What is an Executive Summary? Definition, Components, Tips

What is an Executive Summary? Definition, Components, Tips

Whether you’re a business owner looking for investors for your small company, or the CEO of a large corporation, a business plan is a critical component for long-term growth and contributes a lot to your success.

While a thorough business plan is essential, it’s equally critical you provide readers with a short and attention-grabbing executive summary, as well. Investors, lenders, CEOs, executives, and managers are busy. Always. They might not have time or interest to read your full business plan.

So, how can you deal with that? Don’t worry, in this article, we’ll show you everything about an executive summary, including how to write it in a succinct way.

Let’s dive right into it now!

Table of contents

What is an executive summary?

As the name implies, an executive summary is a brief document at the beginning of the business plan, report, or proposal. It’s a section that captures the reader’s attention and summarizes critical information involving your company overview and future short-term and long-term goals.

What is an executive summary?
What is an executive summary?

After all, an excellent executive summary is meant to inform readers of the essential information in your business plan, so they don’t need to read it all and can get caught up quickly. Typically two pages long, the executive summary is often written last, after the entire business plan has been finalized. The executive summary eventually covers the highlights of all the other sections.

Unlike an abstract, which is a short overview, an executive summary is a condensed form of the sections contained in the business plan. In reality, abstracts are more commonly used in academic and research-oriented writing and act as a teaser for readers to see if they want to read on.

The importance of an executive summary

In a plan being used to pursue funding from angel investors, venture capitalists, or banks, an executive summary is designed to intrigue the reader. Its primary goal is to provide enough information that the audience will want to dig in and read all the specifics within the plan.

However, it is not an introduction. You won’t want to write an executive summary which is a lead-in to the plan as a whole. Instead, it needs to be more of a highlight reel.

Crafting an executive summary has many advantages, some of which include:

  • Creating a concise statement about the what, why, when, and how of your competitive advantages that you’re proposing
  • The possibility of repeatedly reusing and repurposing the content for placement in marketing as a part of the selling process
  • Perhaps most importantly, an executive summary helps you organize your thoughts and get all of your ducks in a row. The components of an executive summary require you to do some accounting work; to figure out your practice’s value, the way that you plan to sell it, the potential growth that may be involved, or orient a sale to a prospective buyer so that they can realize this is a good deal for them.

A piece of good news when creating an executive summary is it is short. But here’s the bad news: it is a critical document that can be challenging to write. The pressure of crafting an executive summary comes from the fact that everyone will pay attention to it, as it lies at the top of the business plan.

An executive summary explains all that follows and can make or break your plan or proposal. Your executive summary must understand the potential audience’s needs and zero in on them like a laser. So, which key components should it contain? Read on to our next section to explore!

What are the components of an executive summary?

There is no exact or perfect formula for the way that one puts together an executive summary. That said, there tend to be some common components to them. Generally speaking, an executive summary may include the following elements.

Business description

Right up front, state the name, location, and mission of your business. Make it straightforward what your company does and what your value proposition is. Then, mention a brief description of your target market - your main audience, or the people you think will spend money on your solution.

After showing basic information about your business, it’s time for a little history lesson. More detail about when your business was launched, by whom, what their backgrounds and roles are, and where the business stands now.

Business description in your executive summary
Business description in your executive summary

If you’re a young enterprise and write a business plan to raise money, you’ll want to include evidence of “traction” in your executive summary. This can consist of revenue growth rate, customer growth rate, results from consumer surveys, pre-order numbers for your goods or services. It doesn’t have to be much, but any early success proves that your market research, business model, and product/ service are well-founded.

Product or service description

One or two paragraphs of your executive summary should go into more detail regarding the company’s goods and/ or services, their competitive advantage, and why demand is growing for them.

Don’t kill your credibility by saying your products/ services have no competition. At a minimum, you compete with the ways things get done currently. Most likely, readers have already seen multiple plans with similar solutions. Hence, emphasize what makes your products/ services different here.

The problem your business solves

Clearly describe the problem that you’re going to solve for your audience. Your business doesn’t need to deal with a more significant social problem, but it should address a need for the audience or an opportunity in the market.

Emphasize the problem your business solves in the executive summary
Emphasize the problem your business solves in the executive summary

Remember to use straightforward language and show exactly what you have and how it solves the problem you’ve identified above. This could be how consistently you have been successful, and other languages that assure them that your practice would be the most efficient to take over and profit from.

Market size and growth opportunity

Your investors are seeking a large and growing market, so spend a few sentences providing the basic market size, segmentation, growth, and dynamics. How many people or companies are participating in your niche? How fast is it growing? What is driving the growth? Are there any other ways to improve that you haven’t adopted yet, but consumers could? Be specific.

Financial overview

If you have been in the game long enough, it might be as simple as highlighting recent annual sales and growth over the last year. For a startup, this might be a brief description of projections, such as a sales forecast goal for the following year or three years from now. It is often recommended to add a simple pie chart or bar chart with sales and gross margin for the next three years.

Your team

Keep in mind that investors fund people more than ideas. Who is behind your business? Why is your team uniquely qualified to win? What have they achieved before? You should specifically explain why the background for each team member fits by naming their roles and responsibilities.

Introduce your team in the executive summary
Introduce your team in the executive summary

It also may be valuable to focus on any gaps in your team and how you intend to fill them. In case you have potential candidates or partners in mind, briefly mention them and expand on their qualifications within your full business plan.

Funding needs

If you’re using your business plan to raise money, your executive summary should focus on how much money you are looking for. Investors need to know exactly the amount of funding you’re asking for now, and what they get. The request should generally be the minimum amount of cash you need to reach your business plan’s next major milestone.

Future plans

Where is your business headed? What will it look like in the next 3-5 years? What expansion plans exist? Those should all be noted down in the last paragraph or two of your executive summary.

7 Tips to write a compelling executive summary

Keep it short and simple

The executive summary is not called a “summary” for nothing! Your audience is not looking for an in-depth analysis. So, you should manage to keep it as short and simple as possible.

Many sources suggest that it should not be longer than 2 pages. Handing out a single sheet that is printed on both sides is much more appealing than a 5-page summary. Nevertheless, sometimes business plans can be up to 50+ pages long, and it is practically impossible to summarize 50 pages in two pages only! An appropriate ratio for the executive summary length would be roughly 5-10% of the length of the business plan itself.

A good check whether your executive summary is effective or not is to have someone from outside your circle read your draft, and reflect back to you what they got out of it. If they can’t, take a step back and try again. Besides, remember that bulleted lists are your best friend!

Conduct your research

While an executive summary is short, it should include plenty of research. For instance, your summary will contain competitive advantage analysis and financial considerations.

Conduct your research before writing an executive summary
Conduct your research before writing an executive summary

Although your business plan or report will flesh out the details, it’s essential to include key findings in your executive summary. Think of it as an elevator pitch. If somebody stopped reading and you only had the executive summary to explain your business, what information would you include?

Think about it and conduct your research thoroughly.

Tell a story

When investors read your executive summary, they should know what your business is about. It is one of the first elements of your business plan, so it should set the tone.

In the executive summary, be sure to tell your story. What does your business do, and why do you do it? Who is involved in your business? Answering these questions will help your audience be excited about your company and reading the rest of the business plan.

Modify it according to the target audience

Depending on whom you’re proposing your business plan with, your executive summary might be a little bit different. For example, bankers are mainly interested in the financial overview; therefore, they might expect more details about the company’s finances.

On the other hand, angel investors might want to see more information regarding the company’s vision and what it is trying to accomplish. To each his own!

Provide proof and justification

Everything that is included in your executive summary should be accompanied by verified justification and data. However, most of the time you won’t have enough place to provide the necessary justification. In such cases, explicitly mention which section of your business plan they need to refer to for verifying your statements and assumptions.

Write it last

Don’t start writing the business plan with your executive summary. Even though it is at the beginning of a complete business plan, many experienced entrepreneurs choose to write it after they’ve finished everything else.

Write your executive summary last
Write your executive summary last

The reason behind it is simple: it’s hard to write a summary when you haven’t written your business plan yet. So, you should save your executive summary for the end, and think carefully about what to include in it.

Proofread for grammar after writing

The last run should be proofing the copy. This means double-checking to make sure that spelling is correct, and there are no grammatical mistakes or typos. Whoever wrote the executive summary is not certainly the best one to edit it; they can easily gloss over errors.

So, find someone good at copy-editing. If you deliver sloppy content, it will show a lack of professionalism that eventually affects the way readers think of your company.

5 Common mistakes to avoid when writing an executive summary

When crafting an executive summary, you should consider avoiding these following common mistakes.

Using cliche language

It’s best to avoid cliches with any style of writing. Cliches can actually rub people the wrong way, which is something you want to avoid when someone reads your executive summary.

In addition, cliche languages tend to overpromise and underdeliver. Your executive summary should reflect the fact and who you are as a company. If your facts don’t support that, you might as well kiss your opportunity goodbye.

Introducing new information that is not in your business plan

Every component of your executive summary should correspond to one or more sections of the business plan or main document. Therefore, don’t make your audience confused by introducing new and irrelevant information in your executive summary.

Outsourcing the job

It is common when many business owners are too busy to write an executive summary, they will find someone else to write it for them. However, you really need to do this yourself.

You should write your executive summary by yourself
You should write your executive summary by yourself

An executive summary needs to be a compelling statement of why investors or lenders should pour money into your business. Doing it yourself will motivate you to think through your value proposition and choosing the most salient points to highlight. It will also help you hone your selling skills, which you need to draw on heavily to be successful at raising funds.

Not including any graphics

A perfect executive summary is the one that can make it clear how everything related to what you propose together with the outcome the audience desires. And including some necessary graphics can help you obtain that goal.

Graphics provide a lot of benefits that words alone cannot:

  • They demonstrate logical and numerical relationships
  • They communicate spatial information more effectively than words alone
  • They are more engaging and attention-grabbing
  • They increase the credibility of your message
  • They require less effort and time

Diving too deeply into the nitty-gritty of your proprietary technology

If potential investors or lenders want to know more about your solution, they will ask. Just use your executive summary to give them a high-level overview of your products/services and how they work, with appropriate analogies to make things more tangible for them. Once you finally meet them, product demos are a really effective way of explaining the user experience and generating enthusiasm.

The bottom line

You’ve reached the end of this article! You might now have something in your mind about an executive summary, and might be more confident to write a compelling one.

We’ll try to keep this content up-to-date as new reporting methodologies or trends arise. However, we also value our readers’ opinions and would love to hear from you. If you’d like to share something or want a more in-depth clarification on some concepts and terms, let us know in the comments box below. We will be happy to help!

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