All Summary, No Substance
The executive summary below is actually an altered and disguised version of a real executive summary. But it remains as badly done in this state as it was in its original one.
Electronic Components Inc.
Electronic Components Inc. is a start-up company that will make a variety of electronic components, beginning with a new type of aluminum-based capacitor. This unique product, coupled with excessive commercial demand for capacitor devices, will provide us with an ample share of the capacitor market and numerous opportunities for expansion into related electronic components.
The founders are dedicated and determined to make the venture a successful and profitable entity. Technical expertise is provided by James F. Lynch, who has been involved in designing capacitors for 11 years. He obtained a Bachelor of Science degree in electronic engineering from the Massachusetts Institute of Technology.
Technology for capacitors is changing rapidly. Electronic Components Inc. has an opportunity to capitalize on a major technological change by getting off to a quick start and expanding quickly.
This proposal pertains to two additional phases of required financing. The first phase, consisting of about $150,000 for pilot plant start-up, has been completed from the personal funds of the principals. The remaining financing is for the following:
Phase Two: Obtain $750,000 capital for:
- Hiring and training production personnel;
- Purchasing additional equipment necessary for appropriate productivity;
- Develop the market;
- Complete the sales rep network;
- Explore new markets.
Phase Three: Increase production and sales
- Computerize manufacturing to triple output with minimal increase in labor;
- Begin exporting;
- Expand new marketing activity.
Financing will be used to purchase manufacturing equipment, hire the necessary employees, and develop new markets. In addition, management intends to spend between 10% and 20% of revenues on research and development of new products.
The electronics component field offers attractive opportunities for fast sales and profit growth. Already, demand exceeds supply in the capacitor area as well as in other related areas.
What's wrong with it? You can probably spot some problems, but here are four prominent ones:
- It says little about the company's strategy. In the contents listed in Chapter 2,information about the company and its strategy was near the top of the list. Howdoes the company plan to carry out its goals, and what evidence can it offer that itwill succeed?
- It barely touches on marketing issues. We learn that the company's productserves an industry with "excessive industrial demands," but there's littleexplanation or corroboration. What is meant by excessive, in quantitative terms,and how will the company take advantage of the situation?
- It focuses too heavily on the company's financial needs. Obviously, thisbusiness plan is intended as a financing document, but the company's financialneeds are overemphasized. Yet there's nothing about the company's financialprojections. Investors want to know how management will make the investmentgrow and pay them back with a hefty return.
- It is internally directed rather than externally directed. Readers learn about thecompany's plans for building a plant and hiring people, along with the founder'squalifications. But they learn little about where these efforts will take the companyin the marketplace.
Of course, you will likely see other weaknesses, such as the lack of explanationabout the competition and the management team. But essentially, the businessplan's authors wasted space; by devoting so much time to certain issues, theyneglected others. It's hard to get excited about the business plan.
This material was excerpted from Chapter 4 of How to Really Create a Successful Business Plan, by David E. Gumpert.
Copyright © 1996 Goldhirsh Group Inc.