Summary . . .

refers to a synopsis of the key points of a business plan. Sometimes referred to as an executive summary, it appears at the beginning of a business plan and highlights certain aspects of the company’s proposal that are particularly important to prospective investors. It is one of the most important parts of a business plan.

The importance of the summary can be illustrated by a simple fact: Few venture capitalists will spend more than five or ten minutes on a business plan before deciding whether they are interested enough to study it seriously. The two portions of the business plan most venture capitalists focus on during this critical first reading are the summary and the financial information (projections). If the summary does not heighten their interest, few investors will turn to the financials or consider the company further.

Because of its importance in getting investors to investigate further, the summary should be prepared with particular care. It should be short (two to four pages is ideal), concise, descriptive, well organized, and enticing.

A lot to ask of a summary? Maybe, but while no professional investor is likely to invest in a company on the basis of two pages of reading, many will decide against investing just that quickly. To ensure that the potential investor does not discard the company’s business plan after reading only the summary, the plan writer should be sure it provides the investor with the right information about the company.

An effective summary should include the following information:

• Company identity and contact. Give the name, address, and telephone number of the company. The name of the person the investor should contact and how he or she may be reached should be prominently displayed.
  

• Business of the company. A short description of the company’s business should be given here. How did it get started? What is its market niche, and why will it succeed?
  

• Management. What are the strengths of the company’s key management personnel? A short itemization of the relevant accomplishments of key management members should be given.
  

• The product. This paragraph should contain a short description of the company’s product and what makes it unique. A brief analysis of the company’s competition and why management believes its product will succeed in the marketplace should also be included.
  

• Funds required. How much money does the company need? Does management have any preference as to equity versus debt? If the funds are requested on a staged basis, this should also be set forth. If there is collateral available, it should be described.
  

• Use of funds. How the company plans to use the funds should be detailed here.
  

• Financial history. A short financial history of the company should be provided here. This can be done in a narrative or in a chart listing four or five key figures such as revenues, income or loss, assets, liabilities, and net worth for each year of the company’s operation.
  

• Projections. This section should contain a summary of the key elements of the company’s projections for the next three to five years.
  

• Exits. Any plans the company has to go public or to provide the investor with other exits in the next three to five years should be spelled out. The investor wants to know how he will get his money out.

See: Business Plan, Business Plan Format, Negotiation, Three Questions.