164 ENTREPRENEURSHIP
- Type of Business: The summary should describe the firm’s industry or sector in
about ten words. Some investors will not invest in certain industries, so being clear
up front saves time for everyone. - Company Summary: This thumbnail sketch of the firm’s history and background
emphasizes the positive—briefly. More than half a page (150 words) is not a sum-
mary. A statement defining the firm’s primary product or service should not be com-
plicated by lists of product extensions or auxiliary services. Instead, stress should be
placed on the uniqueness of the product or service. If it is not unique, why will it
succeed? - Management: The people running the company matter more than any other factor,
but the summary need not include a lot of detail. Listing the top two or three peo-
ple and emphasizing their industry experience should suffice. - Product/Service and Competition: Mentioning the competition defines the niche
the firm occupies. Again, this description should be no longer than half a page (150
words). - Funds Requested: This brief statement specifies the exact amount of money needed
and the investment vehicle: debt, equity, or some hybrid. If the firm is flexible in
this regard, the summary should state both the company’s preference and its will-
ingness to consider alternatives. In this case an investor may make a counterpropos-
al and the deal can be restructured. - Collateral: If the summary offers a debt instrument, it should indicate whether and
in what form collateral will be available. The more collateral the company has, the
lower the interest rate it will be charged and the less equity it will have to give up. - Use of Proceeds: The financial section in the main body of the business plan should
specify how the money will be used. Overly broad terms like “pay expenses” and
“increase working capital” do not inspire confidence, so entries such as “pay salaries”
and “build inventory” are preferred. - Financial History: The firm’s financial history should include only the major cate-
gories—revenues, net income, assets, liabilities, and net worth—for the last two or
three years. Figures presented in the history must coincide exactly with those in the
main body of the plan. This section is omitted if the venture is completely new. - Financial Projections: These projections follow the same format as the financial his-
tory, covering two or three years and matching the figures in the main body of the
plan.
Street Story 5.2 provides an example of an executive summary for the proposed com-
pany Babyyourway.com. The rest of the business plan (abridged) can be found in the
Appendix to this chapter.
Major Sections
Outline.
I. Background and Purpose
A. History
B. Current situation
C. The business model and resource-based elements