The job of the executive summary is to sell, not to describe. The executive summary is often your clip_image002initial face to a potential investor, so it is critically important that you create the right first impression. You need to convey its essence, and its energy. You have about 30 seconds to grab an investor’s interest. You do not need to explain the entire business plan in 250 words. You want to be clear and compelling.

This means your executive summary should be about two pages, maybe three. Business owners are usually too close to their products and the everyday grind of building a company. It is usually a challenge for the business owner to boil down hundreds if not thousands of pages that exist on paper and in their mind to succinct set of words. I produce an excellent, attractive and informative executive summary using what I call the Jerry Bruckheimer approach clip_image006(American film, television and commercial producer best known for CSI: Crime Scene Investigation and movie Pirates of the Caribbean). Jerry’s approach is “Every single frame counts. Literally.” You have to be able to tell a story, sometimes with humor, sometimes with emotion, very quickly. I equate a good executive summary to producing a commercial versus producing a movie, where every frame does not count because the story carries so much of it. Whereas in advertising sometimes the execution is the idea. When producing a commercial the creator takes the time to finesse the words, play on the emotions, carefully architect the flow and the look and feel. If the investor can’t clip_image004get past the first 30 seconds, their interest in your company disappears. The goal of a good executive summary is not to get them to invest, but to get them to flip back to the financial section, which also has to rock their emotions.

My Executive Summary development service starts with gathering all the information you have already prepared. I do a gap analysis to figure out the price, which typically ranges from $3,000 to $6,000 and takes about a month to create for you.


In order for an early stage or emerging company to raise money, it must provide investors with a set of financial projections.  Typically, companies will pull together a top-down P&L projection going out for three to five years.  I have learned from hard experience that this is wholly inadequate.  You will need a complete Business Plan which once the company starts executing the plan becomes an Operating Plan. The development of financial projections is an interactive exercise with the me working alongside the entrepreneur, not created in a vacuum and thrown over the wall. My business planning work includes teaching the business owner(s) how to explain the financials and you get an understanding of fundamental financial terminology you can show potential investors and lenders.

We have developed a set of financial tools for comprehensive Business Plan financials, which embodies the experience of nearly 2,000 combined years of my CFO partners’ experience building such plans for these type firms in all industries:

· Pre-funded, pre-revenue startups

· Funded, pre-revenue startups

· Hyper growth entrepreneurial companies

· Revenue generating companies that want to grow

These tools provide a platform for the rapid development of custom Business/Operating Plans which clients can then use to optimize their funding strategies.

These are the financial elements of a Business Plan/Operating Plan suitable for presentation to investors, please see below.

  • Revenue Model
  • Department Budgets
  • Expense Summary
  • Fixed Assets
  • Income Statement / P&L
  • Cash Flow Projections

There are many reasons why a simple top-down P&L will not suffice for raising capital. Firstly, before contacting investors, the company should determine how much capital it needs to raise. A P&L projection can tell you the operating losses that you will need to fund, but it misses at least three other major items that consume cash, and it does not show any relation to what other companies in your industry are doing and have done. It does not properly reflect your purchases of equipment, software and other capital assets (a minor ongoing depreciation item in your P&L, but a lump-sum up front cash outflow). It ignores your accounts receivables (booked income as far as your P&L is concerned, but in reality cash that is NOT yet in your bank account). And it misses your inventory (not yet expensed in your P&L projection, but again an up front cash outflow).  In many cases the total amount of cash required to reach cash flow break-even can be two to three times the operating losses indicated in the P&L projections.

clip_image002[6]I include analysis of Industry benchmarks, which are included to validate assumptions, ratios, profitability, and financial ratios. These industry benchmarks are used as a starting point, and then the differences between the company and the industry are explained in detail.

Moreover, a P&L alone cannot answer a wide range of questions concerning the company’s business model and possible performance.  For instance, does the company consume more cash before reaching cash flow break-even by growing quickly or slowly?  How much cash needs to be raised to reach the first milestone at which the company’s riskiness (and therefore its cost of capital) drops sharply?  How many assets can be funded with inexpensive asset-based debt finance rather than expensive VC equity?  The answers to these and many other questions determine the optimum financing strategy to avoid unnecessary dilution of the founding team’s ownership percentage in the company.   They can only be answered by a thorough analysis of the P&L, Balance Sheet and Statement of Cash Flow.

For all of these reasons, it is critical that a startup develop a complete economic model of its business, a living, breathing set of interactive relationships modeled in a spreadsheet that behaves like the actual business and can be used for scenario generation, analysis and optimization.  This document is not just a pretty picture for investors, it is a hardcore Operating Plan with all of the gritty details of who, what and when.  Properly done, the management team can analyze and discard many alternative approaches to launching or growing the business, including testing different pricing schemes, distribution strategies, sales force models, support options, payment cycles, hiring plans and marketing budgets, to name just a few.

The output of such an Operating Plan is a set of P&L, Balance Sheet, and Cash Flow projections.  But standing behind these is a complete model of the business that provides the following benefits:

    • The entire management team knows exactly what each individual needs to do in each month of the plan.
    • The management team has a yardstick against which to measure execution.
    • The management team knows exactly how much cash it needs to raise to reach cash flow break-even, and how sensitive that number is to changes in key operating assumptions.
    • The Company has hard evidence to provide investors that it has thought through every aspect of execution.
    • The Company can strongly support the credibility of its projections by showing investors that its forecast is built from the bottom up, sale by sale, hire by hire, with all key assumptions clearly articulated.
    • The Company has a cash forecasting tool that can be adjusted for actual results to provide invaluable early warning of the need to start looking for another round of equity with time to raise it before running out of cash.

A savvy management team will have all of this in place before getting in front of investors.


The Revenue Model starts by defining the basic unit of sale, which might be a single product sale, a long term project, a subscription, a service transaction, or a customer relationship.  Whatever the unit is, the Revenue Model defines the economics of a single unit sale, and then builds revenues by generating multiple transactions across all product and service lines.  Revenues are generated by definable inputs, such as the number of salespeople hired clip_image004[7]times the average productivity per sales person, or the number of retail outlets carrying the product times the average units sold per outlet.

This granular bottoms-up approach builds real credibility for your projections.  It transforms arguments from investors along the lines of “We don’t think your revenue ramp is achievable” into conversations such as “Yeah, hiring one salesperson a month doesn’t seem unreasonable” and “Your projected revenue per salesperson is about industry average, and we like the way you don’t show any sales for the first six months after a new sales hire”.


The Operating Plan includes a spreadsheet detailing expenses for each department in the enterprise.  Since most expense items are driven by headcount, a department budget starts with a section that tracks personnel and salary costs.  The second section then extrapolates an expense line for each expense item.  Expense items are generally defined to match exactly to the Company’s General Ledger account structure, so that historical data and future updates for actual results can be easily copied in.clip_image006[7]

Special expense categories such as rent, travel, outsourced Server Farm charges or Help Desk expenses are calculated in their own sub-models within the appropriate Department spreadsheet.  All variable expenses are ratio driven and tie to primary drivers, such as unit sales, total number of customers or headcount employed, which in turn are driven by the primary revenue assumptions so that all variable expenses shift up and down naturally with changes in revenue projections.  This approach ensures that the model behaves like a real business and can be used for accurate scenario generation and sensitivity analysis.


The Operating Plan includes a spreadsheet called Expense Summary which summarizes total corporate expenses by Expense Item and also by Department.  This summary provides investors with a complete picture of how you intend to spend their cash.


clip_image010The Income Statement ties together the Revenue Model and the Expense Summary to create a P&L for the Company.  Since the expenses for certain Departments are split between Cost of Sale and SG&A categories, the Income Statement includes sophisticated checksums to ensure that no expenses are left unaccounted for.


Many entrepreneurs approach investors without a Balance Sheet in their projections because they figure that investors don’t really care about this aspect of their clip_image012company.  Moreover, it’s very difficult to get a projected Balance Sheet to actually balance, so why bother?   The answer is simple.  You can’t get an accurate Statement of Cash Flow without a Balance Sheet, and EVERYONE cares about cash.

The Balance Sheet contains the critical assumption for the average number of days in the customer payment cycle, which in turn drives the amount of cash tied up in Accounts Receivables.  For product companies, the Balance Sheet also calculates the amount of cash tied up in the inventory needed to support the sales volumes from the Revenue Model.  And for all companies, the Balance Sheet draws in the cash consumed by the asset purchases indicated in the Fixed Asset Schedule.


The Statement of Cash Flow is the Queen of all financial statements. Sophisticated entrepreneurs and investors alike care most about this view. Entrepreneurs want to know how much cash they are going to have to raise to reach cash flow break-even. Investors want to know how much more money will be needed to support their initial investment, and, failing that, how much dilution they stand to absorb from follow-on investment.

The Statement of Cash Flow integrates cash consumed or generated from operating activities flowing in from the P&L with the cash consumed or generated by changes in Balance Sheet items such as Accounts Payable, Accounts Receivable, Inventory and Plant, Property & Equipment.clip_image016


Investors want to see the story behind the numbers, and they need to see the rationale and assumptions the entrepreneur used to create the numbers. There are a lot of numbers in clip_image020financial projections, some are derived, others are entered based on discussion with a competent CFO and documented thoroughclip_image018ly in the plan. Many entrepreneurs make the mistake of not including the thoughts, how they arrived at each of the numbers, and they often fail to prepare the backup material and assumptions that show the investor you have put some serious thought and work into your planning. Those that have not planned this way are seen as financially unsophisticated which leads investors to believe you probably are not the type of person in which they want to invest.



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