What is an Executive Summary? Definition, Components & Tips
Summer Nguyen | 11-11-2024
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!
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.
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.
Read more:
The importance of an executive summary
Your project report’s executive summary plays an important role, as it can either make or break your business or project plan depending on how it’s crafted. Here are some key points on why an executive summary is important:
Give Concise Overview: It gives a short version of the important stuff in a longer document, so busy people can understand the main ideas fast
Save Time: People who make decisions don’t always have much time. An executive summary helps them quickly see the important parts of a document without needing to read everything.
Serve as a Communication Tool: It helps share what a project or report is about, what it aims to do, and what results it has with people like stakeholders or investors in a clear way.
Make Decision: An executive summary helps decision-makers make informed decisions by presenting key insights, analysis, and recommendations in a clear and organized manner.
Serve as a Persuasive Tool: If the summary is written nicely, it can get the reader interested and make them want to read more about the document. This could make them more likely to agree with or support the ideas or plans in it.
Serve as a Reference Point: It’s like a quick reminder for stakeholders to check the important parts of the document again, especially when they need to remember or tell others about it.
When to Use an Executive Summary?
Here are some popular use cases for executive summaries:
Business Plans: In business plans, the executive summary is like a short version of the whole plan. It talks about the business idea, goals, how to reach them, market research, money predictions, and possible problems. It helps investors or other people involved understand what the business is about and what it could achieve.
Project Proposals: When people want to start a new project, they usually write a proposal. This proposal often starts with a short summary, called an executive summary. This summary talks about what the project is about, what it aims to achieve, how long it will take, how much it will cost, and what results are expected. It helps the people who make decisions decide if the project is possible and if it fits with the goals of the organization.
Research Reports: Research reports typically feature an executive summary summarizing the purpose, methodology, key findings, and implications of the study. It allows readers to understand the research without delving into the detailed report.
Investor Presentations: When entrepreneurs want to get money from investors, they often make presentations. These presentations usually start with a short summary, called an executive summary. This summary talks about important things in the business like chances to make money, how it’s better than competitors, how much money they think they’ll make, and what investors could get back. It helps make investors interested and willing to give money to the business.
Annual Reports: Every year, companies make reports to tell people how they’re doing. At the beginning of these reports, there’s usually a short summary, called an executive summary. This summary talks about how well the company did financially, what good things happened, what problems they faced, and what they plan to do in the future. It helps shareholders and other people involved see how the company is doing without having to read the whole report.
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.
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.
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.
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.
How to Write an Executive Summary?
Summarizing an executive summary means squeezing the important parts of a big document into a short and clear summary. Here are some tips for creating an executive summary. It becomes easier when you use AI summarizer and get instant summary results either in bullet point or in a short paragraph.
Understand the Purpose: Understand why you’re writing the summary and who will read it. Is it for a business plan, project proposal, or research report? Ensure your summary fits the purpose and the people who will read it.
Read the Entire Document: Before you begin writing, make sure to read the whole document carefully. This way, you’ll understand the main ideas, what was discovered, and any suggestions given.
Find the main ideas: Point out the most important stuff like goals, results, main discoveries, suggestions, and any big numbers or facts.
Keep it short: Try to be brief! An executive summary is usually a few paragraphs to a couple of pages long, depending on how long the original document is.
An executive summary should show the main points of the document. There are different kinds of executive summaries. But whatever type it is, it needs to cover all the important stuff from the business plan or project proposal. Here is the specific structure you can refer to for writing an executive summary:
1. Introduction: For the summary, start with a quick intro. In this short paragraph, share some basic info about the project or plan you’re summarizing.
2. Company Description: The company summary should cover its name, where it’s based, and what it aims to do. Don’t forget to mention the management team, advisors, and the crew working on the project. It’s also helpful to give a quick rundown of the company’s past, so readers know what it’s done before.
3. Marketing Plan: In this section, outline key marketing strategies tailored to your target audience, chosen platforms, and channels. Consider including pricing strategy here too. Also, discuss how to gauge the effectiveness of these strategies, which could involve tracking changes in user numbers or product sales post-implementation.
4. Need/ Problem: In this part, discuss the market gap, identifying the specific need or problem your product will tackle. Explain the policy issue your services will address and why it’s crucial enough to invest resources in.
5. Product/ Services: Describe what your product or service is about. Explain how it will help fix the current problem in the market.
6. Market Analysis: In this section, identify key market competitors. Analyze their strengths and weaknesses to devise new strategies. Also, outline the market size and growth prospects in the industry.
7. Resources: You should identify your current resources and future needs, including human capital (team members, advisors), physical resources (equipment, facilities), and technical resources (software, tools).
8. Financial Planning and Budget: Detail the funds required for your project or business. Explain the financial support needed and how it will be allocated. Include existing budget, funding, and support. Highlight the benefits of supporting this plan.
9. Timeline: In this section, provide a timeframe for your project or business. Detail the duration for product/service creation, timing for implementing marketing strategies, and milestones. Utilize Decktopus’s timeline templates for an attractive visual representation!
10. Conclusion: In this final section, conclude with a compelling message. Encourage readers to explore the detailed business plan and consider investing in your project. Highlight the value and potential benefits of your venture. End with a strong call to action!
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.
8 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. To help with this step, you can use an online summarizer tool that drastically reduces the length of your executive summary with a single click.
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.
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.
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 can’t afford a copy editor there is a free and effective way that is to pass your copy through a suitable grammar checker. It will automatically proofread your writing for grammatical and typos and correct them. Doing so will make your executive summary clear and professional to read. However if you deliver sloppy content, it will show a lack of professionalism that eventually affects the way readers think of your company.
Critical views on executive summary
Executive summaries are often criticized for oversimplifying complex information, which can lead to a loss of important details and context. Their conciseness sometimes results in a lack of depth, leaving out crucial nuances that are present in the full report. Additionally, poorly crafted summaries may be prone to confusion or fail to address specific needs due to generic templates.
These problems show that executive summaries need to be carefully written. They should provide a useful overview without replacing the detailed information found in the full report. The goal is for the summary to effectively highlight key points while ensuring that readers still refer to the main document for complete details. You can also use an online summary generator to write an effective summary. It can write an accurate summary using advanced algorithms while retaining the essence of the content.
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.
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 choose 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!