The Executive Summary Essay Research Paper The

The Executive Summary Essay, Research Paper

The Executive Summary

The executive summary is arguably the most important section of the business plan. It must be concise, specific, and well-written. It summarizes the highlights of the completed business plan and provides a brief snapshot of the plan, with sales, spending, and profit summary figures. The summary emphasizes those factors that will make the business a success. It must contain sound numbers for market size, trends, company goals, spending, return on investment, capital expenditures, and funding required.

For new businesses or businesses seeking funding, credibility and excitement are key elements of the executive summary. Venture capitalists receive hundreds of plans each month, and just a few are actually being read from cover to cover. A quick 20-second scan of the executive summary is the basis for screening which plans to read and which companies to interview for investment. When the plan is the vehicle used to attract financing or investment, the executive summary should make it clear to the reader who is a

potential source of funds why this is a sound investment.

Business Background

The business background section of your business plan generally consists of two to four sections that present information that is specific to your business. You may have gathered substantial information about competitors and the industry in general in the

course of considering your business plans. This is not the place for that information. Instead, concentrate solely on those characteristics of your business that are specific to your particular business.

The business background generally includes the following:

a document describing the business entity and its general operation

a document describing the product or service that your business will provide

a document describing your facilities, if appropriate

a document describing the people in your organization, if appropriate

The Business Entity

The business entity portion of the plan provides information that is specific to your business. This document sets forth the current status of operations, the management structure and organization, and the identification of key personnel. If the plan is being created for an existing business, historical information is also included. The business background provides the reader with information regarding: the type of business (e.g., wholesale, retail, manufacturing, service, etc.) type of legal entity (e.g., corporation, partnership, sole proprietorship, etc.)

when the business was established where it is located the type of facilities, if any (e.g., retail establishment, manufacturing plant, etc.), although you may need to devote a separate section to this subject if your facilities are very important to your business the number and type of employees the organizational structure (table of organization showing who is responsible for what) operational information, such as a schedule of the hours the business is open identity of key employees, including a description of their abilities that make them vital to the success of the business. You may decide to devote a separate section to employees, if you think they are key to your success.

The information provided should go beyond a simple statement of facts. For example, if you chose to incorporate rather than to operate as a sole proprietor, what factors influenced your decision? Explaining why a particular decision was made goes a long way in helping the reader understand your decision-making process.

Don’t forget yourself when you think about key employees, particularly if you’re starting a new

business. You need to present your educational background and prior business experience in a

way that establishes your ability to succeed. While you probably won’t include a copy of your

resume, much of the information that appears on your resume will appear in the plan. Don’t be

afraid to present yourself in the most favorable light that you can honestly and objectively

portray.

The business background is also the place to identify the goals and objectives of the business by explaining in general terms what business you are in or want to be in. How is it unique and why will your goods or services appeal to customers? This requires consideration of competitors who are appealing to the same customers. Why will customers prefer your business to theirs?

Note that startup businesses face a special challenge when drafting the business background. In the absence of an existing business, the background will be couched in terms of what the business will do, not what it has done. This makes it even more important to have a clear picture in mind of how your business will look and operate once it’s up and running. When you have a track record, it’s easy to point at the results you’ve achieved as an indication of your potential for success. Without any history, you’ll have to work a little harder to make sure that you’ve developed, and presented, a realistic idea of what it will take to make your business work.

Product or Service Description

If you have reached the point where you are trying to write a description of what it is that your business actually does or sells, you’ve probably been thinking about your product or service for quite some time. Now is the time to take a step back and reflect. Because of your familiarity with the idea (after all, it is your idea), you will have to consciously avoid giving it short shrift in your plan. Don’t provide needless detail, but remember that the product or service idea you have hasn’t been kicking around in the heads of the people who might read your plan. You may have to set the stage a little bit to make sure that a reader understands exactly what your product or service is.

The starting point is a clear and simple statement of what the product is or what service your business will provide. Avoid the temptation to compare your offering to similar services or products offered by others. Reserve that analysis for the marketing plan, where you will discuss competitors and potential competitors.

Instead, focus on those factors that make your offering unique and preferable to customers. Explain what it does, how it works, how long it lasts, what options are available, etc. Of particular importance is whether you are selling a stand alone product (e.g., lunch) or a product that must be used with other products (e.g., computer software or peripheral devices). Be sure to describe the requirements for any associated products (especially vital for software). And, if there are special requirements for successful use or sale, say so.

Another issue to consider is whether you hope to sell items on a one-time or infrequent basis or whether repeat sales are the goal. If you’re opening a bakery or restaurant, you’re going to count on the same customers returning on a regular basis. But a heating contractor installing a new furnace or a consultant helping to implement a new order processing system probably isn’t going to do that for the same client again any time soon (we hope!). A similar issue is how long the product or service will last and whether you intend to upgrade or supersede the product or service at some point in the future.

A useful way to present some product or service information is to create a features/benefits analysis. A feature is a specific product attribute or characteristic. A benefit is the advantage a customer or user will derive from the product feature. Consider the following table, which illustrates this type of analysis for a theoretical high-tech wrist watch:

Auto-Watch Features and Benefits Analysis

Feature Benefit – battery has an indefinite life – recharges whenever watch is exposed to light

consumer doesn’t have to deal with time, inconvenience, and expense of periodic battery replacement time signal from National Institute of Standards and Technology updates time automatically by radio consumer never has to set the time and can rely on near absolute accuracy dial lights up at night when looked at consumer doesn’t have to use two hands to see time in dark receives global positioning satellite signals and uses to determine time zone

consumer doesn’t have to adjust watch while traveling

Timing is also an issue. Be realistic about the time it will take to develop the product or service. For example, if you’re writing the plan while the first prototype is being built, provide a timetable for completion of development and estimate how long testing will take

before production in commercial quantities can begin. Timing issues are also addressed in the financial projections that you prepare and in the market plan you create. Both of those analyses, however, rest on the product or service being available on schedule.

Business Facility Assessment

There are a number of issues you should address in your business plan regarding the choice of a facility. Not surprisingly, the most important consideration is usually one of location. The first question to address is why you need a business facility. At one extreme, a consultant may perform most services in space provided by clients. That consultant may not need a facility at all and may maintain a small home office to store reference materials and business records. At the other extreme, a manufacturing business may require, for example, access to rail transport, room for manufacturing operations and storage, parking facilities for a lot of employees, etc.

Once you have assessed your facility requirements, you’ll also want to look at the cost. There are numerous factors, some unrelated to your business, that will figure into your planning. For example, you may be faced with the choice of leasing property or buying it outright. The trends in the local real estate market could have a big impact on your decision. If real estate prices are rising quickly, buying may provide some protection from the risk of escalating rent and afford a way to mitigate losses if the business doesn’t work out.

Your business plan should also describe the basic aspects of your facility (age, size, general location) as well as the important aspects of any equipment that you may need for operation.

Planning for People

A business plan can help to organize the roles and responsibilities of all the people involved in your business. Even if it’s just for your own benefit, a checklist of all the different tasks performed by individuals (or classes of individuals, if you have many employees) may be useful.

In writing your plan, show that you’ve considered options other than full-time employees. In many cases, a startup business or a business taking on a new product, service, or market will experience a short-term need for a lot of help. How you fill that short-term need for help will be dictated in large part by your expectations regarding business direction and performance. If you choose to use temporary help, what you learn about various temporary help providers, and any relationships you establish, could be quite helpful if you have a need for temporary help again.

At one extreme, your business plan can make it clear that you won’t ever have any employees. What little you can’t do, you’ll contract out. Many businesses built around performing services tend to be near this end of the spectrum. At the other extreme, your plan may reveal a need for an exponentially expanding sales force until you have reps in every major city in the US. Your choice in filling short-term needs would be very different, and, in terms of building a sales force, very important.

It can be a little difficult to predict how many people your business is going to need, particularly if you’re in a new business. The process of creating a business plan can help a lot. As you consider each of the key areas, you’ll develop a picture of all the activities that go into running your business. Also consider the “key person” concept. Is there anyone whose presence in the business is vital (other than you)? If so, it makes sense to consider what your business would do in the event that a key player is lost.

Marketing Plans

A business plan is the blueprint for taking an idea for a product or service and turning it into a commercially viable reality. The marketing portion of the business plan addresses four main topics:

Product: what is the good or service that your business will offer?

How is that product better than those against which it will compete?

Why will people buy it?

Price: how much can you charge?

How do you balance between sales volume and price to maximize income?

Promotion: how will your product or service be positioned in the marketplace?

Will your product carry a premium image with a price to match?

Will it be an inexpensive, no-frills alternative to similar offerings from other businesses?

What kinds of advertising will you use?

When will ads be run?

How will the product be packaged?

Place: which sales channels will you use?

Will you sell by telephone or will your product be carried in retail outlets?

Which channel will let you economically reach your target audience?

The marketing portion of a business plan addresses how you will get people to buy your product or service in sufficient quantities to make your business profitable. It consists of: a market analysis, which assesses the market environment in which you compete, identifies your competitors and analyzes their strengths and weaknesses, and identifies and quantifies your target market your marketing strategy, which explains how you will differentiate your business from your competitors’ businesses and what approach you will take to get customers to buy from you

your marketing and sales plans, which specify the nature and timing of promotional and other advertising activities that will support specific sales targets

Market Analysis

How do you determine if there are enough people in your market who are

willing to purchase what you have to offer at the price you need to charge to

make a profit? The best way is to conduct a methodical analysis of the

market you plan to reach. The market analysis presents your conclusions

regarding external market factors that will affect your business. It examines

the totality of the business environment in which you will compete.

Topics addressed in the market analysis include the existence and type of

competitors, the characteristics of your target customers, market size,

distribution costs, trends in your industry and in the market in general, etc.

Much of the information that will be included in the market analysis will be

derived directly from the SWOT analysis that you performed early on in the

planning process. The purpose of the market analysis is to set the stage for

presenting your marketing strategy. That strategy sets forth your plan for

successfully competing in your selected market.

Marketing Strategy

The marketing strategy portion of your business plan presents the approach you plan to take in providing products or services to your customers. It explains, at a high level, what you’ve determined to do to get your customers to buy in the desired quantities. Someone who reads your market strategy should come away with a “big picture” view of how your business will present itself to the market segment in which you will compete. You should assess both the merits and the risks of your enterprise in the marketing strategy.

In the marketing strategy section of your plan, you’ll address issues such as:

identification of your target buyers

the market segment in which you’ll compete

the reasons why the product or service you offer is unique

your pricing philosophy

plans for market research

ongoing product or service development plans

You’ll find it useful to keep in mind the 4 Ps of marketing (product, price, promotion or advertising, and place (distribution)) as you

define the scope of your marketing strategy. And be sure to stress what is unique about your business.

Marketing and Sales Plan

Your marketing and sales plan explains how you plan to reach your targeted customers and how you will effectively market your product or service to those customers. For example, the marketing plan specifies the types of advertising that you will use and the timing of those advertisements. In essence, the marketing plan takes the marketing strategy that you developed to a tactical level. It sets forth the specific steps you will take to sell your product or service and provides a timetable for those actions to occur.

For example, how will you advertise your business? If you decide on radio ads, which stations will you choose and at what times of day? Can you afford enough repetitions of the ad to make it memorable? How will you assess whether you’re getting your money’s worth from the radio spots?

The marketing and sales plan usually includes a calendar that ties marketing and sales activities to specific operational events. For example, an advertising campaign may begin some months before a new product is ready to be sold. As the date of the new product introduction approaches, the ad campaign would be stepped up. Once the new product hits the market, additional advertising is used to support specific sales objectives.

Sales plans. An integral component of any business plan is a strategy for getting your product or service to your targeted customers. There are many ways to reach your customers. One challenge that you face in developing your business plan is selecting the sales channel that is most effective. For instance, if you’re in a business where you provide services personally, your participation in the sales process can be extensive.

Many good home improvement contractors make all their sales pitches in person, and they

count on referrals from satisfied customers to generate new sales prospects. It would be difficult

to rely on a separate sales organization when the essence of the job includes creating estimates

and selling the prospective customer on your ability to deliver what the customer wants.

In contrast, if your business deals in the sale and production of large quantities of product with little associated service, then you face a different challenge. Customers may not know or care who you are.

A coffee distributor roasts and grinds coffee for resale to a number of local convenience stores.

The stores brew and sell the coffee by the cup. The people who buy and drink the coffee are

the end users of the product. But the convenience stores are the target market for the

distributor’s product. The sales plan must address how to reach them, as intermediaries

between the producer and the end user.

Planning for selling is, therefore, based on the particular mix of goods and services that you plan to offer and on the way you intend to reach potential customers. If you are going to have a sales force of some kind, be sure you know what you will expect them to do. When making hiring decisions, do your best to find people who can do what you want. If you will be the entire sales force, try to quantify the activities and time involved. For example, a remodeling contractor won’t spend all of the time actually working on houses. In addition to the back office tasks, the contractor will also spend time meeting with potential customers, discussing the job, preparing and submitting bids or estimates, etc. These are vital sales activities and are essential to keeping work lined up.

Action Plans

The action plan is our name for the portion of the business plan in which you account for business operations that weren’t covered in the marketing and sales plans. The marketing and sales plans spell out the steps your business will take in an effort to achieve its financial and sales goals. The action plan explains how you will operate and manage your business. It also addresses the back office activities that don’t relate directly to providing goods or services to customers. These include activities such as:

employee hiring and management

obtaining and working with vendors for needed materials and supplies

ensuring that production takes place as planned

providing customer service and support after the sale

order fulfillment

collections

dealing with a changing business environment

These types of issues can be conveniently grouped into three categories for purposes of dealing with them in your plan. The categories are:

operations plan

management plan

contingency plans

Planning Your Business Operations

Your marketing plan sets forth the details of promoting, pricing, advertising, and physically reaching your customers. These core business activities focus on getting to the customer and providing the product or service that will generate income. But you also need to plan for the activities that support the primary business activities. An operations plan summarizes how you will create and deliver your product or service to your customers.

The types of operational issues that you’ll face will vary tremendously based on the type of business you operate. For example, a consultant who deals primarily in assisting customers with network communications isn’t going to have an extensive manufacturing or inventory control plan. A fast food vendor, in contrast, will have to carefully plan for inventory storage and turnover; the cooking process; wrappers, bags and beverage containers; employee sanitation; etc.

In most businesses, there is a lot going on in addition to the primary business of providing products or services to customers. You may find it useful to look at your business as if it were a linear process that starts with raw materials and ends with a delivery to a satisfied customer. You’ll probably be surprised at how many steps there are and how critical the timing and duration of each step is.

While it is easy to relate to production issues in a manufacturing or other process where goods are fabricated, grown, or otherwise produced, the concept is also applicable to other types of businesses.

As a consultant you are engaged to help a company convert from a paper-based billing system

to a computer-based system. The end “product” that you will deliver is assistance in selecting

the appropriate software and hardware, training on that new equipment, and supervision of the

process by which the data is converted to electronic format. You can do a great job without

“producing” anything tangible beyond, perhaps, documentation of the process.

This doesn’t mean that you can ignore “production.” Consider all the work that you would have to do. First, a working knowledge of the client’s existing system has to be acquired. Then, software and hardware combinations are evaluated in light of the client’s needs and budget. A conversion process has to be developed so that those portions of the existing data that carry over to the new system are available in the new format. Documentation must be prepared to train the client’s employees in using the new system. Whether you thought of them that way or not, each of these activities would be part of your production process.

Another production issue you may have to consider in drafting a plan is that there may be situations in which completing the job requires work outside your areas of expertise.

A self-employed plumber deals primarily in pipes, faucets, and fixtures. Those pipes have a

nasty habit of being inside walls, and when the plumbing goes bad, the walls frequently stand

between the plumber and the pipe. A good plumber knows that his production process goes

beyond his primary area of expertise and will plan for the time and costs associated with the

non-plumbing activities, such as plastering, required to satisfy customers. If you or someone else

has to do it to finish the job, plan for the time and cost.

Planning Management Activities

Small business owners have to orchestrate all of the different activities that are needed to make a business work. These activities include providing goods or services to customers. They also include managing any employees you have, as well as performing the back office or administrative duties required to keep the business running. Having a business plan helps to organize and prioritize these activities.

Many large businesses have project managers whose job it is to track and manage internal corporate processes. These managers work from a project plan, which sets forth the timetable for all the events, milestones, deadlines, etc., that make up the project. Frequently, project managers have no other part to play except to ensure that the project stays on track.

You, however, probably won’t have the luxury of hiring a project manager. Instead, the difficult task of making sure all the diverse elements of your business come together as they should is left to you. Of course, you are also probably a major player in the process being managed. This dual role is made much easier if you have a comprehensive list of what should occur, and when.

It’s easy to overlook management as a major drain on your time and resources, but even a very small business can present some complex logistical issues. Almost every business relies to some extent on outsiders to contribute to the success of the business. Keeping everything on schedule requires you to monitor all of the diverse activities and actively intercede when things aren’t going according to plan. If you operate an existing business, you know just how many balls you have to keep in the air at once. If you are just starting out, don’t underestimate the demands of managing.

Managing your employees. Managing people is far more time-consuming than you might imagine. Even if the people who work for or with you are talented and self-motivated, some direction must be provided. While you may have a fairly good idea about what needs to be done, the people working for you are less likely to see the entire picture. If some task “falls through the cracks,” your entire business can be placed in jeopardy. On the other hand, if two or more workers are duplicating each other’s work, your

business will be wasting time and money. It’s up to you to divide up the work in a reasonable manner and to assign particular tasks to those best equipped to handle them.

Tracking progress is another important element of managing your business. It isn’t enough to divide up the work and assign it out. You also have to see that the work proceeds at a reasonable pace. If realistic deadlines were set at the outset, you can keep tabs on whether individual activities will be completed when needed. It is far better to find out half way through a project that some essential element is lagging behind than to be surprised later in the game. You have to be aware of all the pieces of the plan, including your own. Managing your own time can be even more difficult than managing the people who work for you. Don’t put

pressure on yourself by taking on too much.

Administrative activities. Every business deals with a variety of operational issues that don’t relate directly to providing goods or services to customers. These back-office activities are part of the overhead of doing business. Someone has to open the mail, pay the bills, keep the books, remit taxes, provide customer service, handles collections, and do the hundreds of little things that make up running a business. It is a serious mistake to ignore the demands that these activities will place on you and your business.

A good starting point is to make a list of all the activities that someone will have to perform to keep your business operating. A house painter has to do a lot of things that are not directly related to applying a fresh coat of paint to a house. Someone has to purchase the ladders, tarps, paint and brushes, masking tape, and other necessities. Someone also has to bid on jobs, bill customers when jobs are completed, and deal with complaints if a customer isn’t happy. And those