How to Build an Effective Executive Summary
By Rob Ryan of Entrepreneur-America.com

The executive summary is one of the most important tools for raising money or prospecting accounts. This summary, along with the business presentation, are the two tools necessary and sufficient for raising money.

I see lots of summaries each year and 99% of them stink. They fall into one of two categories:

1. Those that don't have a clue about their business.
2. Those that do, but don't have a clue how to communicate.

Those that don't have a clue about their business are easy to spot as they use the old college shotgun technique. This is where one writes down everything they know on the subject (the more cryptic the better) and quote analysts about the humongous size of the market. Never mind that no one can figure out what you do or why they should care. If this is you, you have work to do. I advise you to see "The Keys to the GoldMine". For those of you that know your business but can't communicate, read on or visit Entrepreneur-america.com for more insight.

I have taken FreeMarkets' executive summary from their IPO document and annotated it. It is an excellent one page document. I don't own stock in FreeMarkets, nor am I pushing their stock. It is a well written summary. Here it is:

 
FreeMarkets creates customized business-to-business online auctions for buyers of industrial parts, raw materials and commodities. [Big score here-this is a clean, brief and understandable statement of what the business does. They've skipped the gobbledy-gook of buzzwords and hyperbole that most companies indulge in.]

We created online auctions covering $1.0 billion worth of purchase orders in 1998 and $1.4 billion worth of purchase orders in the nine months ended September 30, 1999. [The hard numbers generate excitement about the potential for this business. What if you don't have sales yet? Talk about prospective customers instead; "ABC company plans to use our product for X, which would result in Y million in the first year and Z in the second."]

We estimate that the resulting savings for our clients ranged from 2% to more than 25%. [A great statement of the value proposition, terse and believable.] Since 1995, we have created online auctions for more than 30 clients in over 50 product categories, including injection molded plastic parts, commercial machinings, metal fabrications, chemicals, printed circuit boards, corrugated packaging and coal. More than 2,000 suppliers from over 30 countries have participated in our auctions. Our current clients include United Technologies Corporation, General Motors Corporation, The Quaker Oats Company, Emerson Electric Company, Honeywell International Inc. and the Commonwealth of Pennsylvania.

Two of our clients accounted for 58% of our revenues during the first nine months of 1999. [An excellent picture of the market and customers. Wanna-Bees that follow my advice would have prospects they have talked to and, in some cases, revenues.] Based on industry research and government statistics, we estimate that manufacturers worldwide purchase approximately $5 trillion each year of "direct materials" -the industrial parts and raw materials that they incorporate into finished products. Because these direct materials are often custom-made to buyers' specifications, there are no catalogs or price lists to enable buyers to make price comparisons. The process of purchasing direct materials is further complicated by the fragmentation of supply markets and the importance of product quality in supplier selection. Because this complexity leads to market inefficiencies, we think that buyers of direct materials often pay prices that are too high. [A great statement of why there is a business, what unmet need there is, and the industry forces that contribute to create the opportunity. All too often, Wanna-Bees shorten this statement to simply refer to the "zillion dollar" number, not explaining what specific opportunity exists within that market.]

The Internet offers an opportunity to create more efficient markets for direct materials. As the number of Internet users has grown, large companies have increasingly adopted electronic commerce as a way to do business. Forrester Research estimates that United States business-to-business electronic commerce will grow from $109 billion in 1999 to $1.3 trillion in 2003, accounting for 90% of the dollar value of all electronic commerce by 2003. However, because of the complexity of direct materials purchasing, we believe that Internet technology alone cannot solve the problems faced by large industrial buyers. To solve these problems, we think that Internet technology must be combined with services that are customized to buyers' needs. [The first half is the normal, "Wow, what a big opportunity." The last sentence hints that more than just Internet technology is needed, which sets up the next paragraph.]

We combine our proprietary BidWare Internet technology with our in-depth knowledge of supply markets to help industrial buyers obtain lower prices and make better purchasing decisions. In a FreeMarkets online auction, suppliers from around the world can submit bids in a real-time, interactive competition. Our auctions are "downward price" auctions in which suppliers continue to lower their prices until the auction is closed. Before each auction, we work with our client to identify and screen suppliers and assemble a request for quotation that provides detailed, clear and consistent information for suppliers to use as a basis for their competitive bids. Our service, which we call "market making", creates a custom market for the direct materials or other goods or services that our client purchases in a particular auction. [A concise but clear statement of how Freemarket's business and technology work, plus it reinforces the value proposition stated earlier.]

We seek to be the world's leading provider of business-to-business online auctions. Our strategy is to extend our client base in our target market of large purchasing organizations. We also intend to expand into additional product categories where our online auctions can generate savings for buyers and to add new functions and features to our BidWare technology to further automate portions of our market making process. [A perfect ending that points the reader forward, toward the future vision.]

Got the idea? If so, submit your executive summary for review now.



2000 Entrepreneur America. The information you receive on-line from Entrepreneur America is protected by the copyright laws of the United States. The copyright laws prohibit any copying, redistributing, re-transmitting, or re-purposing of any copyright-protected material. The information and a lot more will appear in my book "Entrepreneur America: Lessons from Inside Rob Ryan's High-Tech Start-Up Boot Camp" to be published by Harper Collins in Jan 2001.

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