What is the Executive Summary of a Business Plan?
What is the Executive Summary of a Business Plan?
Through a business plan, stakeholders, such as founders and investors, can see the possibility of enormous growth in a vast market. An executive summary of a business plan is a one-page description of your company’s overall business plan.
An executive summary of a business plan provides the reader with a high-level understanding of your company’s overall business strategy.
It gives a general overview of the company’s business model and the essential facts and tactics that support its expansion.
The executive summary of a business plan should show that the company can achieve a significant market position with a long-term and distinctive product or service offering in its first section, the executive summary.
The business plan can also prove that the company represents an excellent investment opportunity.
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As a result, it must have a reasonable valuation that allows investors to reach their objective return on investment and explain a clear exit path for investors.
Writing and constructing a business plan is an excellent way for the entrepreneurial team to organize their thoughts about their new firm and its business potential.
Investors are analyzing your company or project at every stage of the fundraising process, so be mindful of this. They want to make sure you’re trustworthy as a long-term companion.
For this reason, the executive summary of a business plan must exhibit professionalism, conciseness, clarity, and precision from the very beginning of the document.
Lenders and investors use the executive summary of a business plan to gauge interest and decide whether to read the whole plan if the plan is being offered for funding.
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Creating an excellent executive summary is like building a short version of your entire business plan. Keep it brief and direct if you want to keep the reader’s interest and persuade them to keep reading.
When writing an executive summary of a business plan, cover all of the major sections (company profile, industry analysis, customer analysis, and competition analysis) and why your business is different from the rest.
What is the executive summary of a business plan?
A business plan’s executive summary is usually the first thing an investor sees when learning about your project.
To get people to read the complete business plan or set up a meeting to hear the company’s presentation, executive summaries are written.
From the very beginning, the executive summary of a business plan should impress potential investors.
A business plan’s executive summary is frequently submitted to a potential investor as a separate document. An executive summary of a business plan is often presented to a potential investor as a standalone document.
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Why Do I Need an Executive Summary?
Your business plan, as previously said, is a lengthy document that necessitates careful reading. Saving the reader’s time and letting them know which sections of the business plan are most important by providing a brief and entertaining overview of your strategy is a smart move.
Your company’s plan’s chances of being read and comprehended go up this way. Because of this, executive summaries are essential.
The first criterion of creating an executive summary is to be concise as well as detailed. Your business plan’s executive summary should not be more than three pages long; the ideal length is one to two pages.
Key Elements of an Executive Summary
An executive summary of your business plan should include the following critical elements:
The problem statement or business opportunity: If your company wants to prosper, it must identify a market need that it plans to fill.
Investors want to know whether your company’s products and services are required; thus, this is your issue statement, and it must be mentioned in the summary.
If you have an innovative company concept, next, the reader will want to know how you intend to address and solve the problem at hand. You should briefly explain how your product or service can help solve the problem in your business model.
History: The company’s history is the strongest indicator of future success. By reading about your company’s history, the reader better understands its growth and progress.
It is usual for a company’s name, goods, and location to be set even in the early phases.
Industry: You will describe the industry you work in, its size, and whether or not it is influenced by current or future trends. There’s no better way to convey the scale and scope of your ambitions than to describe them in this way.
The intended audience or clientele: target customers or markets are essential to every firm. This section will go over the demographics and psychographics of the customers you hope to attract.
Competition: Whenever you enter a new market or industry, you’ll face competition from other players. You need to know your competition and conduct market research to be successful.
The readers of your business plan are interested in knowing about your competitors, their strengths, and the areas in which you have a clear advantage over them. Executive summaries must provide information on the company’s competitors.
Milestones: When putting together a timeline for significant milestones or points in the future, it’s essential to indicate the vital milestones that your organization has already completed.
Included are dates for product launches, sales milestones, and the hiring of critical workers, among other things.
Financial strategy: Investors and banks will want to know how you will use their money if you request funding.
The summary should include a concise financial summary outlining how and where the money will be allocated. Additionally, you should show a history of financial performance for organizations that have been around for a while.
All businesses require economic predictions so that investors and lenders can decide whether or not they will obtain an appropriate return on their investments and whether or not they will be able to pay back their obligations, respectively.
Management Team: In this part, you’ll introduce the members of your management team. Your company’s success is ultimately influenced by the people that work there, which raises the obvious question of your team’s level of preparedness for the task at hand.
Executive summaries should include a list of key employees and the talents and experience they bring to the table.
How Do I Write an Executive Summary of a Business Plan?
The executive summary of a business plan is critical because it’s the first thing investors, lenders, and potential customers see when reviewing your business plan.
A lack of interest will cause them to put the book down, and you will have lost them for good. Follow these guidelines when drafting your executive summary for the most outstanding results.
1. Complete the business plan – Each section of your business plan is summarized in your executive summary, and the first step is to draft those parts. Read each piece and find out what information you need to add to the executive summary.
This is an exciting figure and an opportunity that should be addressed in your executive summary if your industry analysis section says that your sector’s present size is $20 billion and is predicted to increase by 90% per year over the next five years.
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2. Start by describing your company in one or two sentences –It is essential that your executive summary begins with a brief description of your organization and what it does.
Readers must quickly and easily comprehend what your organization performs in order to decide whether or not to pursue the opportunity. Many readers will stop reading if they don’t understand what you do soon enough, and you’ll lose the chance to engage them in your business.
3. Outline the structure of your executive summary – For each area of your business plan, begin by developing headings for each section.
This includes headers for your marketing strategy and consumer analysis. Summing up the most relevant points in each section’s title is a final step.
It’s common to list your three most critical marketing strategies under the “marketing plan” section. You’d produce a one-to-two-sentence description of your target customers under customer analysis.
Your executive summary should be organized to make sense for your audience. New sections can be made, and you can cut and paste existing sections into them as needed. You can also keep the original parts and make new sections like “company overview” or “unique success elements.”
4. Make the executive summary simple and short – The more concise your executive summary, the better. It’s time to read your executive summary and make it as straightforward as possible to convey your most important points in the fewest words feasible.
Give a concise executive explanation of your company’s operations and goals. Use simple language and only one or two phrases for this definition to do this.
It’s not appropriate to discuss the company’s plans in the executive summary, which focuses on its key competencies. Keep the business definition simple enough for anyone with no prior knowledge of the sector to grasp.
5. Language use – Using a positive and confident tone in your writing can significantly impact how the reader receives your paper. When writing an executive summary, use solid and robust language to convince the reader that your plan will succeed.
In place of words like “may” or “could,” try using “will” instead. Using sloppy language or a disingenuous tone will only raise the readers’ suspicions about your competence.
6. To avoid confusion, make sure the information in your executive summary corresponds to the information in your business plan. No differences between the two should be found.
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7. It is essential to ensure that the plan and the executive summary are logically connected – To be successful, you must be able to explain why your team and resources are ideally matched to a given market opportunity and why you’ve chosen the marketing approaches that you have.
8. Eliminate duplication in the executive summary – There isn’t much room in your executive summary to include what you need to. It’s a waste of space to restate the same information.
There must be an executive summary at the top of every business plan, no matter how big or small your company is. It is up to the quality of your executive summary to persuade them to read your entire business plan or simply ignore it completely.
We sincerely hope that you will use the information in this article when putting together the executive summary for your company’s business plan.
Financial Plan of Business Plan
What is a financial plan?
According to Wikipedia, “a financial plan is a comprehensive evaluation of an individual’s current pay and future financial state by using current known variables to predict future income, asset values, and withdrawal plans.”
Similar to the executive summary, a financial plan of a business plan can help you determine whether a business idea is viable and keep you on track to achieve financial health as your company expands.
It is an essential component of a comprehensive business plan and consists of three financial statements: the cash flow statement, the income statement, and the balance sheet.
Your company’s financial plan is a subset of your overall business plan that focuses on financial problems. It employs accurate financial data and projections to contextualize the remainder of your company’s strategy.
Even if your company expands or encounters new issues or misfortunes, a solid financial plan will keep you on course.
It helps employees and investors communicate clearly and helps build a modern, transparent company.
What should be included in the financial plan of a business plan?
We won’t go into great detail here, but having a rough idea of what should be included in a standard financial plan of your business plan is vital.
The most popular financial plan lasts for three years or more. However, regardless of the time range, your approach should include the following components:
Sales projections: Estimate your company’s expected future sales growth and the costs of those sales. People, goods, and other essential things can be broken down into subcategories.
Creating a forecast that corresponds to the sales statistics in your profit and loss statement will assist you in developing realistic sales predictions.
You don’t want to underestimate how much you’ll sell, but you also don’t want to be overly optimistic in your forecast.
Expenses and budgets: The most important consideration is cost, divided into fixed and variable expenses.
Investment Plans: A robust financial plan considers all of the company’s risks, objectives, and conditions. As a result, it should also serve as a guide when deciding on investments that will assist you in meeting the organization’s needs.
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A cash flow statement, which achieves the same result, can also be generated. Essentially, you want to anticipate how much money will come in and how much will go out over the next three years or more.
Net profit or loss: Deducting your expenses from your total income yields your net profit or loss, also known as your gross margin.
Your small business’s income statement (also known as a profit and loss statement) examines sales and expenses to determine if it will make or lose money over a specified period (usually three months).
Liabilities and assets: These are typically separated from your profit and loss statement, and they will almost certainly include startup costs and assets for new businesses.
Your balance sheet provides you with a picture of your firm’s financial health at any one time since it shows you how much cash you have on hand and how much money you owe others.
Break-even plan: To keep your doors open without turning a profit, your break-even analysis will tell you how much you need to sell.
However, while running at break-even is not ideal for your firm, it is preferable to operate at a loss.
Using your break-even analysis, you can estimate how many items you will need to sell to pay your costs and keep your doors open.
How to Write a Financial Plan of a Business plan
To make a financial plan and start a business, you need to follow the steps below. These steps will help you look at the big picture, figure out what you need, and then come up with solutions.
1. Financial and Economic Analysis.
The first step at developing a solid financial plan is to analyze the firm’s existing situation.
This starts with the income and cost models, which provide exact statistics on whether a company is growing, stagnant, or contracting.
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In its most basic form, a revenue model is a graphic that displays how a corporation produces income. It is sufficient to extract information on the increase in sales and the percentage of profit earned to conduct an analysis.
Experts say that for businesses that are already up and running, data from the last three years should be considered to get a more accurate result.
When we consider the cost model, it helps us determine the expenses that must be incurred to enable the business to run efficiently and effectively.
This category includes fixed expenses such as services, wages, raw materials, etc. Then there are the variables, including card payment, advertising investments, and event attendance.
2. Define Business Objectives and Goals
Once you have gathered all of the essential information, the next stage is to develop goals for your firm, considering how far you want to push it in the future.
Using this information, you can write down specific, measurable, attainable, relevant goals and have a set deadline for completion, all of which are important.
Many small businesses fail because they pursue goals out of sync with our times.
If you use this approach while outlining your goals, you will be able to direct your plan by prioritizing and concentrating on the most crucial techniques.
3. Business Proposal Financing
Once the financial requirements have been defined, the next stage is to devise a backup plan to meet the lack of accessible funds.
This should include data on potential funding sources, investments, and associated costs.
There are numerous financing options available today that are specifically designed to help businesses acquire cash and satisfy their financial obligations.
Everything from SME loans to company loans to corporate credit cards can be obtained. Make sure that you select those suited for the stage of your organization’s development and the payment capacity that it can accomplish.
You can use a credit simulation to determine how much it would cost to finance a firm.
4. Sales Forecasting
The following step is to develop a financial projection that specifies your company’s performance should be in the next period to meet your objectives.
Remember to factor in the expenses incurred to generate a sale and the rate they will rise year after year.
A medium-term projection of roughly five years is often provided as a starting point. In this section, you must estimate the amounts of sales, costs, profits, and growth to assess your financial requirements and be prepared accordingly.
You can simplify the process by using an excel spreadsheet or software created for this.
5. Create a Strategic Plan
You must now explain the strategies used to achieve the objectives you have set for yourself. You may figure out your financial condition by using the three pillars being analyzed as a reference: income, expenses, and investments.
Specify the actions to be taken, including who will be held accountable and whether or not they are feasible.
The next phase in formulating a financial plan of a business plan is the creation of budgets. You must manage the available capital to keep it under control and strategically reinvest it.
Remember that tax charges must be considered, which means that taxes and other liabilities that come with doing business must be considered.
You can either create a budget split by department or break out each expenditure and investment that must be made independently.
It depends on the capacity of your business and the goals you set for yourself. After you finish this budget, you will be able to start implementing your financial plan.
7. Analysis of Business Outcomes
Comparing results is one part of the financial plan that must be carried out constantly to be effective.
When putting the plan into action, it is critical to assess your organization’s impact and, if necessary, make modifications.
Prepare a weekly or monthly balance to establish a historical record, and then examine how your small or medium-sized firm benefits from the credit.
You should also compare your progress to that of your direct competitors and the overall performance of your industry.
How can you see how having a financial strategy might help you bring more excellent orders to your organization and hence allow it to grow?
We’ve discussed the benefits of developing an excellent financial plan for your business and taking the steps.
As previously stated, the financial plan of a business is an essential component of your overall business plan, and without it, you would struggle to evaluate your company’s overall success.
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