Introduction Module 10

Executive Summary

The executive summary provides a succinct synopsis of the vital elements of the project/program plan.  This module discusses why an executive summary is so important, and how it can be crafted to be most effective.  In addition, this module presents some common mistakes that managers should avoid.

 

 

1.    Purpose/Format

Perhaps the most crucial section of the project/program comes at the beginning of the plan but is written last.  It is called the executive summary, and its importance cannot be overestimated.  The executive summary captures and presents the core elements of the project/program plan in a short, succinct form.  It is, in essence, a condensed version of the entire plan.

 

Many managers wonder what the purpose of writing an executive summary is.  Or, if they are necessary, then what is the point of writing the remainder of the plan.   The executive summary can seem unnecessary.  However, managers must remember that those individuals who are reviewing the project/program plan most likely do so for a living.  As a result, they are inundated with proposals and plans from managers looking for capital, board members, etc.  The executive summary provides these busy professionals with a solid understanding of what the project/program is about. 

 

In addition, the executive summary is meant to grab the reader’s attention, and make them want to read more.  Poorly written executive summaries could cause investors to reject the plan without reading any further.  managers should craft their executive summaries with a sense of excitement and importance, while keeping a professional tone.  This is a fine line to walk.  managers want to get the reader excited and enthusiastic about the project/program.  However, they should also be careful to avoid too much hype.  This can make the plan seem unrealistic, or can leave the reader disappointed when they read further.

 

Typically, the executive summary is one to three pages in length.  The most common method of organization is to divide the summary into short paragraphs on each of the key sections of the plan.  Each paragraph highlights the key points of the module.

 

2.    Concept

The opening section of the executive summary should sum up the concept for the project/program in a clear and concise manner.   The opening statement should immediately grab the reader’s attention.  If the concept will be the first of its kind or will offer a new benefit to consumers that has been previously unmet, that should be highlighted. If initial market research has been conducted that proves the project/program is a viable investment that should also be mentioned.  Essentially, from the first section, the reader should understand the core concept for the project/program and feel there is a compelling need for the organization to exist.  All of this information will come from the organization and sector of activity section of the project/program plan.

 

organization’s that are already up and running must address this section differently. Instead of looking for investment to start operations, these organizations are looking for funds for growth.  In addition to describing the concept for the project/program, the initial sections should also discuss the organization’s current status. This information can include the basic history of the organization’s evolution, the location and size of current operations, the project/program form, etc. The managers should discuss their sales record, their operating history, and any milestones they have already met.  In this scenario, this first section should show why growth is achievable for the young organization.

 

In addition to discussing the organization and its core concept, the first section should also summarize the sector of activity within which the organization will operate.  Only the critical elements need to be discussed, such as if the sector of activity is growing or shrinking, the main competitors, etc.  If the organization will be creating a new sector of activity, that should also be mentioned.

3.    Product/Service

The core product or service is a critical element of the executive summary.  Most organizations are formed around a core product or service, so the organization’s concept is closely tied to the offering.  Therefore, the executive summary needs to explain the product or service in a manner that is concise.  By the end of this section, the reader should be able to tell someone else what the product or service is that the organization plans to offer.

 

Information to be included in this section includes the product’s features or benefits, especially those that differentiate it from the current products on the market.  If the product is already in development, the state of development should be discussed.  If there are variations of the product or any planned product line extensions, that should also be mentioned.  If the product has had positive reviews, has won any awards, or has had any positive press, these reviews should be cited.  Essentially, managers want to explain how the product will benefit the lives of their consumers.  Readers should understand why people would pay money for the product or service, even if they themselves are not in the target market.

 

The product’s distribution system should also be discussed.  If the managers have secured any distribution agreements or relationships with specific retail outlets, these should be mentioned.  If there are any advance sales agreements or if sales have already begun, then any key customers should be cited.  If there is any information that the demand for this product is evident or already exists, then that information should be included.  While this is merely a summary of the product section of the plan, this is the point to share the positive information.  Any product limitations should be included in the product section within the project/program plan.

4.    Market

In addition to summarizing the product, and the consumer needs it meets, the executive summary should also contain a synopsis of the market that the product is targeting.  Readers want to see that the market is attractive and stable; that there is potential for growth, and that the product will perform well.

 

managers can begin by stating the target market, estimating the total market size.  Projected market share for the organization should be presented.  Or, if the organization is already operating, then the current market share and the share growth should be cited.  If there are key competitors from who share must be taken, these competitors should be highlighted.  In addition, the rationale behind the choice of the target market should be briefly discussed.  The reader should understand who the organization’s target customer is and why they are an appropriate target.

 

In addition, this section should mention the marketing plan, and the key efforts that are planned to get the target market to try the product and, hopefully, adopt it.  This may entail a brief mention of the marketing efforts planned to reach the target market.  If the organization plans on relying on any specific marketing method, then this choice should be mentioned.  If an advertising campaign has been developed, or if key taglines have been developed, they should be mentioned.

 

It is important to note that many investors and lenders want to see that the organization understands not only how to build and market a product, but also how to build and manage a brand.  Products can become obsolete, but strong brands can have last value that can be extended to additional products or markets with greater success and less funds.  Therefore, the manager must demonstrate that they are interested in crafting a brand that can be built and sustained over time.

 

 

5.    Operations

Operations are a crucial and often overlooked portion of the project/program plan.  Often managers craft project/program plans around ideas for products or services without any idea how they will ever actually deliver the product to consumers.  In the executive summary, the reader should see that the managers have a strong grasp of the operations for the organization, or have a distinct plan for determining the operations plan as the organization evolves.

 

managers should briefly state the major processes that must be completed to produce the product or service and deliver it to the marketplace.  If the operations will require significant capital investment, then this should be cited and further addressed in the funding section of the executive summary.  If the product is extremely technical or requires advanced knowledge to understand the operations, then these explanations should be saved until the body of the plan.  In addition, if the organization has developed any processes or systems that offer an advantage over the competition, then these should be stressed in the executive summary.  managers should also state how this advantage is being protected (patent, trade secret, etc).  Any element of the operations will be contracted out should be detailed here as well.

 

For service project/programs, the operations involve the delivery or performance of the service for the customer.  Services are extremely difficult to differentiate.  Therefore, in this section the managers must be clear about how their service will be different than the competition.  It is also difficult to maintain differentiation in a service project/program.  Therefore, if the organization feels it has a effective advantage, they should cite how they will seek to maintain it.

 

6.    Management

As discussed earlier in the module on management, investors and lenders do not provide capital for organizations, they provide capital to individuals.  The greatest idea in the world can be fruitless without the right management team.  Therefore, in the executive summary, the manager must quickly convince the reader that the right management is in place to turn a great idea into a thriving, growing project/program.

 

The first thing that must be discussed is the key people involved in the project/program.  While further detail on backgrounds will be provided within the plan, each member should be briefly introduced with some key aspects of their experience and expertise.  If the managers are the only ones currently involved in the organization, then they should stress their skill sets and experience.  managers should not be concerned if they lack experience in certain areas.  Instead, they should mention the other management team members they hope to recruit.  This demonstrates that the managers understand their limitations and know what skills are needed to make their new project/program more than just a good idea.

 

In addition to the management team, the managers should also mention the amount of support personnel that will be required to run the organization.  The reader wants to know if the organization will be two people or two hundred people.  Also, the manager should demonstrate here that the organization has a plan for expansion and growth that is in place to keep salaries and overhead at a minimum.

 

Essentially, this section of the executive summary should show the reader that the organization has solid individuals in charge and plans for growth.

 

7.    Funding

Since most project/program plans are crafted to encourage an investor or lender to provide capital for the project/program.  In the executive summary, the managers should inform the reader of how much money they are looking for and in what form they are hoping to receive it. 

 

Many organizations already have some for of investment when they have crafted a project/program plan.  This may come in the form of personal investments from the managers, angel funding, or friends and family funds.  These should be outlined quickly, so that the current ownership structure is made clear.   In addition, potential investors will want to know who other stakeholders will be.

 

In regards to the capital the managers are looking to secure, they should be very clear about what they are willing to give in exchange for the funds.  If offering equity, the managers should state how much equity they are offering and the potential return on the investment.  If they are looking for debt financing, then the managers should state the payback period for the funds.  All of this comes out of the earnings projections for the next three to five years.  Therefore, the managers should state their key financial projections formed in the financial plan.  This is commonly accomplished in the form of a chart.

 

As mentioned in the module on capitalization, it is crucial that the managers not negotiate in the plan.  The project/program plan should be considered a starting point for negotiations.  Therefore, the managers should set the benchmark above where they would like to end up.  If they set the point where they hope to end up, they can easily end up with a deal that is less than what they had hoped.

8.    Fact Sheet

Many managers manage the creation of the executive summary by assembling a fact sheet.  The fact sheet contains all the pertinent information that should be communicated in the summary.  Some managers even choose to include the fact sheet in the executive summary as a succinct synopsis.  The following are the key categories for the fact sheet:

·          Name of organization

·          Location (address, city, county, state)

·          Zoning Classifications (licenses)

·          Type of project/program or sector of activity (ex. Manufacturing, agriculture)

·          project/program Form  (proprietorship, partnership, etc.)

·          Product or Service Line  (electronics, household)

·          Patent, Trademark, or Service Mark  (type, number, date issued)

·          Length of time in project/program  (or in development)

·          Number of Founders/Partners/Employees 

·          Current and/or Projected Share of Market  (ex:  10% in 2003)

·          Invested to Date  (equipment estimate, supplies, time)

·          Net Worth 

·          Additional Financing Needed  (estimate of total dollar amount)

·          Minimum Investment 

·          Terms and Payback Period  (equity position, limited partnership agreement, 3-year buyback, 40% ROI)

·          Total Valuation 

·          Legal Counsel

·          Financial Counsel

·          Management Counsel

9.    Table of Contents

It is essential that a project/program plan be easy to navigate.  The audience often wants to locate a specific portion of the plan, or refer back to the plan after reviewing it.  Therefore, the project/program plan needs a comprehensive table of contents. 

 

Typically the table of contents does not need to be extremely detailed.  However, the main sections of the project/program plan should be included.  In addition, managers must be careful when adding to the plan to keep the table of contents current with the accurate page numbers.  Some managers choose to provide a detailed table of contents, with subheadings that list the major elements within each section.  For example:

I.  The organization

·          Background

·          Current Status

·          Future Plans

 

The manager must consider the following questions when assembling the table of contents:

·          What are the pertinent sections that are included in the plan?  What are the appropriate subheadings, if any.

·          In what order will the sections be presented?  What is the logical flow of the plan?

 

The table of contents can come either before the executive summary, introducing the entire plan, or after the executive summary, leaving the executive summary as a stand-alone document.

 

10.  Common Mistakes

As mentioned earlier, the executive summary is often the only portion of a project/program plan that many potential investors or lenders will read.  The will only proceed to the remainder of the plan if the executive summary succeeds in grabbing their attention and getting them excited about the project/program. As a result, more than any other section, the manager must work to ensure that the executive summary is as composed as it can possibly be.    managers can improve their executive summaries by avoiding the following mistakes:

·          Too wordy – A project/program plan is rich with an managers plans and dreams.  As a result, they often don’t want to reduce it down to a shortened synopsis in a project/program plan.  However, by being too wordy, the reader is likely to be frustrated and lose interest.

·          Failure to identify a unique opportunity – People reading the executive summary want to see that the manager has found a project/program concept that is interesting, unique, and compelling.  If the executive summary fails to convey this sense, the remainder of the plan is unlikely to be read.

·          Failure to explain the project/program – If someone has read the executive summary and still does not understand what the project/program is about, then they are unlikely to invest the time to learn more about the project/program.

·          Management Plans – Executive summaries often explain what the project/program is all about, without explaining what the plans and goals of the management team are.  As a result, the audience has no idea what the vision for the organization is.

·          Deal terms – For busy investors or lenders, they want to know what the organization is looking for up front.  They do not want to spend the time investigate a organization that wants more capital than they can commit.

·          Legal security – Nothing can raise a red flag for a reader than evidence that the manager has not taken the legal steps necessary to protect and secure their project/program.  This can include failure to being the patent process, failure to choose the proper legal form, etc.

 

 

Assignments

#1 Matching the Columns

a.  Executive Summary	1.  Brief synopsis of the target and the marketing plan.
b.  Product/Service	2.  List of the important items that should be covered in the exec summary.
c.  Market	3.  Summary of the capital needed and the projected performance.
d.  Fact Sheet	4.  Explanation of what the offering will be.
e.  Operations	5.  Explanation of how the offering will be made or assembled.
f.  Funding	6. A condensed version of the entire plan.

Answers:  A-6, B-4, C-1, D-2, E-5, F-3

 

#2&3 Multiple Choice

1.    The executive summary should be _____________________.

A.    Written first

B.   Written last

C.   Written first and updated

D.   Written at the same time as the plan

2.    Executive summaries should _____________________:

A.    Grab the reader’s attention

B.    Explain the project/program

C.   State the funding being sought

D.   All of the above