Welcome to Part 4 of how to write your first business summary.
After the introduction (Part 1), we covered Market Opportunity/Problem, Our Solution and Business Model in Part 2, and Markets & Channels, Competition, and Our Advantages in Part 3. Seven more sections to cover; so today we will look at Risks, Key Metrics & Financial Projections, and Team Bio’s.
You may not be ready to work on these sections until you have done some detailed work on the six sections we previously covered in Part 2, and Part 3.
In the Risks section, you need to identify the major risk issues that would prevent your business from being a success. More importantly, you need to discuss steps you have taken, or are planning to take, to reduce the potential impact of each risk factor. Generic risks can be such things as lack of market acceptance, well-funded competitors beating you to market, or your product/service quickly being made obsolete. I usually try not to list more than four risks – after all, we don’t want the business to look too risky! – but you need to be honest with yourself in this section. If you deliberately leave out something major, someone will call you on it.
Key Metrics & Financial Projections is usually where I get a lot of initial pushback from my clients. They feel that they “don’t know enough to make realistic projections”; that “things are going to change so much” as the business develops that projections made now are meaningless. I’ll tell you what I tell them.
First, you need some idea about what financial success means in this business – otherwise, how do you know if it can generate enough wealth to satisfy your lifestyle goals? Secondly, you are going to need a yardstick against which to measure the progress of the business – metrics give you that. Think of it as part of your due-diligence on the feasibility of this business.
Having said that, you need to accept that these are preliminary numbers and that they will change as you learn more and as the business develops. The important part of the numbers you project at this stage are not the actual projections, but the assumptions on which you have built those numbers. If your assumptions are top down – e.g., there are 100 million potential customers, if I get x% then I will generate $y – then nobody is going to believe anything about your numbers. If they are built bottom up – e.g., our initial market is local/region/state with 300 retail outlets that could carry our product, we plan to capture one new store per week for the first six months and and two per week after that – and supported by your plans regarding your markets and channels, then that shows that you have given some thought to how you are going to grow the business and what the financial impact of that may be.
Finally in this section, some of you are probably wondering what Key Metrics are. Key metrics are those key non-financial numbers that you will watch that describe the progress and development of the business. In the case of the prior example, above, a key metric could be the number of retail stores captured per month.
Some people put Team Bio’s in the body of their business summary. I like to have them as an attachment. Why? Once you get past 4 or 5 bios the list starts covering multiple pages and, in my opinion, breaks up the flow of the story you are telling. The goal of this section is to show that you have a highly qualified team that will ensure the success of your business.
For each team member listed, you should have their name, their current role/position, and a few sentences that describes their experience that is relevant to the development of your business.
In my team attachment I have one to three sub-sections for different types of team members, depending on what types of team members you have. The first sub-section is Management. This sub-section always exists even it contains only you!! This sub-section is where you list the operational management team (and sometimes key consultants who are filling operational roles). You may also list potential executives, especially if you have identified the need for that person in Next Steps and you have a candidate in mind. You don’t have to list employees (current or potential) who are not key executives.
The second (potential) sub-section is the Board of Directors/Owners. For most start-ups this section will not be necessary as they probably haven’t created a corporate entity. As soon as you create a corporate entity, you should list the Board of Directors for a C corporation or the Managing Partners for an LLC.
The third sub-section is your Advisory Team. I advise all of my clients to create an Advisory Team. This is not what some people might call an Advisory Board, who would be operating in some quasi-management or board of director role, on a part-time basis, and getting paid for their efforts. It is made up of people who you can call and discuss issues with on an irregular basis – just a few hours per month for which they are not compensated. This team will change as the knowledge-base needs of your company changes. Remember those questions you wrote down in some of the other sections? The Advisory Team are some of the people who will help you find the answers to those questions.
Also, it is not unusual for people that may become part of your management team, or later step into an operational consulting role, to initially be on your Advisory Team.
That’s it for this time. Come back next time for the fifth and final part of our discussion, where we will wrap things up with the summary sections Introduction and Conclusion, and the task-oriented Accomplishments to Date and Next Steps sections, along with a few final tips and the opportunity to download the Collaborative Xceleration Business Summary Template.