Cut to the chase

“Anybody can have ideas — the difficulty is to express them without squandering a quire of paper on an idea that ought to be reduced to one glittering paragraph,” Mark Twain wrote in his famous letter to Emeline Beach in 1868.

That fact is it’s still true today, more than 130 years later.

The executive summary of your business plan should be short regardless of the complexity of your ideas. It’s the single most important section of your business plan when luring investors, so the temptation is to make it longer than it needs to be. Keep it two to three pages at the most.

Experts recommend the section focus on:

  • Background about the entrepreneur and the management team in terms of education, work experience and accomplishments, and skills.
  • The basic idea and the market background focus on the uniqueness of the idea and its competitive advantage, along with the market size and characteristics.
  • Sales and profits forecasting for three years.
  • “While you may want to grab an investor’s attention, you need to be careful not too be too glitzy,” says Robert Hisrich, professor of entrepreneurial studies at Case Western Reserve University Weatherhead School of Management. “It should be written in a professional business style and should be very carefully written and rewritten and rewritten again as it is very important, particularly in securing outside capital.”

    Consider the audience

    It’s true the executive summary is the most often-read section of the business plan for investors, but investors shouldn’t be the only ones looking it over.

    “I might use the executive summary to convince a key supplier to supply me, even though I don’t have a track record,” says Jeffrey C. Susbauer, associate professor emeritus at the James J. Nance College of Business Administration at Cleveland State University. “I may use it to entice a key customer to buy from me or to get a potential key employee on board.”

    The executive summary is like a cover letter before a resume, Susbauer says. You wouldn’t send the same cover letter to apply for a job at a bank as you would for a job at a marketing firm. You need to emphasize the important facts based on the intended reader.

    Stay conservative

    An investor will certainly be impressed by a forecast saying you will dominate the market or you will have billions of dollars in sales in less than five years. But don’t play Nostradamus unless you can prove your predictions will come true.

    “I always tell my students you have be both Republican and Democrat in writing a business plan,” Susbauer says. “You want to be very conservative on the sales numbers — almost a worst case scenario. You want to be extremely liberal on the expenses because if there’s anything I know about starting a business, it’s going to cost more and take longer to get there than you could wildly imagine.

    “If I end up with conservative sales forecasts and liberal expenses, if I still make money, I’ve got a pretty good case.”

    Save the best for last

    Experts recommend you write the executive summary last. If you write it first, it often bears no relationship to what is in the plan.

    “It serves as the guide to what’s behind the plan,” Susbauer says. “It’s an evolving thing.”

    How to reach: Weatherhead School of Management Case Western Reserve University, (216) 368-2030 ; James J. Nance College of Business Administration Cleveland State University, (216) 687-3786

    Morgan Lewis Jr. ([email protected]) is senior reporter at SBN Magazine.

    COSE VentureQuest 2002