Hook, line and sinker

Twice in the past week, I have encountered entrepreneurs who wanted to write an executive summary as the first step in their business planning and funding efforts.

They each wanted something that would show their general ideas to funding sources, and the summary was to be their starting point.

But, the overzealous entrepreneurs had it backwards. A summary is your last prepared — and hopefully most effective — document. It is what hooks the reader on your idea and shows the viability of your plans. It summarizes a thorough, well thought out business plan.

It presents the essence of your business model and plan in a quick to read, shortened form. The executive summary also includes key financial data greatly condensed from your vigorous pro formas.

If a good business plan is an important tool in getting funding, a well-done executive summary is vital. A typical business plan contains 10 to 20 pages plus exhibits, although I have seen some run more than 100 pages. An executive summary can be done in two pages, maybe five if there are unusual circumstances.

A pro forma that includes only a best case and a worst case scenario over two years contains a lot of data. A summary of key financial data might consist of a few dozen numbers. These summaries allow readers to quickly decide if they have sufficient interest to review your more comprehensive plans, assumptions and projections.

If you don’t have an executive summary based on a full business plan and you feel you must have something in writing, be completely and totally honest by representing the document for what it truly is. You might want to call it “Preliminary Plans,” or “An Idea Needing Validation,” etc.

But I caution against trying to use this sketch of an idea as a funding tool. The executive summary might be the only document your potential funding source will read, so base it on your business plan and make it outstanding.

A really good executive summary will have a “wow factor.” You want the reader to say, “Wow, this is good and I want to pursue it.” If the narrative and numbers don’t excite the reader, your chances of progression are just about over.

I called a capital source recently to advise him of an opportunity. I gave him a one-minute telephone overview and he expressed interest and asked for the summaries. He didn’t want to get together for coffee; he didn’t want to see the full business plan; he wanted the summaries, and he assumed I had them prepared and could send them via e-mail at the end of our conversation.

This capital source will be able to read 1-1/2 pages, look at a two-scenario financial summary, and within three to five minutes, know if he wants to pursue this opportunity further. If he isn’t interested, he will only have invested 10 minutes of his time.

The bottom line is that, used correctly, the executive summary can be a powerful tool. But it should be the final document prepared and the initial document presented. Erwin Bruder ([email protected]) is president of The Gordian Organization, which provides business planning and structuring services to start-up and growing companies. He can be reached at (216) 292-2271.