Executive Summary
“Begin at the beginning,” the King said, gravely, “and go till you come to the end; then stop.”
LEWIS CARROLL
Alice’s Adventures in Wonderland
Read This Chapter Last!
This admonition is like saying, “Don’t open this package until Christmas!” You are, right this minute, ignoring me and reading this chapter anyway. Fine, but when it comes to writing your business plan, write the Executive Summary last. Typically, investors will read the Executive Summary first; nevertheless, it is the section you want to write last. It is the hook that pulls readers into your net, and it must represent your future plans precisely.
The Executive Summary is the place where you tell readers what you’re about to tell them. Am I confusing you? Remember that old advice about writing term papers: “Tell them what you’re going to tell them; tell them; tell them what you told them”? You do the same thing in the Executive Summary. It is a condensed version of the rest of your proposal. This is not a term paper; this is your life.
The beginning of your business plan is the section about your film (or films, if you are starting a multifilm company). You give a brief overview of the people, the products, and your goals. In the rest of the sections—Company, Films, Industry, Markets, Distribution, Risk, and Financing—you provide more detail about how the company is going to function. The last section you write is the Executive Summary, which is just that: a summary. It presents a review of the plan for the reader.
Why Write the Summary Last?
Developing a business plan is a process of discovery. Until you actually put your business plan together, you cannot be sure what it will contain. As you will see in reading the rest of this book, much research, thought, and skill go into a proposal of this type. The total plan is the result of everything you learn from the process, and the Executive Summary is the culmination of that full effort.
The Executive Summary is written last for the same reason that you prepare a full budget before you do the top pages. You may have a problem with this comparison if you do the top pages of the budget first or if you do only the top pages. At best, filling in numbers on the top pages is a “guesstimate.” Only when you actually work out the real 20 to 30 pages of the budget, based on the script breakdown, do you know the real costs.
Perhaps your guesstimate will end up being right on the mark. I don’t think anyone has worked out the precise odds on that happening, but you might be more likely to win a lottery. A more probable scenario is that you will have backed yourself into a corner with original numbers that are too low. The real budget will turn out to be greater than your estimate by $500,000, $800,000, or even more. When that happens, your potential investors will be extremely unimpressed. If you are not sure how their money will be spent, ought they to trust you with it?
A business plan is the same situation magnified a thousand times. All the reasons outlined in the Introduction of this book for writing a business plan come into play. You may be setting parameters for yourself that are unrealistic and that lock you into a plan you cannot carry out. In putting together the proposal, your investigation of the market may cause you to fine-tune your direction. Learning more about distribution—and we all can—may invite a reworking of your film’s release strategies.
Even when inventing a fictional company, as I did in Chapter 11, the Executive Summary must be written last. I did not know what I was going to say in the summary until the rest of the plan was written. Although I invented the company and the statistics for the sake of an example, my Industry, Market (except for the cats), Distribution, and Financing sections are all real. I did not know which facts about all those elements would apply to my particular situation. Likewise, until I worked out the numbers and cash flows, I could not summarize the need for cash. The most difficult task for many entrepreneurs is resisting the impulse to write five quick pages and run it up the flagpole to see if anyone salutes. A business plan is not a script, and you cannot get away with handing in only a treatment. Your business plan must be well thought out, and you must present a complete package. Think of this as a rule. Other guidelines are suggestions that you would be wise to follow, but this is definitely a rule. Go through the process first. By the time you have carefully crafted your document and gone through all the steps outlined in this book, you will be able to proceed with as few hitches as possible.
This process has to be a cautious one, not a haphazard one. You want to be sure that your proposal makes business sense; you want to be able to meet any goals or verify any facts that you set forth. Passion does count. The film business is too hard and it takes too long to tackle projects if you do not have the passion for filmmaking. However, business facts are the glue that holds everything together in a tidy package.
Investors are the second reason that you write the Executive Summary only after you have carefully devised your business plan. Before you approach any money source, you want to be sure that your project is reasonable and rational. Potential investors did not accumulate their money by chance, and they are not likely to give you money on impulse. If you appear rash and impulsive, your 15 minutes of fame will run out before you know it. Treat potential investors as intelligent people, even if you are approaching the stockbroker’s favorite group—widows and orphans. They’ll have a business advisor who will read the proposal.
Once in a while, there is that exception to the rule: someone will ask to see just the Executive Summary. However, five will get you ten that the next communication says, “Let me see the rest of the plan.” That person means today—now. He assumes that there is a body of work supporting your summary; therefore, the summary and the complete proposal have to match. You do not want to have to tell potential investors that you will have the complete plan in a month, or you may lose their trust. The same is true if you need to put together a business plan for a single film—and it does happen. Certain investors or equity groups will ask for a business plan. Have all the market explanations, facts, and figures at hand and in order.
Style of the Executive Summary
The image experts say that you have 30 seconds to make an impression, whether it is at a job interview, in a negotiation, or at your local party place on a Friday night. Your business plan has a similar amount of time. First impressions count; they will make the reader either want to read further or want to toss the proposal aside.
Cicero said that brevity is the charm of eloquence; this thought is a good one to keep in mind. In a few paragraphs, you must summarize the entire business plan to show the goals driving the business, the films, the essential market and distribution factors, and the major elements for the success of the business. Each of the chapters in the outline has its own summary. I know that it is hard to understand this repetition; students and clients ask about it all the time. That is why I keep coming back to it.
Earlier I said that the Executive Summary is the hook; you can also think of it as the bait that attracts the fish. You want the reader to be intrigued enough to read on. You need not try to rival John Grisham or Stephen King as a writer of thrillers or horror stories. You should not expect to keep readers on the edge of their seats. Simply provide the salient points in the Executive Summary: less is more. If the Executive Summary of your plan is as long as this chapter, it is entirely too long. You can be long-winded later. All you want to do in this section is give your readers the facts with as little embellishment as possible. Remember that this is a business proposal, not a script.
Laying Out the Executive Summary
Follow your outline when writing the Executive Summary. Give the basic information of each section with as little imagination as possible. Do not deviate from the path that you have already chosen. Anything you say here has to appear in more detail somewhere else in the proposal. Refer to the Executive Summary of the sample business plan (in Chapter 11) while reviewing how to lay out your own summary.
Typically, the first of the eight sections of the Executive Summary is called “Strategic Opportunity.” This section is the introduction to your business plan. It describes the outstanding elements of your goals and plans. From this section, the reader finds out what your production company name is, what type of film or films you are making, and who you are.
The Management Team
Although part of the Company section, a mention of your management team should be added to the Executive Summary to give investors an idea of your team’s experience and expertise. If you happen to be starting a company with a well-known person or even lesser known people, put those names up front on the first page. Be sure, however, not to name anyone who has not agreed to be part of the project.
The Films
In this section, give readers only the most important information about your proposed film or films. The synopses of your story comes later. In the sample business plan in Chapter 11, in which there are three films, I have noted that the planned films are related to a series of cat books and have suggested the tone of the stories. Indicate any notable attachments: director, producer, and/or actors, but save their bios to follow your synopsis in the longer section. The same rule about people applies here: do not mention anyone who has not seen your film and indicated in writing, at least by a “Letter of Intent,” that they are interested in participating.
The Industry
Before describing your specific segment of the marketplace, it is necessary to give an overview of the industry. Just a short paragraph to show the current shape and financial growth of the industry will do. Include such things as the U.S. box office, worldwide box office, total admissions, and size of the independent film market.
In this section, you should give readers a feel for the markets for your films and other products. Spell out target markets (genres, affinity groups, etc.) as well as typical age groups. In addition, include any self-marketing methods you intend to use, with explanations of their value.
Distribution
Simply saying “We will get distribution,” is not enough. Don’t laugh. I’ve seen this in plans.
If you have distribution attached, give names here. Don’t be shy. However, do be circumspect, as with the body of the plan. Mention only real companies from whom you have received actual written commitments. Phrases such as “We have interest from many companies to distribute our films” are public relations jargon.
If potential investors think that they will find such meaningless generalizations in the rest of the plan, they may not read on. If you are planning to self-distribute your film, mention it here. Hiding that fact until readers have worked their way through 20 pages or more of the business plan will not help you at all. State your reasons and describe in a few sentences your knowledge in the area of distribution.
Investment Opportunity and Financial Highlights
This section summarizes all the financial information in your plan. The first item to include is that all-important fact that hundreds of people leave out of their plans—how much money you want. Do not keep it a secret. The whole point of handing this plan to potential investors is to relieve them of a little of the green stuff. They know that; they just want to know how much.
Follow the amount with a summary of the projected profit and loss over the next five years (if it is a multifilm plan) to give readers an idea of when they will get their investment back. Even though you are starting films over five years, the following years should appear in your cash flow. You want to calculate all the returns so it doesn’t look like your company is losing money over time.
Notice that I continually use the words projection, forecast, and estimate throughout the financial sections. Always qualify any expressions of future gain with one of these three words.
Negotiation Stances
The first strategy that I suggest in negotiating with an investor is to leave the negotiation deal points out of the business plan altogether. By doing so, you keep yourself open for the best deal. Notice that the financial examples in the sample business plan in Chapter 11 do not show a breakdown for the split with investors. They simply show the pretax dollars available for sharing. How the interested parties decide on equitable shares will depend on the number of parties involved, the type of entities involved, and proposals not foreseen by this plan. Even if you have a limited liability company (LLC) or limited partnership (L.P.) (or any other offering memorandum) that specifies shares, you may find an investor who wants to put in all the money. In this case, he will probably want to negotiate one on one with you and your attorney. Several of my clients have had this happen.
I advise my clients to hold their cards close to the vest and to let the other person go first. Even though you have determined your needs and expectations in advance, a situation may arise that you had not anticipated. For example, one group that I worked with assumed in advance that they were looking for an investor in the company as a whole. I convinced them to forego detailing this investment share in their business plan. In the beginning, equity investors for the whole amount were hard to find, but the filmmakers knew several people who would invest in individual films. This option was better for them in the end. They kept control of the company, as there were no new partners, and they found the resources for financing features on an individual basis.
The Investor Wants How Much?
It is always perplexing for creative people who have put their hearts and souls into a project to give away 50 percent or more to an investor. A common complaint is, “I’m doing all the work. Why should he get 50 percent?” Your decision has to be based on whether the amount of investment money is worth giving the investor that large a share of the profits. I cannot answer this question for you. Your priorities and goals are part of this decision. A standard business plan ploy that seldom gets funded is the 70/30 or 60/40 split in your favor. There may be someone out there willing to take it—never say never—but chances are that you will give your business plan to a variety of people, so reserve the bargaining for the individual. If potential investors seem unsophisticated, you can try it. If you are lucky, they will only laugh. If you are unlucky, they will laugh while leaving the room. At least the thought is not written in stone in your Executive Summary.
Specialized Financial Instruments
If your company is a limited partnership, private placement, or LLC, the amount of ownership is set ahead of time in the prospectus. Many entrepreneurs think that the business plan and the prospectus are one and the same. While the prospectus includes a business plan, it is also much more. It is a registration statement document that has been worked on carefully by an attorney (I hope). It includes securities that are to be sold, arrangements for selling, discounts and commissions to dealers, subscription agreements, how monies are to be distributed, and responsibilities and rights of company management and investors. An attorney must do the customary legal explanations. Otherwise, you run the risk of unintentionally opening yourself to accusations of fraud.
Even if you plan to use one of these business structures, I recommend keeping the business plan a freestanding document. The business plan is part of the total package, and being able to circulate the plan separately could come in handy. You never know what opportunities may come your way.