Writing a Business Plan: The Executive Summary
A strong business plan holds few surprises for its target. Itconforms to generally accepted guidelines of form and content. Eachsection should include specific elements that will clarify yourbusiness goals.
Your plan should address all the relevant questions that will beasked by individuals who review it, namely, investors. If yourbusiness plan is not structured in order to provide the appropriateinformation in a concise and logical progression, then your chancesof satisfying the key questions concerning development andoperations will decrease.
Generally there are seven major components that make up abusiness plan. They are:
1. Executive summary
2. Business description
3. Market strategies
4. Competitive analysis
5. Design and development plans
6. Operations and management plans
7. Financial factors
An optional component is a section for SBA materials, whichshould be included only if the purpose of developing your businessplan is to obtain financing from this source. Documents required bythe SBA may be useful to you in setting up your business.
Title Page And Table OfContents
While the business plan can be divided into the segments listedabove, there are a few elements that don't fall within thesebroad classifications but are, nevertheless, critical to theplan's success. These elements include a cover, atitle page and a table of contents.
A business plan should have a cover. There is no reason to haveyour work bound in leather; what is required is a neat cover ofadequate size to hold your material. Buy a blue, black, or browncover at a stationery store. A lender is more likely to think wellof you if you are conservative than if you spend money onunnecessary show. Subtle factors like this reflect your businessjudgment. In some respects, the way a person reads your businessplan will affect his or her judgment of your managementability.
Include a title page in your business plan. On this page, putthe name of the business, the name(s) of the principals who own it,and the business address and phone number. If you have aprofessional, businesslike logo, you can use it to dress up yourtitle page. On some plans, the first page has the name of apackager or any other person who assisted the business owner inpreparing the plan. We believe this is a mistake. A business planshould be represented as a personal document by the principalsthemselves. There is a place in the plan where you can showprofessional assistance, but the business and the plan itself areyours.
You'll also need a table of contents that should follow theexecutive summary or statement of purpose, whichwe'll discuss later. Although the table of contents appearstoward the beginning of the plan, you will naturally prepare thislast. Be aware, however, that you do need to include a table ofcontents. When you or others look over your plan, you should beable to quickly find financial data, market information, and thelike.
The BusinessDefinition
The first component of the business plan should describe thenature of the business through several elements, including theexecutive summary or statement of purpose and thebusiness description. These two elements serve to define thebusiness, the type of product it will offer, and its role withinthe context of the overall industry.
The Executive Summary
Within the overall outline of the business plan, the executivesummary will follow the title page. The summary should tell thereader what you want. This is very important. All too often, whatthe business owner desires is buried on page eight. Clearly statewhat you are asking for in the summary.
The statement should be kept short and businesslike, probably nomore than half a page. It could be longer, depending on howcomplicated the use of funds may be, but the summary of a businessplan, like the summary of a loan application, is generally no morethan one page. Within that space you'll
need to provide a synopsis of the entire business plan. Keyelements that should be included are:
1. Business concept: Describes the business, its product,and the market it will serve. It should point out just exactly whatwill be sold, to whom, and why the business will hold a competitiveadvantage.
2. Financial features: Highlights the important financialpoints of the business including sales, profits, cash flows, andreturn on investment.
3. Financial requirements: Clearly states the capitalneeded to start the business and to expand. It should detail howthe capital will be used, and the equity, if any, that will beprovided for funding. If the loan for initial capital will be basedon security instead of equity within the company, you should alsospecify the source of collateral.
4. Current business position: Furnishes relevantinformation about the company, its legal form of operation, when itwas formed, the principal owners, and key personnel.
5. Major achievements: Details any developments withinthe company that are essential to the success of the business.Major achievements include items like patents, prototypes, locationof a facility, any crucial contracts that need to be in place forproduct development, or results from any test marketing that hasbeen conducted.
When writing your statement of purpose, don't waste words.If the statement of purpose is eight pages, nobody's going toread it because it will be very clear that the business, no matterwhat its merits, won't be a good investment because theprincipals are indecisive and don't really know what they want.Make it easy for the reader to realize at first glance both yourneeds and capabilities.
Part one of seven. Tomorrow, we'll cover the businessdescription. Tips are updated on a daily basis at 8:30am PST or11:30 EDT.
