outside investment. Second, the executive summary for a bank, as part of a loan document. Third, the executive summary for internal use, for employees, or managing a plan. Each of these is a different animal.

The Classic: Seeking Investment

This summary, whether you like it or not, performs a sales function. You are selling your concept, your startup, or your growing company to an outsider who is interested in becoming an investor. So put yourself in the investor’s place and emphasize the elements that will make her money.

What’s strongest about your plan, compared to others? Make that a highlight. You might even lead with it. For example, if you’ve got a venture already backed by major brand-name backers, say so early in the summary. If you’ve got a founders team that includes several known entrepreneurs with good track records, then get that up front. If you have a good business track record, like impressive early sales or landmark deals with major channels or corporations or governments, put that first. If you have an amazing new invention or break-through technology, lead with that. Use good judgement. You’re an editor, at this point, looking at things through the audience’s eyes.

So the order depends on the specifics of your company, but, regardless of order, here are some elements you should definitely include:

  • The heart of the plan. That includes the essential reason for buying, the target market, and key elements that match identifiable core competencies and market opportunities.
  • If you have a new product or new technology, sell it to the investors. Sell it by showing there are already customers and commitments, if you can. If you don’t have that, and you have a patent, then say so, but don’t think you don’t have to defend the patent. Be prepared for objections and don’t make the summary imply that a patent alone is enough. If you have working prototypes, say so.
  • Description of the management team. You can’t get away with saying nothing about this. If you have to depend on board members or advisors, so be it; investors are always looking for the team. The better the track record, the lower the risk. If your team has no experience, say very little.
  • Some key numbers. Usually this includes a sales forecast. In some rare cases, some Web companies can get away with forecasting traffic; in those cases, however, they’d better explain a business model. Sales are almost always essential, and profits are good too, if you have a realistic projection. Include just a few numbers as bait in the summary, don’t go too deep.
  • The offering to investors. What do you want from investors, and what are you prepared to give in return. You have to see the deal from the investors’ point of view. Don’t tell them just how great your company will be, tell them how they make money. They want to know how much money you need now and how much equity you are prepared to give.
  • About the business model: if you have a traditional business, the business model is obvious. You have to explain it only if it’s not obvious. Channels of distribution can make a big difference too; if your business depends on physical distribution, you should show that you know the channel and that your projections are realistic. Your sales should assume channel margins too.

The Summary for Lenders

Read through my recommended points for the investment or venture competition-oriented summary, and think about the revisions you’ll want for a summary for a bank. Here are some highlights you want to hit:

  • The heart of the plan. Just about the same as for investors. People want to know what you’re doing.
  • Financial history. How long have you been in business? What legal formation or legal entity is involved? Who owns this company, and what kind of financial history do they have?
  • A balance sheet. Banks can’t lend you money for ideas; they need to secure the money with assets. You have to have more assets than liabilities.
  • Payment history. Your company has to live with the debt and payment record it has, and the bank has to check that. Give a head start.
  • Description of the management team. You can’t get away with saying nothing about this. If you have to depend on board members or advisors, so be it; investors are always looking for the team. The better the track record, the lower the risk. If your team has no experience, say very little.
  • Some key numbers. Usually this includes a sales forecast. In some rare cases, some Web companies can get away with forecasting traffic; in those cases, however, they’d better explain a business model. Sales are almost always essential, and profits are good too, if you have a realistic projection. Include just a few numbers to make your reader interested in the summary; don’t go too deep.
  • For bank purposes, expect to submit a complete financial projection including profit and loss, balance sheet, and cash flow, both for recent past and projected into the future.

What Else Should an Executive Summary Include?

For a standard summary you should generally include:

  • business name
  • business location
  • what product or service you sell
  • purpose of the plan

Another paragraph should highlight important points, such as projected sales and profits, unit sales, profitability and keys to success. Include the news you don’t want anyone to miss. This is a good place to put a highlights chart, a bar chart that shows sales, gross margin, and profits before interest and taxes for the next three years. You should also cite and explain those numbers in the text.

How long should an executive summary be?

The shorter the better. If you can say it in a single page, then wow, that’s really impressive. Generally two pages is better than five, and five is better than 10, but ten pages is probably too much.

Stay sensitive to the exact purpose and audience. These days you run into situations in which people use the phrase “executive summary” to mean “business plan, but keep it short.” Always ask if you can.

Particularly in venture competitions, find out what the general standard is and how the summary will be used. I’ve seen competitions (and been among the judges as well) in which the best summaries were penalized for being short. Longer summaries seemed to do better because they included more information and the judges were impressed. The short ones didn’t get a chance to make all the points they wanted.

Realize that some people say summary or summary memo when what they want is a one-page letter or email. As I said above, always ask if you can.

If you check around, you’ll see that experts differ on how long an executive summary or summary memo should be. Some insist that it takes just a page or two, others recommend a more detailed summary, taking as much as ten pages, covering enough information to substitute for the plan itself. Although business plans of 50 pages used to be common, investors and lenders these days expect a concise, focused plan.

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.