In this series of installments I am discussing the executive summary and how to make it stand out.  The executive summary should present the compelling reason for the investor to buy into the company.

Another common mistake is that entrepreneurs do not worry about how they will pay back the investor.  Imagine you were going into a bank to by a CD. They say it will cost you $5000 but they do not know when it will mature or for how much.  Would you still buy it? Of course not. The same thing applies to investors putting money into a business. Without knowing the intended rate of return and when they will get their money out (with profit) why would they invest?

They would not.

The focus on this last section is how much the investor will get out, when, and how. Consider the following two points:

1. Are you going public, selling privately, doing an LBO (levered buyout offer), paying back in cash over time?
2. How much and when?

Question 1 is not necessarily written in stone. The best way to answer this question is to first consider how do the other businesses in your arena exit? Do they go public, or LBO?  The next consideration is what is currently in favor at the time of the presentation: IPO or cash flow stream for example. Any investor knows that you will consider other methods, and this can be discussed in the business plan.

Question 2 needs to be within the typical timeframe of most investors (5 years, ranging from 3 to 7) and for the typical target amount. 

The target amount can be as high as 100x the original investment (or more) and as low as 10x to 20x. Anything lower should be like a cash flow stream from the company.  A cash flow stream from the company is lower risk, more likely, and thus does not need to be as lucrative.

Investors like to see that the entrepreneurs have considered their point of view.  By showing the investor what they will get out of investing in the business, the entrepreneur also shows that they consider the investor a key customer that must be satisfied.