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| Selling Your Business — a Summary |
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 Israel is regarded by many as a hotbed of technological innovation, but are start-up companies doing enough to "sell themselves" to prospective investors? Trendlines' Managing Director, Steve Rhodes, suggests that start-up companies need to take a more business-like approach to marketing themselves, starting with the most basic tool of all — the business plan executive summary.
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When Trendlines was retained by a European investment fund to make introductions to early-stage Israeli companies, the mood was one of excitement and optimism among all concerned. Here was a chance to "matchmake" and help fledgling businesses move forward.
Over 20 companies were identified as appropriate to the Fund's goals and they were approached to ascertain if they were interested in meeting with the investors. All these companies had to do was produce an introductory document, preferably a business plan executive summary, describing their company and what their investment requirements were.
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| Who's at the Top? |
But over 50% of the submissions were rejected out of hand. Why? "The executive summaries didn't even begin to tell the story," says Rhodes. "While most addressed the product or technology, most didn't describe the need — how the proposed solution addressed a problem in the marketplace. There was also no yardstick — how this product differed from the competition, or any indication of market size — what the potential market was. There's absolutely no point in having the most high-tech gizmo or gadget if there's no market to sell it to."
And, the documentation presented failed to indicate whether the company had the people to do the job. "Many of the documents lacked any mention of the management team," notes Rhodes. "Who was captaining the ship: did he or she have the ability to make the vision a reality? Bring the product to market? Lead a start-up company through the difficult and challenging start-up phase into marketing and manufacturing?"
With little or no information on whether the company's management team was capable of doing the job; whether there was a need for the product, or indeed, a sizeable potential market; which players were already out there and what they had to offer, there was simply nothing to go on — no convincing reason, based on these documents at any rate — to introduce a serious investment consortium to such companies.
"There's a hard lesson to be learnt from this experience," comments Rhodes. "Companies need to take the production of a business plan, and the executive summary in particular, very seriously indeed. It is an important tool in the quest to obtain investment. If a company has failed to consider these basic factors, how can they expect anyone to take them — or their product — seriously?
If companies don't ensure that their executive summary is a concise, accurate and compelling account of their people, their business, and the market they aim to serve, they can't play the game. It's the admission ticket.
| | Telling the Story |
The executive summary of a business plan is often a potential investor's initial introduction to your company: make it short, make it punchy and most of all, make sure it tells the company's story concisely and accurately. Not only will this be your first — it could be your last chance to sell your company to a prospective investor. The executive summary must be a compelling account which includes the following information:
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| |  | The product. A brief product description should clearly explain what your product does and why it is better than anything currently on the market or coming to market. If you have a new patent or patent pending, be sure to mention it. Don't worry about explaining how the product works; this will be accomplished in a later section of the document. A simple explanation that is clear and concise is critical. Especially if there isn't a similar product available, talk about the problem your product solves and how it will be good for all those who use it.
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The market. Your discussion of the market should include who your potential customers are, the need for the product, the current market size and an estimate of market growth. Be prepared to defend your numbers and the best way to do this is by the experience of similar companies — it's called benchmarking.
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The people. Investors want to know as much as they can about who is running your company and what their capabilities are. Brief descriptions of the individuals who make up your management team should include all information that relates to what your company is trying to accomplish. Include short backgrounders on your research and development director, marketing guru and so on. Remember, keep this short; you'll go into more detail later in the plan.
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| | | The players. Talk a little about your competition and why your product is better than what is currently out there. Acknowledging your competition's strengths will show you are aware of the market and what you must do to gain a foothold.
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The whole idea of an executive summary is to summarize. Keep it concise, accurate and compelling. In many instances busy investors will only take the time to read the executive summary and review the financials. What they read in these three or four pages must make them want to know more.
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The Trendletter team welcomes your comments.
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Steve Rhodes
Managing Director
The Trendlines Group
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