what is the executive summary of business plan

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How to Write an Executive Summary in 6 Steps

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When you’re starting a business, one of the first things you need to do is write a business plan. Your business plan is like a roadmap for your business, so you can lay out your goals and a concrete plan for how you’ll reach them.

Not only is a business plan essential for any business owner, but it’s also a requirement if you decide to apply for small business funding or find investors. After all, before a bank or individual hands over any money, they’ll want to be sure your company is on solid ground (so they can get their money back).

A business plan consists of several pieces, from an executive summary and market analysis to a financial plan and projections. The executive summary will be the first part of your business plan.

If wondering how to write an executive summary has kept you from completing your business plan, we’re here to help. In this guide, we’ll explain what an executive summary is and provide tips for writing your own so your business plan can start strong.

What is an executive summary?

An executive summary is a short, informative, and easy-to-read opening statement to your business plan. Even though it’s just one to two pages, the executive summary is incredibly important.

An executive summary tells the story of what your business does, why an investor might be interested in giving funds to your business, why their investment will be well-spent, and why you do what you do. An executive summary should be informative, but it should also capture a busy reader’s attention.

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Why write an executive summary?

Anyone you’re sending your executive summary and business plan to is likely busy—very busy. An entire business plan is long, involved, and deals with a lot of numbers.

Someone busy wants to get an understanding of your business, and they want to do it quickly, which is to say not by diving into a complicated, 80-page business plan. That’s where your executive summary comes in.

An executive summary provides just the opportunity to hook someone’s interest, tell them about your business, and offer a clear selling point as to why they should consider investing in your business.

Your executive summary is your chance to sell your business to potential investors and show them your business is worth not only their money but also their time.

What to include in an executive summary

By its nature, an executive summary is short. You must be able to clearly communicate the idea of your business, what sets you apart, and how you plan to grow into a successful enterprise.

The subsequent sections of your business plan will go into more detail, but your executive summary should include the most critical pieces of your business plan—enough to stand on its own, as it’s often the only thing a prospective investor will read. Here’s what your executive summary should include—consider it an executive summary template from which you can model your own.

1. The hook

The first sentence and paragraph of your executive summary determine whether or not the entire executive summary gets read. That’s why the hook or introduction is so important.

In general, a hook is considered anything that will get a reader’s attention. While an executive summary is a formal business document, you do want your hook to make you stand out from the crowd—without wasting time.

Your hook can be sharing something creative about your company, an interesting fact, or just a very well-crafted description of your business. It’s crucial to craft your hook with the personality of your reader in mind. Give them something that will make your company stand out and be memorable among a sea of other business plans.

Grab their attention in the first paragraph, and you’re much more likely to get your executive summary read, which could lead to an investment.

2. Company description summary

Now that you’ve hooked your reader, it’s time to get into some general information about your business. If an investor is going to give you money, after all, they first need to understand what your company does or what product you sell and who is managing the company.

Your company description should include information about your business, such as when it was formed and where you’re located; your products or services; the founders or executive team, including names and specific roles; and any additional details about the management team or style.

3. Market analysis

Your market analysis in the executive summary is a brief description of what the market for your business looks like. You want to show that you have done your research and proven that there is a need for your specific product or services. Some questions you should answer:

Who are your competitors?

Is there a demand for your products or services?

What advantages do you have that make your business unique in comparison to others?

To reiterate, stick to the highlights of your market analysis in your executive summary. You’ll provide a complete analysis in a separate section of your business plan, but you should be able to communicate enough in the executive summary that a potential investor can gauge whether your business has potential.

4. Products and services

Now that you’ve established a need in the market, it’s time to show just how your business will fill it. This section of your executive summary is all about highlighting the product or service that your company offers. Talk about your current sales, the growth you’ve seen so far, and any other highlights that are a selling point for your company.

This is also a good time to identify what sets your business apart and gives you a competitive advantage. After all, it’s unlikely that your business is the first of its kind. Highlight what you do better than the competition and why potential customers will choose your product or service over the other options on the market.

5. Financial information and projections

In this section of your executive summary, you want to give the reader an overview of your current business financials. Again, you’ll go more in-depth into this section later in your business plan, so just provide some highlights. Include your current sales and profits (if you have any), as well as what funding you’re hoping to acquire and how this will affect your financials in the next few years.

This is also where you can explain what funding, if any, you’ve received in the past. If you paid back your loan on time, this is an especially bright selling point for potential lenders.

6. Future plans

While asking for what funding you need is essential, you’ve also got to make clear what you’re going to use that funding for. If you’re asking for money, you want the person to know you have a plan to put those funds to good use.

Are you hoping to open another location, expand your product line, invest in your marketing efforts? This final section of your executive summary should detail where you want your business to go in the future, as well as drive home how funding can help you get there.

Tips for writing an executive summary

Even if you include each part of a good executive summary, you might not get noticed. What is written can be just as important as how it’s written. An executive summary has to strike a delicate balance between formal, personable, confident, and humble.

1. Be concise

An executive summary should include everything that’s in your business plan, just in a much shorter format. Writing a concise executive summary is no easy task and will require many revisions to get to the final draft. And while this is the first section of your executive summary, you’ll want to write it last, after you’ve put together all the other elements.

To choose your most important points and what should be included in the executive summary, go through your business plan, and pull out single-line bullet points. Go back through those bullet points and eliminate everything unnecessary to understanding your business.

Once you have your list of bullet points narrowed down, you can start writing your executive summary. Once it’s written, go back in and remove any unnecessary information. Remember, you should only be including the highlights—you have the rest of your business plan to go into more detail. The shorter and clearer your executive summary is, the more likely someone is to read it.

2. Use bullet points

One simple way to make your executive summary more readable is to use bullet points. If someone is reading quickly or skimming your executive summary, extra whitespace can make the content faster and easier to read.

Short paragraphs, short sentences, and bullet points all make an executive summary easier to skim—which is likely what the reader is doing. If important numbers and convincing stats jump out at the reader, they’re more likely to keep reading.

3. Speak to your audience

When writing your executive summary, be sure to think about who will be reading it; that’s who you’re speaking to. If you can personalize your executive summary to the personality and interests of the person who will read it, you’re more likely to capture their attention.

Personalizing might come in the form of a name in the salutation, sharing details in a specific way you know that person likes and the tone of your writing. An executive summary deals with business, so it will generally have a formal tone. But, different industries may be comfortable with some creativity of language or using shorthand to refer to certain ideas.

Know who you’re speaking to and use the right tone to speak to them. That might be formal and deferential, expert and clipped, informal and personable, or any other appropriate tone. This may also involve writing different versions of your executive summary for different audiences.

4. Play to your strengths

One of the best ways to catch the attention of your reader is to share why your business is unique. What makes your business unique is also what makes your business strong, which can capture a reader’s interest and show them why your business is worth investing in. Be sure to highlight these strengths from the start of your executive summary.

5. Get a test reader

Once you’ve written and edited your executive summary, you need a test reader. While someone in your industry or another business owner can be a great resource, you should also consider finding a test reader with limited knowledge of your business and industry. Your executive summary should be so clear that anyone can understand it, so having a variety of test readers can help identify any confusing language.

If you don’t have access to a test reader, consider using tools such as Hemingway App and Grammarly to ensure you’ve written something that’s easy to read and uses proper grammar.

How long should an executive summary be?

There’s no firm rule on how long an executive summary should be, as it depends on the length of your business plan and the depth of understanding needed by the reader to fully grasp your ask.

That being said, it should be as short and concise as you can get it. In general, an executive summary should be one to two pages in length.

You can fudge the length slightly by adjusting the margin and font size, but don’t forget readability is just as important as length. You want to leave plenty of white space and have a large enough font that the reader is comfortable while reading your executive summary. If your executive summary is hard to read, it’s less likely your reader will take the time to read your business plan.

What to avoid in an executive summary

While the rules for writing a stellar executive summary can be fuzzy, there are a few clear rules for what to avoid in your executive summary.

Your executive summary should avoid:

Focusing on investment. Instead, focus on getting the reader to be interested enough to continue and read your business plan or at least schedule a meeting with you.

Clichés, superlatives, and claims that aren’t backed up by fact. Your executive summary isn’t marketing material. It should be straightforward and clear.

Avoiding the executive summary no-nos is just as important as striking the right tone and getting in the necessary information for your reader.

The bottom line

While an executive summary is short, it’s challenging to write. Your executive summary condenses your entire introduction, business description, business plan, market analysis, financial projections, and ask into one to two pages. Condensing information down to its most essential form takes time and many drafts. When you’re putting together your business plan’s executive summary, be sure to give yourself plenty of time to write it and to seek the help of friends or colleagues for editing it to perfection.

However, some tools make crafting a business plan, including your executive summary, a simpler process. A business plan template is a great place to start, and business plan software can especially help with the design of your business plan. After all, a well-written executive summary can make all the difference in obtaining funding for your business, so you’ll want all the help you can get.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

How to Write an Executive Summary (+ Examples)

• March 21, 2024
• Business Plan , How to Write

The executive summary is the cornerstone of any business plan, serving as a gateway for readers to understand the essence of your proposal.

It summarizes the plan’s key points into a digestible format, making it crucial for capturing the interest of investors, partners, and stakeholders.

In this comprehensive guide, we’ll explore what the executive summary is, why we use it, and also how you can create one for your business plan. Let’s dive in!

What is an Executive Summary?

An executive summary is a concise and compelling overview of a business plan (or simply a report), designed to provide readers, such as investors, partners, or upper management, with a quick and clear understanding of the document’s most critical aspects.

For a business plan, it summarizes the key points including the business overview , market analysis , strategy plan timeline and financial projections.

Typically, the executive summary is the first section of a business plan, but it should be written last to ensure it accurately reflects the content of the entire document.

The primary goal of an executive summary is to engage the reader’s interest and encourage them to read the full document.

It should be succinct, typically no more than one to two pages, and articulate enough to stand on its own, presenting the essence of the business proposal or report without requiring the reader to go through the entire document for basic understanding.

Why Do We Use It?

The executive summary plays a crucial role in whether a business plan opens doors to funding, partnerships, or other opportunities . It’s often the first (and sometimes the only) part of the plan that stakeholders read, making it essential for making a strong, positive first impression. As such, we use it in order to:

• Capture Attention: Given the volume of business plans investors, partners, and lenders might receive, an executive summary’s primary function is to grab the reader’s attention quickly. It highlights the most compelling aspects of the business to encourage further reading.
• Save Time: It provides a succinct overview of the business plan, allowing readers to understand the key points without going through the entire document. This is particularly beneficial for busy stakeholders who need to make informed decisions efficiently.
• Facilitate Understanding: An executive summary distills complex business concepts and strategies into a concise format. Therefore, it makes it easier for readers to grasp the business’s core mission, strategic direction, and potential for success.
• Driving Action: By summarizing the financial projections and funding requirements, an executive summary can effectively communicate the investment opportunity. Indeed the investment opportunity, whether to raise money from investors or a loan from a bank, is the most common reason why we prepare business plans.
• Setting the Tone: The executive summary sets the tone for the entire business plan. A well-written summary indicates a well-thought-out business plan, reflecting the professionalism and competence of the management team.

How to Write an Executive Summary in 4 Simple Steps

Here’s a streamlined approach to crafting an impactful executive summary:

1. Start with Your Business Overview

• Company Name: Begin with the name of your business.
• Location: Provide the location of your business operations.
• Business model: Briefly describe how you make money, the producfs and/or services your business offers.

2. Highlight the Market Opportunity

• Target Market : Identify your target market and its size.
• Market Trends : Highlight the key market trends that justify the need for your product or service.
• Competitive Landscape : Describe how your business is positioned to meet this need effectively.

3. Present Your Management Team

• Team Overview: Introduce the key members of your management team and their roles.
• Experience: Highlight relevant experience and skills that contribute to the business’s success.

4. Include Financial Projections

• Financial Summary: Provide a snapshot of key financial projections, including revenue, profits, and cash flow over the next three to five years.
• Funding Requirements: If seeking investment, specify the amount needed and how it will be used.

2 Executive Summary Examples

Here are 2 examples you can use as an inspiration to create yours. These are taken from our coffee shop and hair salon business plan templates.

Coffee Shop Executive Summary

Hair Salon Executive Summary

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How to Write an Executive Summary

9 min. read

Updated December 13, 2023

An executive summary isn’t just the beginning of your business plan – it’s your opening act, your first chance to impress potential investors, banks, clients and other stakeholders.

An effective executive summary gives decision-makers critical information about your business instantly.

Creating an executive summary is more than just a writing exercise. It requires careful crafting and strategic thinking, as well as an ability to balance the needs to be both succinct and comprehensive.

• What is an executive summary?

The executive summary is a brief introduction and summary of your business plan. It introduces your business, the problem you solve, and what you’re asking from your readers. Anyone should be able to understand your business by simply reading this section of your plan.

While structurally it is the first chapter of your plan—you should write it last. Once you know the details of your business inside and out, you will be better prepared to write this section.

• Why write an executive summary?

The business plan executive summary provides quick access to critical information from your more detailed business plan.

It is essential for informing anyone outside of your business. Many people—including investors and bankers—will only read your summary. Others will use it to decide if they should read the rest. For you, it is a snapshot of your business to reference when planning or revising your strategy.

Now if you’re writing a business plan solely for internal use you may not need an executive summary. However, some internal plans may necessitate writing an executive summary for assignment—such as for an annual operations plan or a strategic plan .

It takes some effort to do a good summary, so if you don’t have a business use in mind, don’t do it.

• How long should it be?

Business plan executive summaries should be as short as possible. Your audience has limited time and attention and they want to quickly get the details of your business plan.

Try to keep your executive summary under two pages if possible, although it can be longer if absolutely necessary. If you have a one-page business plan, you can even use that as your executive summary.

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• Executive summary outline

Two pages isn’t a ton of space to capture the full scope of your vision for the business. That means every sentence of your executive summary counts.

You will want to immediately capture the reader’s attention with a compelling introduction. Without getting too lengthy, present who you are as an organization, the problem you are seeking to solve, your skills, and why you are the best entity to solve the problem you’ve outlined.

It’s crucial to establish the need or problem your business is solving in a clear manner, in order to convince your audience that it must be addressed. Following that, recommend the solution and show its value. Be clear and firm in your recommendation, making sure to justify your cause and highlighting key reasons why your organization is the perfect fit for the solution you’re proposing. Finally, a strong conclusion is needed to reiterate the main points and wrap up the executive summary.

What to include in your executive summary

1. business overview.

A one-sentence description that explains what you do, why you do it, and how you do it.

Summarize the problem you’re solving in the market and reference any data that solidifies that there is a need.

3. Solution

Describe your product or service and how it addresses the problem you identified.

4. Target market

Who is your ideal customer? Describe who they are, how they’ll benefit, and why they’re an attainable customer base.

5. Competition

Who are your competitors? List out any primary competition as well as alternatives that your customers may consider. Include key details about their current offerings, promotions, and business strategy.

6. Your team

In your executive summary, outline your organizational structure and current team. List out brief explanations of who you and your team are, your qualifications, and what your function will be within the business. It may be valuable to also highlight any gaps in your team and how you intend to fill them. If you have potential partners or candidates in mind, briefly mention them and expand on their qualifications within your full business plan.

7. Financial summary

Highlight key aspects of your financial plan that address sales, expenses, and profitability. Try to keep these in chart or graph form to ensure the information is easy to consume and resonates visually.

8. Funding requirements

This section is only necessary if you’re seeking out funding or pitching to investors. Be sure to throw out your financing number and reasoning upfront, rather than hiding it later on in your plan. It helps investors understand your position, what you’re asking for, and how you’ll use it.

9. Milestones and traction

Add initial sales, pre-sales, newsletter sign-ups, or anything else that showcases customer interest. Outline what steps you’ve already taken to launch your business, the milestones you’ve hit, and your goals and milestones for the next month, six months, year, etc.

Executive summary vs introduction

A common mistake some people make when starting an executive summary outline is thinking it performs the same function as the introduction to their business plan. In fact, the two serve different purposes and contain different types of information, even though they are both essential.

As we’ve discussed, the executive summary is a high-level overview of the entire business plan. The introduction, by contrast, dives deeper into your business, providing information about the nature of your business, the history of your company, your mission statement, products or services, and the specific problem that your business solves.

The introduction is more detailed, and usually comes right after the executive summary.

On the other hand, the introduction gives investors or lenders – anyone reading your business plan – a sense of why they should continue reading. Think of it more as the space to tell stakeholders why you are speaking to them. An executive summary can also serve this purpose, but the introduction is meant to speak more directly to your target audience, while an executive summary could give a larger audience a general overview of your business.

Tips for writing an effective executive summary

Here are a few best practices to make writing your executive summary easier, and ultimately more effective. 

1. Think of an executive summary as your pitch

The executive summary is like an elevator pitch. You’re selling someone on reading your full plan while quickly summarizing the key points. Readers will expect it to cover certain areas of your business—such as the product, market, and financial highlights, at the very least.

While you need to include what’s necessary, you should also highlight areas that you believe will spark the reader’s interest. Remember, you’re telling the brief but convincing story of your business with this summary. Just be sure that you’re able to back it up with the right details with the rest of your business plan. 

2. Write it last

Even though the executive summary is at the beginning of a finished business plan, many experienced entrepreneurs choose to write it after everything else. In theory, this makes it easier to write since all of the information is already written out and just needs to be condensed into a shorter format. 

Now, if you’ve started with a one-page plan, this process is even easier. Just use your one-page plan as a starting point and add additional details to any sections that need it. You may even find that no changes are necessary.  

3. Keep it short

Ideally, the executive summary is short—usually just a page or two, five at the outside—and highlights the points you’ve made elsewhere in your business plan. Whatever length you land on, just focus on being brief and concise. Keep it as short as you can without missing the essentials. 

4. Keep it simple

Form follows function, so don’t overcomplicate or over-explain things. The best executive summaries are a mixture of short text, broken up with bullets and subheadings, and illustrations, such as a bar chart showing financial highlights. 

Run through a legibility test after writing your summary. Is it easy to skim through? Are the right pieces of information jumping out? If the answer to either of those questions is no, then work back through and try breaking up information or adjusting the formatting.

5. Create an executive summary outline based on importance and strengths

Organize your executive summary outline so that the most important information appears first. While there are specific components to include, there is no set order of appearance. So, use the order to show emphasis.

Lead with what you want to get the most attention, and add the rest by order of importance. For example, you may start with the problem because that can add drama and urgency that tees up the solution you provide.

Additional resources to write a great executive summary

Need more information and guidance to craft a convincing executive summary? Check out these in-depth resources and templates.

Key mistakes to avoid when writing an executive summary

Here are the critical mistakes you should avoid when writing your executive summary.

How to write your executive summary for specific audiences

The executive summary should tell your audience exactly what your business is, what it does, and why it’s worth their time. Here’s how you can take it a step further and fine-tune it for specific people.

How to develop a mission statement

Learn to put a heart behind the business and create an easy-to-understand narrative by writing a mission statement.

Executive Summary FAQ

What is in an executive summary?

The executive summary of a business plan is a brief introduction and summary of your business strategy, operations, and goals.

What is the purpose of an executive summary?

An executive summary is typically written to convince someone to read your more detailed plan. For investors, it may be the only thing they look at when deciding if they’d like to hear your pitch. Loan officers may review it to determine if your business seems financially sound. And partners, mentors, or anyone else may use it to determine if they want to be involved with your business.

How do you start an executive summary?

While there is no required order for an executive summary, it’s often recommended that you lead with the problem you’re solving or the purpose of your business. This will help frame your intent for the reader, and ideally make them more interested in learning more.

How do you write a good executive summary?

A good executive summary is brief, convincing, and easy to read. Focus on keeping things short and concise, only including necessary information. Be sure to lead and highlight anything that is especially interesting or important about your business. And after writing, spend some time reviewing and reformatting to make your summary as attractive to read as possible.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• What to include
• Writing tips
• Additional resources

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5 Steps for Writing an Executive Summary

Learn what to include in your executive summary and how to go about writing one.

Table of Contents

Anyone starting a new business must create a business plan that clearly outlines the organization’s details and goals. The executive summary is a crucial element of that business plan.

We’ll explore five steps to writing your business plan’s executive summary, including what to include and avoid. We’ll also point you toward executive summary templates to help you get started. 

What is an executive summary?

New entrepreneurs or business owners typically use a business plan to present their great business idea to potential stakeholders like angel investors . The purpose of the business plan is to attract financing from investors or convince banking executives to get a bank loan for their business . An executive summary is a business plan overview that succinctly highlights its most essential elements. 

It’s not just a general outline; the executive summary might be the only part of your business plan that busy executives and potential investors read. 

“The executive summary of a business plan is designed to capture the reader’s attention and briefly explain your business, the problem you are solving, the target audience, and key financial information,” Ross Kimbarovsky, CEO and founder of Crowdspring, told Business News Daily. “If the executive summary lacks specific information or does not capture the attention of the reader, the rest of the plan might not be read.”

While your executive summary should be engaging and comprehensive, it must also be quick and easy to read. These documents average one to four pages – ideally, under two pages – and should comprise less than 10% of your entire business plan.

How do you write an executive summary?

Your executive summary will be unique to your organization and business plan. However, most entrepreneurs and business owners take the following five steps when creating their executive summary.

• Write your business plan first. The executive summary will briefly cover the most essential topics your business plan covers. For this reason, you should write the entire business plan first, and then create your executive summary. The executive summary should only cover facts and details included in the business plan.
• Write an engaging introduction. What constitutes “engaging” depends on your audience. For example, if you’re in the tech industry, your introduction may include a surprising tech trend or brief story. The introduction must be relevant to your business and capture your audience’s attention. It is also crucial to identify your business plan’s objective and what the reader can expect to find in the document.
• Write the executive summary. Go through your business plan and identify critical points to include in your executive summary. Touch on each business plan key point concisely but comprehensively. You may mention your marketing plan , target audience, company description, management team, and more. Readers should be able to understand your business plan without reading the rest of the document. Ideally, the summary will be engaging enough to convince them to finish the document, but they should be able to understand your basic plan from your summary. (We’ll detail what to include in the executive summary in the next section.)
• Edit and organize your document. Organize your executive summary to flow with your business plan’s contents, placing the most critical components at the beginning. A bulleted list is helpful for drawing attention to your main points. Double-check the document for accuracy and clarity. Remove buzzwords, repetitive information, qualifying words, jargon, passive language and unsupported claims. Verify that your executive summary can act as a standalone document if needed.
• Seek outside assistance. Since most entrepreneurs aren’t writing experts, have a professional writer or editor look over your document to ensure it flows smoothly and covers the points you’re trying to convey.

What should you include in an executive summary?

Your executive summary is based on your business plan and should include details relevant to your reader. For example, if your business plan’s goal is pitching a business idea to potential investors , you should emphasize your financial requirements and how you will use the funding. 

The type of language you use depends on whether your audience consists of generalists or industry experts.

While executive summary specifics will vary by company, Marius Thauland, business strategist at OMD EMEA, says all executive summaries should include a few critical elements:

• Target audience
• Products and services
• Marketing and sales strategies
• Competitive analysis
• Funding and budget allocation for the processes and operations
• Number of employees to be hired and involved
• How you’ll implement the business plan 

When synthesizing each section, highlight the details most relevant to your reader. Include any facts and statistics they must know. In your introduction, present pertinent company information and clearly state the business plan’s objective. To pinpoint key messages for your executive summary, ask yourself the following questions: 

• What do you want the reader to take away from the document? 
• What do you want to happen after they read it? 

“Put yourself in the business plan reader’s shoes, and think about what you would like to know in the report,” Thauland advised. “Get their attention by making it simple and brief yet still professional. It should also attract them to read the entire document to understand even the minute details.”

What should you avoid in an executive summary?

When writing your executive summary, be aware of the following common mistakes: 

• Making your executive summary too long. An executive summary longer than two pages will deter some readers. You’re likely dealing with busy executives, and an overlong stretch of text can overwhelm them.
• Copying and pasting from other executive summary sections. Reusing phrases from other sections and stringing them together without context can seem confusing and sloppy. It’s also off-putting to read the same exact phrase twice within the same document. Instead, summarize your business plan’s central points in new, descriptive language.
• Too many lists and subheadings in your executive summary. After one – and only one – introductory set of bullets, recap your business plan’s main points in paragraph form without subheadings. Concision and clarity are more important for an executive summary than formatting tricks.
• Passive or unclear language in your executive summary. You’re taking the reins of your business, and your executive summary should show that. Use active voice in your writing so everyone knows you’re running the show. Be as clear as possible in your language, leaving no questions about what your business will do and how it will get there.
• Avoid general descriptions in your executive summary. Kimbarovsky said it’s best to avoid generalities in your executive summary. For example, there’s no need to include a line about “your team’s passion for hard work.” This information is a given and will take attention away from your executive summary’s critical details.
• Don’t use comparisons in your executive summary. Kimbarovsky also advises staying away from comparisons to other businesses in your executive summary. “Don’t say you will be the next Facebook, Uber or Amazon,” said Kimbarovsky. “Amateurs make this comparison to try and show how valuable their company could be. Instead, focus on providing the actual facts that you believe prove you have a strong company. It’s better if the investor gives you this accolade because they see the opportunity.”

Executive summary templates and resources

If you’re writing an executive summary for the first time, online templates can help you outline your document. However, your business is unique, and your executive summary should reflect that. An online template probably won’t cover every detail you’ll need in your executive summary. Experts recommend using templates as general guidelines and tailoring them to fit your business plan and executive summary.

To get you started, here are some popular executive summary template resources:

• FormSwift. The FormSwift website lets you create and edit documents and gives you access to over 500 templates. It details what an effective executive summary includes and provides a form builder to help you create your executive summary. Fill out a step-by-step questionnaire and export your finished document via PDF or Word.
• Smartsheet. The Smartsheet cloud-based platform makes planning, managing and reporting on projects easier for teams and organizations. It offers several free downloadable executive summary templates for business plans, startups, proposals, research reports and construction projects.
• Template.net. The Template.net website provides several free business templates, including nine free executive summary templates that vary by project (e.g., business plan, startup, housing program development, proposal or marketing plan). Print out the templates and fill in your relevant details.
• TemplateLab. The TemplateLab website is a one-stop shop for new business owners seeking various downloadable templates for analytics, finance, HR, marketing, operations, project management, and time management. You’ll find over 30 free executive summary templates and examples.
• Vertex42. The Vertex42 website offers Excel templates for executive summaries on budgets, invoices, project management and timesheets, as well as Word templates for legal forms, resumes and letters. This site also provides extensive information on executive summaries and a free executive summary template you can download into Word or Google Docs.

Summing it all up

Your executive summary should preview your business plan in, at most, two pages. Wait until your business plan is complete to write your executive summary, and seek outside help as necessary. A thorough, engaging business plan and executive summary are well worth the time and money you put into them. 

Max Freedman contributed to the reporting and writing in this article. Some source interviews were conducted for a previous version of this article.

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• Writing Tips

How to Write an Executive Summary for a Business Plan

3-minute read

• 19th November 2023

An executive summary is the part of a business plan that gives an outline of the main plan. So to write an executive summary, we first need to read the business plan carefully and understand its key points. These key points are what we will condense to form the executive summary. It’s important to ensure that the executive summary can stand alone because plenty of users will read only that and not the main business plan. We could say that the business plan is the original TL;DR (too long; didn’t read)!

But first, let’s take a quick look at what goes into a business plan so we can focus on the sections we need for our executive summary.

What Is a Business Plan?

A business plan is a document that sets out a business’s strategy and the means of achieving it. The business plan usually contains the following sections:

How to Write an Executive Summary

The executive summary covers the same headings as the main business plan but not in so much detail. This is where our editing skills come to the fore!

The following six steps explain how to approach writing the executive summary.

Consider the Audience

Who will be using the summary? The business plan might be issued only to a very specific group of people, in which case, their needs are paramount and specialized. If the business plan is going out on wider release, we need to think about what a general reader will want to know.

Check That It Makes Sense on Its Own

Make sure the summary can be read as a stand-alone document for users who won’t read the whole plan.

Use Formatting Effectively

Make good use of formatting, headings, numbering, and bullets to increase clarity and readability.

Keep It Brief

One page (or around ten percent of the total word count for a large document) is great.

Avoid Jargon

Try to avoid jargon and use straightforward language. Readers of the executive summary might not have business backgrounds (for instance, if they are friend and family investors in a small start-up business).

Find this useful?

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Proofread the Executive Summary

The executive summary will very likely be the first – and perhaps the only – part of the business plan some people will read, and it must be error-free to make a professional impression.

●  Consider the audience .

●  Ensure that the executive summary can stand alone.

●  Use formatting tools to good advantage.

●  Keep it brief.

●  Keep it simple.

●  Proofread it.

If you’d like an expert to proofread your business plan – or any of your writing – get in touch!

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How to Write an Executive Summary Execs Can't Ignore [+ 5 Top Examples]

Published: May 30, 2024

Early in my career, I was intimidated by executive summaries. They sounded so corporate and formal. But, proper name aside, they’re really just the elevator pitch or the TL;DR (too long, didn’t read) of a document.

Writing an executive summary is an important leadership skill, whether you're an entrepreneur creating a business plan or a CEO delivering a quarterly report.

So, let’s sharpen that skill.

What is an Executive Summary?

An executive summary is a brief overview of a longer professional document, like a business plan, proposal, or report. It's commonly at the beginning of a document and aims to grab a reader’s attention while summarizing critical information such as the problem or opportunity being addressed, objectives, key findings, goals, and recommendations.

Ultimately, an executive summary gives readers a concise overview of the most important information in a document, so they don't have to read the entire thing.

Think of it like the SparkNotes of the business world.

Documents that frequently have an executive summary include:

• Business plans
• Research reports
• Project proposals
• Annual reports

How does it differ from other business statements? Let’s compare.

Free Executive Summary Template

Use this executive summary template to provide a summary of your report, business plan, or memo.

• Company & Opportunity
• Industry & Market Analysis
• Management & Operations
• Financial Plan

You're all set!

Click this link to access this resource at any time.

Executive Summary vs. Business Plan

All business plans have an executive summary, but not all executive summaries belong to business plans.

A business plan includes a company overview, short-term and long-term goals, information on your product or service, sales targets, expense budgets, your marketing plan, and even team information

Business plans are very detailed and comprehensive. They can be as short as a dozen pages or as long as 100 pages. The executive summary is the first section of the business plan.

An in-demand CEO or investor might not have the bandwidth to read your full business plan without first understanding your company or goals. That’s where an executive summary comes in handy.

Note: Need help putting together your business plan? We’ve got a template for you.

Executive Summary vs. Mission Statement

Mission statements and executive summaries are typically found in business plans, but they serve different purposes.

A mission statement defines your organization’s purpose, values, and vision. It’s your company’s North Star and communicates your core identity and reason for existence. On the other hand, an executive summary provides a high-level overview of the document.

I also love how we define key terms to help readers understand the rest of the report. This is an excellent example of setting the tone for the rest of your document in an executive summary and making it easier to navigate.

3. ClickUp: Product Update Release Notes

Now, I know this article is about writing an executive summary, but I love ClickUp’s unique approach with its product release notes videos.

This digital report from research firm McKinsey Global Institute features an executive summary titled “At a Glance.”

Here, the organization recaps the key findings from its 56-page research report in six easy-to-skim bullet points.

It’s compelling, easy to digest, and makes it easy to jump into the full report with download links.

5. UN: World Economic Situation and Prospects 2024

Finally, we have a fairly traditional approach to an executive summary from the United Nations (UN) , clocking in at 16 pages.

Now, I know. Sixteen pages seems lengthy, but the full report is just shy of 200 pages.

The executive summary highlights the report’s largest conclusions with headers. Then, it expands on those headers with relevant statistics. It also uses bold font to draw attention to the countries or regions affected (something the reader will likely be most interested in).

The tone and visual design are both formal, which matches the esteem of the United Nations. Overall, this executive summary does an admirable job of making the report's information more approachable.

Make your executive summary memorable.

Make sure your executive summary is strong. Tell your story. Include compelling data and facts. Use easy-to-understand and digest language. If you can, get visual.

An executive summary should be concise, but also memorable. After all, this may be the only part of your proposal, report, or analysis that actually gets read.

Use the guidance above to ensure your executive summary resonates with your audience and opens the door to the opportunities you crave.

Editor's note: This post was originally published in December 2018 and has been updated for comprehensiveness.

Don't forget to share this post!

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What is an executive summary in a business plan?

Including an executive summary in your business plan can grab attention and help communicate key information quickly.

September 2023 | Published by Xero

What is a business plan?

A business plan is the blueprint for how your business will run. It describes your product or service, identifies your customer and the problem they face, and explains how you’ll succeed in fixing that for them.

Your business plan also helps other people understand what you do and how you do it. Groups like banks and investors will want to see your business plan before deciding to put money into your business, for example. Your accountant should also be able to easily understand what your business idea is and how you’ll make money from it.

It’s a living document that can help you clarify your ideas and maintain a clear direction as you grow. It shouldn’t be just a one-off document – you can return to it at any time and add to it or change it as your business changes.

Looking for help to build your business plan? Download our free business plan templates to get started.

The executive summary is the elevator pitch for the rest of your business plan. Use it to highlight what you do, why you do it and how you’ll succeed.

It’s often the first section that a person will read in your business plan, so this is your opportunity to "sell" your idea and its potential for success.

It should explain enough that a reader could understand the key information about your business without having to read the whole document – this is especially helpful for readers who are pushed for time. However, a compelling executive summary will also grab someone’s attention enough to make them want to keep reading.

While it’s a helpful section for rushed readers, you may feel an executive summary isn’t absolutely necessary just yet. Think about your audience and the complexity of your business plan when weighing up the benefit of having an executive summary.

How does an executive summary differ from a mission statement or business objective?

A mission statement outlines the overall purpose and vision of your business, and a business objective is a specific goal or target you’ll aim for to help you achieve that vision.

The executive summary could include both your mission statement and business objectives. However, it should ultimately be a high-level overview of your whole business plan.

What to include in an executive summary

Treat your executive summary as the one and only section someone may read in your business plan. What must they know in order to understand your business?

Pull the key high-level information from other parts of your business plan, including:

• what your business does and why you do it
• your mission statement, if you have one
• your target customers, the problem they face and how you solve it for them
• the product or service you’re selling
• any key information from competitor or market research that helps tell your story
• a schedule to launch, or steps to implement your business plan

If you’re approaching lenders or investors for financing, include key financial information and your plans for growth in your executive summary too.

How to write an executive summary

It’s a good idea to fill in the other sections of your business plan first, before deciding what goes in an executive summary. This way, you have complete information for you to draw from.

Aim to summarize the key sections of your business plan in a few sentences using plain language that’s easy to understand. Include any important data or information that backs up your ideas, and leave out personal opinions.

Beware of copying and pasting information from other parts of your plan; the executive summary should be as specific and concise as possible. An executive summary that’s too general, or padded with unnecessary detail might lose the reader’s interest.

Think about who will read your business plan, and what they’ll be interested in. For example, if you want to connect with lenders or investors, promote the size of the opportunity for your business, and how much money you’ll need to make it a success.

There’s no strict rule about length, but it should remain clear and engaging the whole way through. Keeping to one page is a good general guide to maintain your reader’s attention without overwhelming them.

Ultimately, an executive summary should benefit your business plan by laying out critical information clearly and simply upfront. An engaging, informative summary will help key people understand your plan and your needs, so they can offer guidance and support your success.

You can find tips on business planning and more in How to start a business

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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Business Plan Executive Summary with Example

Written by Dave Lavinsky

Executive Summary of a Business Plan

The Executive Summary is the most important part of your business plan. This is because it’s the first section in your plan, and if it doesn’t excite readers, they won’t continue reviewing it. Importantly, there is a way to ensure your executive summary is compelling and includes the key information readers expect. In this article, you’ll learn how to craft the perfect executive summary for your business plan.

Download our Ultimate Business Plan Template here >

Table of Contents:

What is an executive summary, why do i need an executive summary, how long should an executive summary be for a business plan, how to write an executive summary for a business plan + template, sample executive summary, other helpful resources for writing your business plan.

An executive summary of a business plan gives readers an overview of your business plan and highlights its key points.

The executive summary should start with a brief overview of your business concept. Then it should briefly summarize each section of your business plan: your industry analysis, customer analysis, competitive analysis, marketing plan, operations plan, management team, financial plan and funding needs.

If presented for funding, the executive summary provides the lender or investor a quick snapshot which helps them determine their interest level and if they should continue reading the rest of the business plan.

An effective executive summary is a quick version of your complete business plan. You need to keep it simple and succinct in order to grab the reader’s attention and convince them it’s in their best interest to keep reading.

As mentioned above, your business plan is a detailed document that requires time to read. Capturing the reader’s attention with a concise format that provides an interesting overview of your plan saves them time and indicates which parts of the business plan may be most important to read in detail. This increases the odds that your business plan will be read and your business idea understood. This is why you need a well-written executive summary.

When structuring your executive summary, the first thing to keep in mind is that it should be short and comprehensive. The length of your executive summary should never exceed 3 pages; the ideal length is one or two pages.

Finish Your Business Plan Today!

To write a compelling executive summary, follow the steps below and use our executive summary template as a guide:

State the Problem and/or Business Opportunity

Briefly describe your business idea, provide key information about your company history, conduct market research about your industry, identify the target market or ideal customer, explain your competitive advantage, establish relevant milestones for your business to achieve, develop a financial plan, describe the qualifications of your management team.

To help you get started, you can download our executive summary example business plan pdf here.

Whether you’re a large or small business, your executive summary is the first thing someone reads that forms an opinion of your business. Whether they decide to read your detailed business plan or push it aside depends on how good your executive summary is. We hope your executive summary guide helps you craft an effective and impactful executive summary. That way, readers will be more likely to read your full plan, request an in-person meeting, and give you funding to pursue your business plans.

Looking to get started on your business plan’s executive summary? Take a look at the business plan executive summary example below!

Finish Your Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Shoutmouth.com Executive Summary

Business Overview Launched late last year, Shoutmouth.com is the most comprehensive music news website on the Internet.

Music is one of the most searched and accessed interests on the Internet. Top music artists like Taylor Swift receive over 5 million searches each month. In addition, over 500 music artists each receive over 25,000 searches a month.

However, music fans are largely unsatisfied when it comes to the news and information they seek on the artists they love. This is because most music websites (e.g., RollingStone.com, MTV.com, Billboard.com, etc.) cover only the top eight to ten music stories each day – the stories with mass appeal. This type of generic coverage does not satisfy the needs of serious music fans. Music fans generally listen to many different artists and genres of music. By publishing over 100 music stories each day, Shoutmouth enables these fans to read news on all their favorite artists.

In addition to publishing comprehensive music news on over 1200 music artists, Shoutmouth is a social network that allows fans to meet and communicate with other fans about music, and allows them to:

• Create personal profiles
• Interact with other members
• Provide comments on news stories and music videos
• Submit news stories and videos
• Recommend new music artists to add to the community
• Receive customized news and email alerts on their favorite artists

Success Factors

Shoutmouth is uniquely qualified to succeed due to the following reasons:

• Entrepreneurial track record : Shoutmouth’s CEO and team have helped launch numerous successful ventures.
• Monetization track record : Over the past two years, Shoutmouth’s founders have run one of the most successful online affiliate marketing programs, having sold products to over 500,000 music customers online.
• Key milestones completed : Shoutmouth’s founders have invested $500,000 to-date to staff the company (we currently have an 11-person full-time team), build the core technology, and launch the site. We have succeeded in gaining initial customer traction with 50,000 unique visitors in March, 100,000 unique visitors in April, and 200,000 unique visitors in May.

Unique Investment Metrics

The Shoutmouth investment opportunity is very exciting due to the metrics of the business.

To begin, over the past five years, over twenty social networks have been acquired. The value in these networks is their relationships with large numbers of customers, which allow acquirers to effectively sell to this target audience.

The sales price of these social networks has ranged from $25 to $137 per member. Shoutmouth has the ability to enroll members at less than $1 each, thus providing an extraordinary return on marketing expenditures. In fact, during a recent test, we were able to sign-up 2,000 members to artist-specific Shoutmouth newsletters at a cost of only 43 cents per member.

While we are building Shoutmouth to last, potential acquirers include many types of companies that seek relationships with music fans such as music media/publishing (e.g., MTV, Rolling Stone), ticketing (e.g., Ticketmaster, LiveNation) and digital music sales firms (e.g., iTunes).

Financial Strategy, Needs and Exit Strategy

While Shoutmouth’s technological, marketing and operational infrastructure has been developed, we currently require $3 million to execute on our marketing and technology plan over the next 24 months until we hit profitability.

Shoutmouth will primarily generate revenues from selling advertising space. As technologies evolve that allow us to seamlessly integrate music sampling and purchasing on our site, sales of downloadable music are also expected to become a significant revenue source. To a lesser extent, we may sell other music-related items such as ringtones, concert tickets, and apparel.

Topline projections over the next three years are as follows:

• Search Search Please fill out this field.
• Building Your Business
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• Business Plans

Executive Summary of the Business Plan

How to Write an Executive Summary That Gets Your Business Plan Read

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

CP Cheah / Getty Images

An executive summary of a business plan is an overview. Its purpose is to summarize the key points of a document for its readers, saving them time and preparing them for the upcoming content.

Think of the executive summary as an advance organizer for the reader. Above all else, it must be clear and concise. But it also has to entice the reader to read the rest of the business plan .

This is why the executive summary is often called the most important part of the business plan. If it doesn’t capture the reader's attention, the plan will be set aside unread—a disaster if you've written your business plan as part of an attempt to get money to start your new business . (Getting startup money is not the only reason to write a business plan; there are other just-as-important reasons .)

Because it is an overview of the entire plan, it is common to write the executive summary last (and writing it last can make it much easier).

What Information Goes in an Executive Summary?

The information you need to include varies somewhat depending on whether your business is a startup or an established business.

For a startup business typically one of the main goals of the business plan is to convince banks, angel investors , or venture capitalists to invest in your business by providing startup capital in the form of debt or equity financing .

In order to do so you will have to provide a solid case for your business idea which makes your executive summary all the more important. A typical executive summary for a startup company includes the following sections:

• The business opportunity. Describe the need or the opportunity.
• Taking advantage of the opportunity. Explain how will your business will serve the market.
• The target market . Describe the customer base you will be targeting.
• Business model . Describe your products or services and and what will make them appealing to the target market.
• Marketing and sales strategy . Briefly outline your plans for marketing your products and services.
• The competition. Describe your competition and your strategy for getting market share. What is your competitive advantage, e.g. what will you offer to customers that your competitors cannot?
• Financial analysis. Summarize the financial plan including projections for at least the next three years.
• Owners/Staff. Describe the owners and the key staff members and the expertise they bring to the venture.
• Implementation plan. Outline the schedule for taking your business from the planning stage to opening your doors.

For established businesses the executive summary typically includes information about achievements, growth plans , etc. A typical executive summary outline for an established business includes:

• Mission Statement . Articulates the purpose of your business. In a few sentences describe what your company does and your core values and business philosophy.
• Company Information. Give a brief history of your company —d escribe your products or services, when and where it was formed, who the owners and key employees are, statistics such as the number of employees, business locations, etc.
• Business Highlights. Describe the evolution of the businesshow it has grown, including year-over-year revenue increases, profitability, increases in market share, number of customers, etc.
• Financial Summary. If the purpose of updating the business plan is to seek additional financing for expansion, then give a brief financial summary.
• Future goals. Describe your goals for the business . If you are seeking financing explain how additional funding will be used to expand the business or otherwise increase profits.

How Do I Write an Executive Summary of a Business Plan?

Start by following the list above and writing one to two sentences about each topic (depending on whether your business is a startup or an established business). No more! 

The Easy Way of Writing One

Having trouble getting started? The easiest way of writing the executive summary is to review your business plan and take a summary sentence or two from each of the business plan sections you’ve already written.

If you compare the list above to the sections outlined in the  Business Plan Outline , you’ll see that this could work very well.

Then finish your business plan’s executive summary with a clinching closing sentence or two that answers the reader’s question, “Why is this a winning business?”

For example, an executive summary for a pet-sitting business might conclude: “The loving on-site professional care that Pet Grandma will provide is sure to appeal to both cat and dog owners throughout the West Vancouver area.”

(You may find it useful to read the entire Pet Grandma  executive summary example  before you write your own.)

Tips for Writing the Business Plan’s Executive Summary

• Focus on providing a summary.  The business plan itself will provide the details and whether bank managers or investors, the readers of your plan don’t want to have their time wasted.
• Keep your language strong and positive.  Don’t weaken your executive summary with weak language. Instead of writing, “Dogstar Industries might be in an excellent position to win government contracts,” write “Dogstar Industries will be in an excellent position.”
• Keep it short–no more than two pages long . Resist the temptation to pad your business plan’s executive summary with details (or pleas). The job of the executive summary is to present the facts and entice your reader to read the rest of the business plan, not tell him everything.
• Polish your executive summary.  Read it aloud. Does it flow or does it sound choppy? Is it clear and succinct? Once it sounds good to you, have someone else who knows nothing about your business read it and make suggestions for improvement.
• Tailor it to your audience.  If the purpose of your business plan is to  entice investors , for instance, your executive summary should focus on the opportunity your business provides investors and why the opportunity is special. If the purpose of your business plan is to get a small business loan , focus on highlighting what traditional lenders want to see, such as management's experience in the industry and the fact that you have both collateral and strategies in place to minimize the lender's risk.
• Put yourself in your readers’ place. And read your executive summary again. Does it generate interest or excitement in the reader? If not, why? Also try giving it to a friend or relative to read, who is not engaged in the business. If you've done a good job on the executive summary, an impartial third party should be able to understand it.

Remember, the executive summary will be the first thing your readers read. If it's poorly written, it will also be the last thing they read, as they set the rest of your business plan aside unread.

Office of the Comptroller of the Currency. " Business Plan Guidelines ," Page 2.

Corporate Finance Institute. " Executive Summary ."

United Nations Conference on Trade and Development. " How to Prepare Your Business Plan ," Page 167.

Iowa State University. " Types and Sources of Financing for Start-up Businesses ."

U.S. Small Business Administration. " Write Your Business Plan ."

Clute Institute. " Using Business Plans for Teaching Entrepreneurship ," Page 733.

Example of Executive Summary for a Business Plan

Starting a business can be intimidating due to the complex web of decisions, uncertainties, and risks that entrepreneurs must navigate through, while ensuring the path to success for their businesses. Business plans serve as a business’s compass to direct a business and drive its growth to achieve its goals and objectives. 

Consequently, a concise but striking executive summary is an essential part and arguably, one of the most critical components of a business plan.

However, people spend only an approximate 48 minutes a day reading about business, according to a study by The Economist Intelligence Unit and Peppercomm. In a week, about 69% of young executives and 43% of veteran professionals read for business for less than four hours. 

Similarly, an article from Time Magazine mentioned that 55% of people only actively read content for less than 15 seconds. This implies that a robust executive summary of a business plan should capture a reader’s interest and show that a business plan is worthy of a reader’s attention in a very narrow timeframe.

As such, it is necessary to know how to craft an impactful executive summary that will communicate the vision of a business. Let’s explore the how-tos of writing an executive summary of business plan, its significance, and some business plan executive summary examples.

What is an Executive Summary?

An executive summary is the first key component in a document such as a business plan, proposal, or report that serves as a concise snapshot that effectively captures reader interest. It also encapsulates vital details that discuss the identified issue or opportunity, market findings, overarching goals, and strategic plans .

A variety of professional documents incorporate executive summaries. Here are some examples:

• Business plans
• Financial reports
• Marketing proposals
• Professional resumes

What is an Executive Summary in a Business Plan?

In a business plan, the executive summary should vouch for a business through a writing that is positive and assertive. The focus should be on factual and practical information that readers want to know, instead of subjective or emotional aspects such as hard work and passion. 

Considering the interest of the target audience in the executive summary will answer their underlying questions about a business and avoid creating new ones that will hold them back from reading a business plan further.

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Executive Summary vs. Business Overview

In general, both an executive summary and business overview play the role of providing a project summary in business plans to give readers a short outline. Both provide essential information but serve distinct purposes. 

The executive summary is a high-level synopsis crafted to capture the reader’s attention, providing a quick understanding of a business plan’s main points. In contrast, a business overview focuses on specifically highlighting a company’s background, mission, vision, and market positioning. This offers a brief description of the business and a comprehensive perspective of its brand and place within an industry.

What Makes the Executive Summary Significant?

The executive summary is that one business plan section that everyone will read. It saves the readers’ time, provides clarity, and assists with document navigation. The benefits of a solid executive summary make it an important portion of a business plan.

Readers look into the executive summary to acquire critical information about a business in a short period to quickly formulate an appropriate decision or course of action thereafter. The contents of the executive summary are important as these outline what the audience will expect to learn while reading a business plan. The executive summary further helps readers navigate the business plan, indicating the main topics discussed in the plan. This makes a business plan more accessible and usable.

What are the Elements of an Effective Executive Summary?

The following will detail the important areas to be included in the executive summary of the business plan:

Business Opportunity: The business opportunity discusses the problem in the existing market that the business aims to address. This section highlights the market need and a business’s plans to meet said demand. The business opportunity will outline the solutions to the market problem and how these initiatives will create a change in the current business scene. 

Target Market: This pertains to the demographic a business intends to reach as its customer base. The target market section in the executive summary will include market research and highlight the consumer group who has potential interest in a business’s product or service. This studies traits such as age, occupation, gender, education level, and socioeconomic status.

Business Model: The business model is the part of the executive summary that zooms into the business concept. This includes the specific products or services a business intends to offer and specific characteristics that allow them to compete in the market.

Marketing Strategy: The marketing strategy presents the methods a business will implement to mold its brand and build brand recognition for its products or services. Marketing techniques such as digital marketing efforts, like Google Ads , and traditional media are discussed in this part.

Competition: This part provides a summary on the analysis of a business’s competitors, industry trends, and customer demand. This highlights the results of a business’s market research and showcases its understanding of the industry. This will allow a business to stand out on a local or international level.

Financial Analysis: A business plan’s executive summary should include how a business intends to control its finances, while generating revenue in the long-term. This section talks about how resources and funds will be utilized to propel the business towards growth and success and how the potential investors will benefit from these plans.

Company Overview: The company overview helps readers understand the growth of a business, its milestones, and how it has evolved throughout the years. This part is a brief description of the business and also includes an introduction of its key members, their qualifications and achievements, and how these people influenced and assisted in the development of the business.

Implementation Plan: The implementation plan is one of the vital parts of an executive summary. This component of the executive summary sketches both a structure and a timeline, starting from a business idea and moving towards launching an actual business.

5 Helpful Executive Summary Writing Tips

 1. Engage Your Audience through Your Story

      As an entrepreneur that steers a business forward, the executive summary should reflect the leadership you want to showcase. Set the tone of the business plan through the executive summary and make your readers understand what your business is about. Tell your story and how that pushed you to start the business that you aspire to build. Using an active voice in writing will demonstrate your proactive role in the business. Ambiguity does not have a place in your business and in achieving your business goals.

2. Highlight Key Elements

Working as a business plan overview, the executive summary focuses on the most critical aspects of your business plan, such as the problem, solution, market research , competitor analysis, and financial projections . While the business plan body elaborates on the details, specific findings will be highlighted in the executive summary.

3. Use a Compelling Tone and Tailor it to Your Audience

      Staying true and accessible is essential to writing an executive summary, similar to the importance of keeping a professional and concise tone in your writing. Discussing information objectively and substantiating it with evidence, projects authority and credibility, while also showing an approachable and engaging side. Avoid voicing out personal opinions and using excessive claims. The key is to strive for clarity and simplicity to resonate with the interest and concerns of your readers.   

4. Steer Clear from Clichés

      Avoiding cliché language is a vital point on how to make an executive summary effective. A good tip to stay true to this is to stay away from using general descriptions in your executive summary. Generalities and clichés tend to create unrealistic expectations that your business may fall short of meeting. Understand and detail the uniqueness of your business by being specific. Do not sell your business short, but stay truthful.

5. Complete it After Doing the Entire Business Plan

      Building the executive summary after completing the whole business plan allows you to have a better understanding of your business and to communicate the vital aspects in the summary. Writing it at the beginning risks the miscommunication of your business’s core concepts to its intended readers. This may further lead to inconsistent and irrelevant details and reduce the precision of the executive summary.

Final Thoughts

Empathizing with business plan readers and grasping the most valuable information to them makes a comprehensive and persuasive executive summary. Overall, keep in mind the following questions before starting an executive summary:

• What knowledge and key takeaways should the business plan reader have?
• What outcomes should the readers achieve after reading the executive summary in business plan?
• Do these expected outcomes align with the business’s mission and long-term goals?

Business Plan Executive Summary Template and Examples

Now, we have established the key elements of and some writing tips on creating an executive summary. If you don’t have a business plan yet, BSBCON has a free business plan template that can help you start with building your own. Looking at an example of executive summary for business plans will allow you to be more familiar with its contents. Below are two examples of an executive summary in a business plan:

Executive Summary Example 1

“ProSecure Squad Corporation” operating as “ProSecure Squad” (The Company) was first incorporated in September of 2016 in Massachusetts, USA and subsequently incorporated in the State of Massachusetts on June 10th 2020. Over the past years ProSecure Squad has developed and patented revolutionary Cyber- security products.  

With digital transformation of industries being hastened by factors such as E-Commerce, Internet of Things (IoT), Connected Machines, Self-Driving vehicles, Cloud Computing, Artificial Intelligence (AI), there has been an enormous increase in the amount of electronic data.

Despite strong cyber-security defenses implemented, cyber-criminals have been getting past these defenses at an increasingly alarming rate and the cost for an organization to retain end-to-end cybersecurity professionals has become astronomical.  This has made the Cybersecurity Market one of the fastest growing industries.  

With patented products, an accomplished team of cybersecurity experts, and a clear strategy for product and service deployment, ProSecure Squad is ready to lead the next wave of cybersecurity.  The company is focused on making its world class data security solutions accessible and inclusive; therefore, targeting wide-scale adoption from medium to large businesses, and government organizations across the globe.

What makes the company’s offering so unique is our focus on simplifying data resiliency; making it easy to protect your data from being spied on, stolen or held for ransom even if a hacker or malware gets past the current cyber-defenses. 

With years of research and development, ProSecure Squad has refined our products and has garnered the interests of large corporations in the security and other Industries. With our offering being tailored to meet the current data security demands, ProSecure Squad is well positioned to become leaders in data security. 

ProSecure Squad Corporation is seeking a 15 Million USD capital investment in return for a 15% equity and voting stake in the company.  These funds will be allocated to taking the company’s products and services to market through direct sales, marketing, customer onboarding and customer support.  With this investment the company will execute on established opportunities, further develop its capabilities, and forge a notable position in one of the fastest growing industries.

Executive Summary Example 2

“Silver Studios, Inc.” (herein also referred to as “Silver”, “Silver Studios” and “the company”) was incorporated on January 9, 2021, in the City of Chicago by Founder and CEO, Jamie Malcolm. With plans to expand the company’s operational reach, Silver Studios also incorporated in New York, U.S.A. on April 30, 2022.

Silver Studios has rapidly emerged as a promising record label and music production company following the successful signing of eight talented artists who have achieved impressive results to date. These include charting on the Top Chicago Downloads, Top U.S. Rotation AC Tracks, U.S. Billboard Country Indicator Chart, and the American Billboard Chart. Additionally, the artists signed to the Silver Studios label have amassed a substantial following with over 58,000 collective monthly listeners and a significant number of streams on Spotify alone.

Today, Silver sits at a focal point where there is an abundance of opportunity to discover emerging artists, sign new talent and support existing artists.  In order to complete the development of the studio, acquire a variety of recording equipment, and hire additional staff, the company is seeking a strategic partnership and capital investment of $8.5M. With this partnership secured, Silver Studios will be positioned to welcome an array of upcoming artists and expedite growth within the music production and distribution industry.

Under the leadership of Mrs. Malcolm, Silver Studios has achieved significant success and earned a reputation as a champion for emerging artists. The company’s unwavering commitment to being an artist-first record label, along with a unique approach to equitable contracts and creative expression, has resulted in the discovery and development of exceptional talent. With increased strategic and financial resources, Silver Studios will continue to push boundaries and pave the way for the next generation of emerging artists.

This business plan acts as a strategic roadmap for Silver Studios in terms of operations, marketing, human resources and finance.

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How to write an executive summary, with examples

The best way to do that is with an executive summary. If you’ve never written an executive summary, this article has all you need to know to plan, write, and share them with your team.

What is an executive summary?

An executive summary is an overview of a document. The length and scope of your executive summary will differ depending on the document it’s summarizing, but in general an executive summary can be anywhere from one to two pages long. In the document, you’ll want to share all of the information your readers and important stakeholders need to know.

Imagine it this way: if your high-level stakeholders were to only read your executive summary, would they have all of the information they need to succeed? If so, your summary has done its job.

You’ll often find executive summaries of:

Business cases

Project proposals

Research documents

Environmental studies

Market surveys

In general, there are four parts to any executive summary:

Start with the problem or need the document is solving.

Outline the recommended solution.

Explain the solution’s value.

Wrap up with a conclusion about the importance of the work.

What is an executive summary in project management?

In project management, an executive summary is a way to bring clarity to cross-functional collaborators, team leadership, and project stakeholders . Think of it like a project’s “ elevator pitch ” for team members who don’t have the time or the need to dive into all of the project’s details.

The main difference between an executive summary in project management and a more traditional executive summary in a business plan is that the former should be created at the beginning of your project—whereas the latter should be created after you’ve written your business plan. For example, to write an executive summary of an environmental study, you would compile a report on the results and findings once your study was over. But for an executive summary in project management, you want to cover what the project is aiming to achieve and why those goals matter.

The same four parts apply to an executive summary in project management:

Start with the problem or need the project is solving.  Why is this project happening? What insight, customer feedback, product plan, or other need caused it to come to life?

Outline the recommended solution, or the project’s objectives.  How is the project going to solve the problem you established in the first part? What are the project goals and objectives?

Explain the solution’s value.  Once you’ve finished your project, what will happen? How will this improve and solve the problem you established in the first part?

Wrap up with a conclusion about the importance of the work.  This is another opportunity to reiterate why the problem is important, and why the project matters. It can also be helpful to reference your audience and how your solution will solve their problem. Finally, include any relevant next steps.

If you’ve never written an executive summary before, you might be curious about where it fits into other project management elements. Here’s how executive summaries stack up:

Executive summary vs. project plan

A  project plan  is a blueprint of the key elements your project will accomplish in order to hit your project goals and objectives. Project plans will include your goals, success metrics, stakeholders and roles, budget, milestones and deliverables, timeline and schedule, and communication plan .

An executive summary is a summary of the most important information in your project plan. Think of the absolutely crucial things your management team needs to know when they land in your project, before they even have a chance to look at the project plan—that’s your executive summary.

Executive summary vs. project overview

Project overviews and executive summaries often have similar elements—they both contain a summary of important project information. However, your project overview should be directly attached to your project. There should be a direct line of sight between your project and your project overview.

While you can include your executive summary in your project depending on what type of  project management tool  you use, it may also be a stand-alone document.

Executive summary vs. project objectives

Your executive summary should contain and expand upon your  project objectives  in the second part ( Outline the recommended solution, or the project’s objectives ). In addition to including your project objectives, your executive summary should also include why achieving your project objectives will add value, as well as provide details about how you’re going to get there.

The benefits of an executive summary

You may be asking: why should I write an executive summary for my project? Isn’t the project plan enough?

Well, like we mentioned earlier, not everyone has the time or need to dive into your project and see, from a glance, what the goals are and why they matter.  Work management tools  like Asana help you capture a lot of crucial information about a project, so you and your team have clarity on who’s doing what by when. Your executive summary is designed less for team members who are actively working on the project and more for stakeholders outside of the project who want quick insight and answers about why your project matters.

An effective executive summary gives stakeholders a big-picture view of the entire project and its important points—without requiring them to dive into all the details. Then, if they want more information, they can access the project plan or navigate through tasks in your work management tool.

How to write a great executive summary, with examples

Every executive summary has four parts. In order to write a great executive summary, follow this template. Then once you’ve written your executive summary, read it again to make sure it includes all of the key information your stakeholders need to know.

1. Start with the problem or need the project is solving

At the beginning of your executive summary, start by explaining why this document (and the project it represents) matter. Take some time to outline what the problem is, including any research or customer feedback you’ve gotten . Clarify how this problem is important and relevant to your customers, and why solving it matters.

For example, let’s imagine you work for a watch manufacturing company. Your project is to devise a simpler, cheaper watch that still appeals to luxury buyers while also targeting a new bracket of customers.

Example executive summary:

In recent customer feedback sessions, 52% of customers have expressed a need for a simpler and cheaper version of our product. In surveys of customers who have chosen competitor watches, price is mentioned 87% of the time. To best serve our existing customers, and to branch into new markets, we need to develop a series of watches that we can sell at an appropriate price point for this market.

2. Outline the recommended solution, or the project’s objectives

Now that you’ve outlined the problem, explain what your solution is. Unlike an abstract or outline, you should be  prescriptive  in your solution—that is to say, you should work to convince your readers that your solution is the right one. This is less of a brainstorming section and more of a place to support your recommended solution.

Because you’re creating your executive summary at the beginning of your project, it’s ok if you don’t have all of your deliverables and milestones mapped out. But this is your chance to describe, in broad strokes, what will happen during the project. If you need help formulating a high-level overview of your project’s main deliverables and timeline, consider creating a  project roadmap  before diving into your executive summary.

Continuing our example executive summary:

Our new watch series will begin at 20% cheaper than our current cheapest option, with the potential for 40%+ cheaper options depending on material and movement. In order to offer these prices, we will do the following:

Offer watches in new materials, including potentially silicone or wood

Use high-quality quartz movement instead of in-house automatic movement

Introduce customizable band options, with a focus on choice and flexibility over traditional luxury

Note that every watch will still be rigorously quality controlled in order to maintain the same world-class speed and precision of our current offerings.

3. Explain the solution’s value

At this point, you begin to get into more details about how your solution will impact and improve upon the problem you outlined in the beginning. What, if any, results do you expect? This is the section to include any relevant financial information, project risks, or potential benefits. You should also relate this project back to your company goals or  OKRs . How does this work map to your company objectives?

With new offerings that are between 20% and 40% cheaper than our current cheapest option, we expect to be able to break into the casual watch market, while still supporting our luxury brand. That will help us hit FY22’s Objective 3: Expanding the brand. These new offerings have the potential to bring in upwards of three million dollars in profits annually, which will help us hit FY22’s Objective 1: 7 million dollars in annual profit.

Early customer feedback sessions indicate that cheaper options will not impact the value or prestige of the luxury brand, though this is a risk that should be factored in during design. In order to mitigate that risk, the product marketing team will begin working on their go-to-market strategy six months before the launch.

4. Wrap up with a conclusion about the importance of the work

Now that you’ve shared all of this important information with executive stakeholders, this final section is your chance to guide their understanding of the impact and importance of this work on the organization. What, if anything, should they take away from your executive summary?

To round out our example executive summary:

Cheaper and varied offerings not only allow us to break into a new market—it will also expand our brand in a positive way. With the attention from these new offerings, plus the anticipated demand for cheaper watches, we expect to increase market share by 2% annually. For more information, read our  go-to-market strategy  and  customer feedback documentation .

Example of an executive summary

When you put it all together, this is what your executive summary might look like:

Common mistakes people make when writing executive summaries

You’re not going to become an executive summary-writing pro overnight, and that’s ok. As you get started, use the four-part template provided in this article as a guide. Then, as you continue to hone your executive summary writing skills, here are a few common pitfalls to avoid:

Avoid using jargon

Your executive summary is a document that anyone, from project contributors to executive stakeholders, should be able to read and understand. Remember that you’re much closer to the daily work and individual tasks than your stakeholders will be, so read your executive summary once over to make sure there’s no unnecessary jargon. Where you can, explain the jargon, or skip it all together.

Remember: this isn’t a full report

Your executive summary is just that—a summary. If you find yourself getting into the details of specific tasks, due dates, and attachments, try taking a step back and asking yourself if that information really belongs in your executive summary. Some details are important—you want your summary to be actionable and engaging. But keep in mind that the wealth of information in your project will be captured in your  work management tool , not your executive summary.

Make sure the summary can stand alone

You know this project inside and out, but your stakeholders won’t. Once you’ve written your executive summary, take a second look to make sure the summary can stand on its own. Is there any context your stakeholders need in order to understand the summary? If so, weave it into your executive summary, or consider linking out to it as additional information.

Always proofread

Your executive summary is a living document, and if you miss a typo you can always go back in and fix it. But it never hurts to proofread or send to a colleague for a fresh set of eyes.

In summary: an executive summary is a must-have

Executive summaries are a great way to get everyone up to date and on the same page about your project. If you have a lot of project stakeholders who need quick insight into what the project is solving and why it matters, an executive summary is the perfect way to give them the information they need.

For more tips about how to connect high-level strategy and plans to daily execution, read our article about strategic planning .

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How to use a feasibility study in project management

How to track utilization rate and drive team profitability

How to accomplish big things with long-term goals

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How to Write an Executive Summary for a Business Plan

Back to Business Plans

Written by: Carolyn Young

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on February 27, 2023 Updated on December 12, 2023

Launching a business involves countless tasks, but a crucial early hurdle is writing a business plan . Many entrepreneurs who aren’t looking for funding think they can skip this step, but that’s never a good idea . 

A sharp business plan is essentially a business owner’s commitment to and preparation for the road ahead, and the executive summary might be the most important part. Investors and lenders usually only read the executive summary, unless it succeeds in grabbing their interest. 

Thus, if you’re looking for financing, an excellent executive summary is absolutely essential. But even if you’re not, writing a strong executive summary can help gather your thoughts and lessons learned. Lucky for you, this guide shows you just how to do it. 

• What is an Executive Summary?

The executive summary opens your business plan, but it’s the section you’ll write last. It summarizes the key points and highlights the most important aspects of your plan. 

Again, often investors and lenders will only read the executive summary; if it doesn’t capture their interest they’ll stop reading, so it must be as compelling as possible, even at two pages or less. 

• What to Include in the Executive Summary

Several key points should be included in the executive summary.

1. The Business Opportunity

What problem are you solving in the market and for whom? Write a few sentences about the opportunity and your target market . This should be at the top of your executive summary after a very brief introduction of your concept and vision. 

2. The Business Idea and Model

Provide specific information about your product or service, how it solves a market problem, and how you’ll sell it. Will it be one-time sales or a subscription? Focus on your product or service as a solution, discussing how it solves the problem and why it’s better than other solutions. 

3. Company History

What have you done to this point? When you’re just getting started, this may be nothing more than coming up with the idea, choosing a business name , and forming a business entity. Highlight milestones you’ve achieved. 

4. Market Summary

Discuss the state of the industry, market size, and projected growth. Include data points with links to sources. Also, touch upon why you chose your target market and the competitive landscape of your market. Don’t go into too much detail, just mention the most intriguing elements.

5. Competitive Advantage

Write a strong statement about how your company is going to stand out in the market – why will customers choose your product over those of competitors? This is extremely important to investors, so take your time on this one after you’ve done your full competitive analysis . 

6. Objectives

Write a short list of specific goals that you plan to achieve in the short term, such as developing your product, launching a marketing campaign, or hiring a key person. 

7. Management team

Provide a summary of your management team, their roles, and the relevant experience that they have to serve in those roles. Don’t be overly self-promotional here; just state the facts in a positive way. 

8. Financial Highlights

Provide a summary of your financial plan including revenue and profit projections (best in bullet form) for at least three years and a break-even analysis in a simple chart form. If you’ve already made some sales, include your revenue numbers.

9. The “Ask”

Your “ask”, if applicable, is what you’re requesting from the investor or lender. You’ll include the amount you’d like and how it will be spent, such as “We are seeking $50,000 in seed funding to develop our beta product”.  

It’s best not to specify the terms of funding you’re requesting, such as stating an equity offer. That will be a matter of negotiation.

10. Other Compelling Points

If there are any other points from your business plan that illustrate how your business will be unique and successful, be sure to include those as well. The executive summary should be as persuasive as possible. 

If you finish your executive summary and it’s more than two pages long, cut it down. Investors and lenders aren’t looking for a long read; they want you to get to the point and to be “wowed” by your vision. That will persuade them to dig into your full plan. 

So take all the time you need to write an excellent summary, then have somebody you trust review it to make sure it delivers. The future of your business could depend on it.

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How to write an executive summary for a business plan

All new businesses should have a business plan. These documents outline the goals an owner has for their new organisation and sets out a plan of action to achieve them.

Although these documents need to be as comprehensive as possible, it is usually the condensed executive summary that is the most important part of any business plan .

While some business owners will talk to a specialist business consultant before writing their executive summary, this can be expensive and is not always necessary.

But what is an executive summary and how do you write one? In this guide, we answer both of these questions and more as we take a closer look at this business plan staple. 

What is an executive summary?

An executive summary is a short introduction that summarises your business plan. Designed to provide a brief but compelling overview of your plan, it should do the following: - Describe the purpose of your business. - Highlight your target market. - Explain what gap in the market it aims to fill. - Outline basic start-up costs and other important financial details. This should include initial overheads costs, stock costs, start-up business insurance expenses, etc.

Despite the title, these introductions are much more than quick summaries of your plan. As the only part of the document that some of your intended audience will have time to read and digest, it has the power to make or break your entire plan. For this reason, it needs to be comprehensive while also being engaging and compelling.

How to write an executive summary

A well-written executive summary should efficiently summarise your larger business plan. To do this it should effectively communicate the major findings from your research, as well as your proposed plan of action.

Where to start

You should always start at the end. This is to say, crafting your executive summary should always be done after every other section of your business plan is finished. This makes sure you can create a summary that best represents your entire plan as accurately as possible. Trying to cut corners will only serve to undermine the time and effort you have invested into putting your business plan together.

With this in mind, below we take a look at the musts when it comes to what to include in your executive summary.

What to include

A strong executive summary can be broken down into just five small sections. These are:

1. An overview of your business

All executive summaries should start with this. This will help to ensure the reader understands who you are and what your business will do. Naturally, this section should always include the name of your business, an introduction to products/services it will provide, and any other insights about the specific industry.

2. A discussion on your target market

This section will cover the ‘gap’ in your chosen industry your business aims to fill by defining your desired target market. In order to do this, you may have to present some research that highlights the current competitive landscape of the market in question. This can help to outline the advantages of your business.

Finally, you may also want to include a brief overview of your marketing strategy here. By covering the strongest aspects of your strategy, you can stay concise while still piquing the readers interest.

3. An overview of operations

As the title suggests, this section should briefly look at how your business plans to operate on a day-to-day basis. This should include details of where your business will be based, the corporate structure, whether you will be based entirely online or have stores, etc.

4. Highlights of forecasting and projections

Your business plan should include detailed financial projections. However, for the purpose of the executive summary you only need to provide an overview of your sales forecasting projections for the first few years of business. This should include a clear break-even point that tells the reader when you expect to turn a profit.

5. An outline of your investment needs

Finally, if your business requires financial help, your executive summary should conclude by detailing these needs. This should include a clear total figure that you explain is fully costed in the business plan. Naturally, this means this number should align with projections mentioned throughout your business plan in the forecasting section of your summary.

How long should an executive summary be?

Less is more when it comes to executive summaries. They need to be brief and concise while still representing your entire plan as accurately as possible. As a rule, try to keep the whole section to one page, or two at a stretch.

Executive summary example

[Business name] GJW’s Coffee Co.

[An overview of your business]

GJW’s Coffee launched as a takeaway service in Hull in December 2021. It specialises in high quality coffee, freshly baked pastries, and handmade sandwiches. After initial success, we now want to expand the business by opening our first brick and mortar coffee house. It will be located in an area of the city which currently lacks coffee houses and cafes, despite being a high-income area with a high footfall.

GJW’s current delivery-only model offers a broad range of coffee and espresso products, all of which contain high quality coffee beans. The business caters to all customers by providing each a fully bespoke coffee service - we will make any coffee to order, down to the smallest detail. This will also be the case when we launch our coffee house.

[An overview of your target market]

As Hull has a cool climate for much of the year, hot coffee beverages are big sellers. However, we will also sell iced coffee to satisfy demand during the warmer months. Located near the city’s business district, as well as the university, young professionals, teaching staff, and students are our primary target audience.

In terms of competition, while there is a Starbucks on the university’s campus, this is small and currently cannot satisfy demand. Additionally, local customers are looking for high quality products and a relaxing, sit-in atmosphere. This chain coffee house cannot provide the level of quality and customer service that GJW’s can.

Other than that, takeaway food outlets are the only food/drink businesses located in a 2.5 mile radius of our site.  

[An overview of operations]

GJW’s is a coffee shop and bakery operated by two partners. One partner deals with the finance and administration of the business, while the other deals with sales and the day-to-day running of the company. In order to launch the business’ first brick and mortar store, each partner is providing capital from their personal savings. This will cover start-up expenses and provide financial stability for the first two months of operations. The business is based in Hull, but plans to expand in future years.

[An overview of forecasting and projections]

As demonstrated in the graph below, GJW’s anticipates a steady growth of sales over the next five years. We also anticipate the business should break even by the third month of operations. While profits are expected to be relatively low during the first two years of operations, we expect increasing growth from the third year onwards. We are projecting an initial investment of £150,000 from the two founders.

[Insert your graph here]

[An outline of your investment needs]

In order for the business to achieve its initial goals, an investment plan is required. Detailed below is a list of start-up funding requirements.

Start-up finances

- Initial expenses of £70K. This includes £30K premises renovation costs, £30K equipment purchase costs, £5K legal fees, £5K other (insurance, tax, etc.). This appears as negative earnings in our initial balance as they occurred before launch.

- Starting cash in the bank of £80K

Investment requirements

- Initial investment from founders, detailed above

- £100K 10-year loan from investors (fully costed in business plan)

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• Write Your Business Plan | Part 1 Overview Video
• The Basics of Writing a Business Plan
• How to Use Your Business Plan Most Effectively
• 12 Reasons You Need a Business Plan
• The Main Objectives of a Business Plan
• What to Include and Not Include in a Successful Business Plan
• The Top 4 Types of Business Plans
• A Step-by-Step Guide to Presenting Your Business Plan in 10 Slides
• 6 Tips for Making a Winning Business Presentation
• 3 Key Things You Need to Know About Financing Your Business
• 12 Ways to Set Realistic Business Goals and Objectives
• How to Perfectly Pitch Your Business Plan in 10 Minutes
• Write Your Business Plan | Part 2 Overview Video
• How to Fund Your Business Through Friends and Family Loans and Crowdsourcing
• How to Fund Your Business Using Banks and Credit Unions
• How to Fund Your Business With an SBA Loan
• How to Fund Your Business With Bonds and Indirect Funding Sources
• How to Fund Your Business With Venture Capital
• How to Fund Your Business With Angel Investors
• How to Use Your Business Plan to Track Performance
• How to Make Your Business Plan Attractive to Prospective Partners
• Is This Idea Going to Work? How to Assess the Potential of Your Business.
• When to Update Your Business Plan
• Write Your Business Plan | Part 3 Overview Video
• How to Write the Management Team Section to Your Business Plan
• How to Create a Strategic Hiring Plan
• How to Write a Business Plan Executive Summary That Sells Your Idea
• How to Build a Team of Outside Experts for Your Business
• Use This Worksheet to Write a Product Description That Sells
• What Is Your Unique Selling Proposition? Use This Worksheet to Find Your Greatest Strength.
• How to Raise Money With Your Business Plan
• Customers and Investors Don't Want Products. They Want Solutions.
• Write Your Business Plan | Part 4 Overview Video
• 5 Essential Elements of Your Industry Trends Plan
• How to Identify and Research Your Competition
• Who Is Your Ideal Customer? 4 Questions to Ask Yourself.
• How to Identify Market Trends in Your Business Plan
• How to Define Your Product and Set Your Prices
• How to Determine the Barriers to Entry for Your Business
• How to Get Customers in Your Store and Drive Traffic to Your Website
• How to Effectively Promote Your Business to Customers and Investors
• Write Your Business Plan | Part 5 Overview Video
• What Equipment and Facilities to Include in Your Business Plan
• How to Write an Income Statement for Your Business Plan
• How to Make a Balance Sheet
• How to Make a Cash Flow Statement
• How to Use Financial Ratios to Understand the Health of Your Business
• How to Write an Operations Plan for Retail and Sales Businesses
• How to Make Realistic Financial Forecasts
• How to Write an Operations Plan for Manufacturers
• What Technology Needs to Include In Your Business Plan
• How to List Personnel and Materials in Your Business Plan
• The Role of Franchising
• The Best Ways to Follow Up on a Buisiness Plan
• The Best Books, Sites, Trade Associations and Resources to Get Your Business Funded and Running
• How to Hire the Right Business Plan Consultant
• Business Plan Lingo and Resources All Entrepreneurs Should Know
• How to Write a Letter of Introduction
• What To Put on the Cover Page of a Business Plan
• How to Format Your Business Plan
• 6 Steps to Getting Your Business Plan In Front of Investors

How to Write a Business Plan Executive Summary That Sells Your Idea Here's an easy-to-follow outline to create an impactful business plan executive summary.

By Eric Butow Oct 27, 2023

Key Takeaways

• The purpose of an executive summary
• Common mistakes to avoid

Opinions expressed by Entrepreneur contributors are their own.

This is part 4 / 9 of Write Your Business Plan: Section 3: Selling Your Product and Team series.

The first part of your plan that anybody will see, after the title page and table of contents, is the executive summary. This could be considered an expanded table of contents (in prose form) because it's more than an introduction to the rest of the plan. It's supposed to be a brief look at the key elements of the whole plan—and it's critical.

Executive Summaries Sell Ideas

The actual executive summary should be only a page or two. In it you may include your mission and vision statements, a brief sketch of your plans and goals, a quick look at your company and its organization, an outline of your strategy, and highlights of your financial status and needs. If you've ever read a CliffsNotes version of a classic novel, you get the idea. Your executive summary is the CliffsNotes of your business plan.

Related: Executive Summary

Labor over your summary. Polish it. Refine it. Ask friends and colleagues to take a look at it, and then take their suggestions to heart. If your plan isn't getting the response that you want when you put it to work, suspect a flaw in the summary. If you get a chance to look at another plan that was used to raise a pile of cash, give special scrutiny to the executive summary.

The summary is the most important part of your whole plan. Even if a plan is relatively short, it's difficult for most people to keep that much information in their minds at once. It's much easier to get your arms around the amount of information—just one or two pages—in an executive summary. Your plan is going to be judged on what you include in the summary and on how well you present it.

A good rule of thumb for writing an effective and efficient business plan is to avoid repeating information. Brief is better and clearer, and needless repetition may annoy some readers and confuse others. Take extra care when writing your summary. You'll be glad you did.

Related: How to Craft a Business Plan That Will Turn Investors' Heads

Ultimately, you want the executive summary to be as strong as possible because it is also the first thing people read in your plan, and we all know the power of a strong first impression. This is where you want to wow people and make them think. This is like the coming attractions, or trailers, at the movie theater. You want that trailer to be enticing and bring the audience members back to see the film. Likewise, you want your readers to want to read your plan.

Your Business Plan's Elevator Pitch

As Tim Berry writes in his article How to Write an Executive Summary : "The executive summary is like an elevator pitch. You're selling someone on reading your full plan while quickly summarizing the key points. Readers will expect it to cover certain areas of your business—such as the product, market, and financial highlights, at the very least. While you need to include what's necessary, you should also highlight areas that you believe will spark the reader's interest. Remember, you're telling the brief but convincing story of your business with this summary. Just be sure that you're able to back it up with the right details with the rest of your business plan."

Related: How to Write a Business Plan

When Should You Write Your Executive Summary?

Because the executive summary comes first in your plan, you may think you should write it first as well. Actually, you should write it last, after you've spent considerable time mulling over every other part of your plan. Only then will you truly be able to produce a summary of all that is there. Returning to the CliffsNotes analogy, it's impossible to summarize a book until the book is written.

Purposes of the Executive Summary

The executive summary has to perform a host of jobs. First and foremost, it should grab the reader's attention. It has to briefly hit the high points of your plan. It should point readers to questions requiring detailed responses to the full-length sections of your plan where they can get answers. It should ease the task of anybody whose job it is to read it, and it should make that task enjoyable by presenting an interesting and compelling account of your company.

The first question any investor has is, "How much?" followed closely by, "When will I recoup my investment?" Perceived risk and exit strategies are supportive information, and these in turn are supported by the quality of the management team and the proposed strategies.

Related: Why You Shouldn't Send Your Business Plan to Investors

It doesn't much matter whether you are presenting the plan to a family member, friend, banker, or sophisticated investors such as investment bankers or venture capitalists. They all need the same information. Concealing the amount and terms will only lessen your chances of successful financing.

How Long Should an Executive Summary Be?

Five minutes. This is how long an average reader will spend with your plan. If you can't convey the basics of your business in that time, your plan is in trouble. So make sure your summary, at least, can be read in that time and that it's as comprehensive as possible within that constraint. If you are using a deck, limit yourself to one slide and one minute of comments.

Related: How to Create a Business Plan Investors Will Love

Points to Include in an Executive Summary

A suggested format for an executive summary:

The business idea and why it is necessary. What problem does it solve?

• How much will it cost, and how much financing are you seeking?
• What will the return be to the investor? Over what length of time?
• What is the perceived risk level?
• Where does your idea fit into the marketplace?
• What is the management team?
• What are the product and competitive strategies?
• What is your marketing plan?
• What is your exit strategy?

If you can address each of these in two or three sentences, you will have a twenty to twenty-seven-sentence executive summary.

Company Description

If your company is complex, you'll need a separate section inside the plan with a heading like "Company Description" to describe its many product lines, locations, services, or whatever else it is that makes it a little too complicated to deal with quickly. In any event, you provide a brief description, no longer than a few sentences, of your company in the executive summary. And for many firms, this is an adequate basic description of their company. Here are some one- or two-sentence (mock) company descriptions:

John's Handball Hut is the Hamish Valley's leading purveyor of handball equipment and clothing.

Boxes Boxes Boxes Inc. will provide the people of the metropolitan area with a comprehensive source for packing materials, containers, and other supplies for the do-it-yourself move.

Salem Segway Witch Tours offers tourists the only Segway tours of the infamous home of the seventeenth-century witch trials.

Related: Turn Your Business Plan Into Money!

Optional Information

The following items are not a necessity in your business plan: mission statement and corporate vision. If you have honed either down to a clear and concise sentence, by all means, use it in your plan.

Mission Statement

A mission statement is a sentence or two describing the company's function, market, competitive advantages, and business goals and philosophies.

Many mission statements communicate what your business is about and should include a description of what makes you different from everybody else in your field. Mission statements have a place in a plan: They help investors and other interested parties get a grip on what makes your company special. A mission statement should be clearly written. Here are some (again, mock) examples:

River City Roadsters buys, restores, and resells classic American cars from the 1950s and 1960s to antique-auto buffs throughout central Missouri.

Captain Curio is the Jersey Shore's leading antique store, catering to high-quality interior decorators and collectors across the tri-state area.

August Appleton, Esq., provides low-cost legal services to personal- injury, workers' compensation, and age-discrimination plaintiffs in Houston's Fifth Ward.

Related: How to Use Your Business Plan Most Effectively

Corporate Vision

A mission statement describes the goals and objectives you could "reasonably" expect to accomplish. A small software company whose mission statement included the goal of "putting Microsoft out of business" would be looked upon as foolishly naive.

In a vision statement, however, just those sorts of grandiose, galactic-scale images are perfectly appropriate. When you "vision"—to borrow the management consultant's trick of turning nouns into verbs—you imagine the loftiest heights you could scale, not the next step or several steps on the ladder.

Does a vision statement even have a place in a business plan? You could argue that it doesn't, especially because many include personal components such as "to love every minute of my work and always feel I'm doing my best." But many investors deeply respect visionary entrepreneurs. So, if you feel you have a compelling vision, there's no reason not to share it in your plan.

Related: 6 Tips for Making a Winning Business Presentation

Extract the Essence

The key to the executive summary is to pick out the best aspects of every part of your plan. In other words, you want to extract the essence. Instead of describing everyone in your company, talk only about your key managers. Instead of talking about all your products, mention only the major ones or discuss only product lines instead of individual products. It's a highlight reel, so to speak.

Article Tools and Summarizing the Summary

Within the overall outline of the business plan, the executive summary will follow the title page. The summary should tell the reader what you are planning to do. All too often, the business owner's desires are buried and lost when the reader scrolls through. Clearly state what you are planning to do (your ideas) and what you are seeking in the summary.

The statement should be kept short and businesslike, ideally no more than half a page. It could be longer, depending on how complicated the use of funds may be, but the summary of a business plan, like the summary of a loan application, is generally no more than one page. Within that space you'll need to provide a synopsis of the entire business plan. Key elements that should be included are:

Financial requirements. Clearly states the capital needed to start or expand the business. Detail how the capital will be used and the equity, if any, that will be provided for funding. If the loan for initial capital will be based on security instead of equity within the company, you should also specify the source of collateral.

Related: The One-Paragraph Start-Up Plan

Business concept. Describes the business, its product(s), and the market it will serve. It should point out just exactly what will be sold, to whom, and why the business will hold a competitive advantage.

Financial features. Highlights the important financial points of the business including sales, profits, cash flows, and return on investment. Current business position. Furnishes relevant information about the company, its legal form of operation, when it was formed, the principal owners, and key personnel.

Major achievements. Details any developments within the company that are essential to the success of the business. Major achievements include items like patents, prototypes, location of a facility, any crucial contracts that need to be in place for product development, or results from any test marketing that has been conducted.

When writing your statement of purpose, don't waste words. If the executive summary is eight pages, nobody's going to read it because it will be very clear that the business, no matter what its merits, won't be a good investment because the principals are indecisive and don't really know what they want. Make it easy for the reader to realize at first glance both your needs and capabilities.

Related: The Main Objectives of a Business Plan

More in Write Your Business Plan

Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.

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How to create an executive summary for a business plan

Table of Contents

What to include in an executive summary

Startup companies, established businesses, how long should the executive summary be, tips on how to create an executive summary for a business plan, leave it until the end, focus on providing a summary, use strong and positive language, polish it up, tailor it to your audience, show off your efficient financial management.

An executive summary of a business plan is an overview that summarises the key points of the document to prepare readers for the upcoming content. When done well, an executive summary entices the reader to keep reading. But, the summary can also cause readers to lose interest if you fail to hook their attention. 

This guide will show you how to write an executive summary for your small business plan to ensure you include everything you need. We’ll cover the following points:

• What to include in your executive summary
• How long the summary should be
• How the right accounting software can help

The information to include in your executive summary depends on where you are in your business venture and what your goal is with writing a business plan. Plans for startups and established businesses typically have different purposes.

Say you’re a startup looking for funding from banks, angel investors , or venture capitalists . In that case, you’ll need to provide a solid case for your business idea to convince investors that it’s a good investment. 

For that reason, a typical executive summary for a startup company will include: 

• Business opportunity – describe the need or opportunity for your solution and how your business will serve the market. 
• Target market – describe the customer base you will target and why. Learn how to define your target market .
• Business model – describe your products or services and how they will appeal to your target market. 
• Marketing and sales strategy – how do you plan to market your solution to your target market? Outline any plans you have and why you believe they will work.
• Financial projection – summarise your financial plan for at least the next three years, including expected startup costs , projected income, and your budgeting plans.  
• Owners – describe the owners of your business (in this case, you) and the expertise they bring to the business.
• Implementation plan – outline the plan and timeline for taking your business from the planning stage to the launch. 

If your business is already up and running, the purpose of your business plan is likely to secure funding to support your growth plans. For example, you may want to expand your product line or add to your existing services. 

So an executive summary for an established business typically includes:

• Mission statement – this is where you articulate the purpose of your business by describing what your company does and outlining your core values and business philosophy.
• Company information – share some background information about your business. Describe your solution, business set-up (freelancer or limited company), owners, business locations, and so on. 
• Business highlights – describe how your business has evolved over time. Include things like year-on-year revenue increases, profitability, number of customers/clients, and increases in market share.
• Financial summary – if the purpose of writing your business plan is to seek additional financing, give a brief summary of how much you’ll need and why. 
• Future goals –  this is where you describe the goals and objectives you have for your business. If you seek financing, explain how you’ll use it to expand the business and any other ways you’ll increase its profitability.

Ideally, your executive summary should be under one-two pages, but it can be longer if absolutely necessary. 

The general rule of thumb is to keep your executive summary as short as possible while still covering the relevant points. Readers will have limited time and attention to read your summary, so getting the key details out as quickly as possible is crucial. 

Follow the tips below to create an executive summary that provides value and grabs the reader’s attention from the get-go.

It’s best to leave your executive summary for last, so you know exactly what the key points are in your business plan. If you don’t know where to begin when writing your summary, the easiest way is to take a summary sentence or two from each business plan section. 

The key to a good executive summary is to avoid going into too much detail. That’s what the business plan itself is for. Your readers don’t want to have their time wasted, so keep the summary brief and to the point. 

You want your summary to pull the reader in and encourage them to read the entire business plan. So use language that creates excitement and shows the reader what a fantastic business you are. For example, instead of writing “this could have potential to succeed in different markets…”, write “this shows excellent potential to succeed in different markets…”

Your executive summary should be easy to read. A great way to test how well your text flows is to read it aloud. Is it clear and concise, or does it sound choppy? Once you’re happy with how your text sounds, let someone read it who knows nothing about your business. Then ask them for suggestions for improvement. 

It’s important to ensure that your summary appeals to the people you expect to read it. So if your goal is to entice investors, focus on highlighting the opportunity your business provides. If the purpose is to get a small business loan , focus on aspects that traditional lenders want to see. Highlight your industry experience and show your collateral and strategies to minimise the lenders’ risk. 

Your executive summary (and entire business plan) should demonstrate why your business is worth investing in. So do what you can to boost your business profitability. 

An excellent way to do this is by investing in a solution that optimises your financial management, like Countingup. This unique two-in-one business current account and accounting software lets you manage all your financial data from one simple app. 

Countingup helps you improve your financial health in several ways. Its automatic expense categorisation feature sorts your costs into HMRC-approved categories, keeping your records organised for you. The app also generates running cash flow reports and tax estimates so you can see how your business performs at any given time.

These features, along with all the other handy tools Countingup offers, give you an easy way to keep track of your expenses, income, profits and loss. This way, you can make informed decisions to improve your profitability and share them in your business plan. 

Find out more here . 

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• Counting Up on LinkedIn

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Learning center series

10 free catering business plan templates and examples

• Published on February 8, 2024
• by Patricia Fernandes
• Last updated: 2 months ago

When starting a catering business, it’s essential to have a well-structured business plan in place. A comprehensive business plan not only helps you outline your goals and strategies but also serves as a detailed roadmap for success. However, creating a business plan from scratch can be a daunting task. That’s where catering business plan templates come in handy. Understand the importance of a well-devised plan for your catering venture , as it can significantly improve your chances of overcoming challenges and achieving long-term success.

Once you’ve found a suitable template, the next step is to customize it to fit your unique catering business. This involves filling in the specific details of your business, such as your target market, menu offerings, pricing, marketing strategies, and financial projections. Customizing key elements of the template allows you to tailor it to your specific goals and vision, ensuring that your business plan accurately reflects catering businesses. Understanding the challenges that come with taking on the catering industry, developing a strategy through a tailored catering service business plan from the onset can significantly influence your path towards achieving long-term success and stability.

Why Creating a Catering Business Plan is Essential

In the catering industry, having a well-thought-out business plan is crucial for success. It provides a roadmap for your business and helps you make informed decisions. Here are some key reasons why creating a catering services business plan is essential:

Defining Your Goals: A business plan allows you to clearly define your goals and objectives. It helps you identify what you want to achieve with your catering business.

Understanding Your Target Market: By conducting market research and analysis, you can gain valuable insights into your target market. This information will help you tailor your services to meet the needs and preferences of your customers.

Outlining Strategies: Your business plan serves as a guide to outline the strategies you will implement to achieve profitability. It includes details on your menu, pricing, marketing tactics, and financial projections.

Setting Yourself Up for Success: By carefully considering all aspects of your business and planning for potential challenges, you can set yourself up for long-term success in catering companies.

If you’re dreaming of starting your catering biz, you’re in the right place. We selected 10 catering business plan templates to help you get from daydreaming to doing. We’ve broken them down into three categories: Basic, Intermediary, and Complete, so you can find just what you need, no matter where you’re at in your catering business planning process.

Basic Catering Business Plan Templates

Template 01: the quick start guide.

This business plan template is like the fast food of business plans – quick, easy, and gets the job done. It’s perfect if you’re just getting your feet wet. Considering launching a catering service? Ensure you have a robust plan for your catering venture by understanding the essential components and pitfalls to steer clear of.

Use the Quick Start Guide Template

Template 02: The Budget Buddy

Focused on the numbers, this one helps you figure out your starting costs and financial plan for how you’ll keep the lights on.

Use the Budget Buddy Template

Template 03: The Startup Planner

This template helps you outline your business concept’s initial needs, legal structure, and pricing strategy.

Use the Startup Planner Template

Intermediary Catering Business Plan Templates

Template 04: conscious catering strategy.

Focusing on the growing trend for healthy and dietary-specific menus, this sample menu template is perfect for caterers wanting to market and specialize in health-conscious catering industry food offerings. Learn to adapt and enhance your catering business plan to cater to health-conscious consumers, ensuring the long-term growth and success of your business.

Use the Conscious Catering Strategy Template

Template 05: Full-Service Catering Plan

Designed for established catering services and catering companies ready to expand, this template focuses on operational and pricing strategies, detailed menu planning, and advanced, marketing strategies and techniques. It’s ideal for caterers looking to scale their operations and refine their service offerings. Discover strategies on constructing a lucrative catering business plan , with guidance on enhancing operations, menu selections, and marketing approaches. Visit Metrobi’s website to delve deeper.

Use the Full-Service Catering Plan Template

Template 06: Catering Growth Accelerator

Unless you’re planning to do everything yourself (spoiler: not a good idea), this template helps you plan out your dream team.

Use the Catering Growth Accelerator Template

Complete Catering Business Plan Templates

Template 07: the full feast.

This is the big one – a comprehensive marketing plan for a full catering company template that covers everything from A to Z. If you’re ready to dive deep, this is for you. Planning to launch or manage a catering service? Ensure you have a detailed catering service business plan to guide you through every step.

Use the Full Feast Template

Template 08: The Event Ace

Specializing in events? This template focuses on planning for different types of clients at events and managing bookings at networking events.

Use the Event Ace Template

Template 09: The Growth Guru

Thinking ahead? This template helps you map out marketing strategy detailed plan for how you’ll expand and grow over time.

Use the Growth Guru Template

Template 10: The Risk Wrangler

Every serious business owner faces challenges. This template helps you identify potential risks to business goals and plan how to handle them.

Use the Risk Wrangler Template

Taking Action and Customizing Your Business Plan

Now is the time to take action and start creating your catering business plan. While examples and templates can be helpful starting points, it’s important to customize them to fit your unique business needs. Remember, your catering business plan template is a living document that can be updated and adjusted as your business grows and evolves. Learn how you can adapt and refine your catering business plan to ensure it aligns with your goals, enabling sustainable growth and success in the competitive catering landscape. Explore strategies to advance and update your catering business plan , positioning your venture for enduring prosperity and distinction in the bustling catering market.

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Lawmakers, led by representative rick larsen, are seeking access to boeing's comprehensive quality improvement plan submitted to the faa. the plan aims to address systemic quality-control issues. boeing is working transparently with congressional leaders and has released an 11-page executive summary covering six critical production areas focused on safety..

Lawmakers want access to Boeing's full comprehensive quality improvement plan delivered to the Federal Aviation Administration, the top Democrat on the House Transportation and Infrastructure committee said Tuesday. Representative Rick Larsen said lawmakers want access to the plan after meeting behind closed doors with FAA Administrator Mike Whitaker, who in late February gave Boeing 90 days to develop a comprehensive plan to address "systemic quality-control issues."

"We want to evaluate it ourselves," Larsen said. "The problems of Boeing in safety and culture were a long time in the making -- and the change in safety culture will be a long time in making as well," Larsen said. The FAA did not immediately comment.

Boeing said Tuesday it is "working transparently with congressional leaders to provide the information requested about our Safety and Quality Plan." The planemaker last week released the plan's 11-page executive summary that disclosed six critical, safety-focused production areas it will address. Key performance measures include employee proficiency, number of hours to address issues, including the total number of rework hours per airplane, and supplier shortages.

Whitaker in February barred Boeing from boosting production of its best-selling plane after a door panel blew out during a Jan. 5 flight on a new 737 MAX 9 operated by Alaska Airlines. He said last week he did not expect Boeing to win approval to increase production of the MAX "in the next few months." Larsen expects the FAA to continue intense oversight of Boeing.

"The inspectors at Boeing that FAA has put on the line are going to be there a long time -- this is going to be a sea change for the Federal Aviation Administration," he said. Rep Garret Graves, who chairs a subcommittee on aviation, wants the FAA to disclose how Boeing can get authority restored to boost production. "What exactly are the metrics that are going to be used to determine yes, you have hit the appropriate criteria," Graves asked. "This needs to be 100% math and science."

Whitaker, who did not meet with reporters after the session, said last week that "regardless of how many planes Boeing builds, we need to see a strong and unwavering commitment to safety and quality that endures over time. This is about systemic change, and there's a lot of work to be done."

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Dol’s retirement security rule & pte 2020-02 amendment: what advisers need to know now about giving rollover advice after sept 23, 2024.

May 15, 2024 07:01 am 0 Comments CATEGORY: Regulation & Compliance

Executive Summary

On April 25, 2024, the Department of Labor (DoL) issued the final version of its Retirement Security Rule (the "Final Rule"), which imposes an ERISA fiduciary standard "that applies uniformly to all investments that retirement investors may make with respect to  their retirement accounts ".  The new rule represents the latest attempt by regulators to define the types of individuals and advice that are subject to a fiduciary obligation, following on the heels of the SEC's Regulation Best Interest (Reg BI) and Commission Interpretation Regarding Standard of Conduct for Investment Advisers, as well as the DoL's own 2016 fiduciary rule (which was struck down by Federal courts in 2020) and Prohibited Transaction Exemption 2020-02.

Specifically, the DoL's new Retirement Security Rule defines an "investment advice fiduciary" as anyone who makes an investment recommendation to a retirement investor which  is provided  for a fee or other compensation (e.g., commissions), and who holds themselves out as a trusted adviser by either stating they are acting as a fiduciary or otherwise indicates that they are making individualized recommendations based on the investor's best interest.  And  although many advisors may have been already subject to a fiduciary standard under existing SEC or DoL regulations, the DoL's fiduciary standard is more stringent than others (e.g., requiring advisors not just to disclose but to eliminate  certain  conflicts of interest), meaning that even advisors who already considered themselves fiduciaries under previous rules may find themselves needing to update their processes to comply with the DoL's new standards.

In practice, the DoL's Final Rule means that financial advisers who advise clients about rolling over assets from an employee retirement account like a 401(k) plan into an IRA are now subject to ERISA fiduciary obligations. Most notably, the new DoL rule  is meant  to capture one-time recommendations by firms and their representatives made to retail retirement investors for almost any type of investment, meaning that the Final Rule covers not only RIAs and broker-dealers, but also insurance agents, bank employees, and others providing advice about how retirement investors should invest their 401(k) plan or IRA assets. It also covers many types of investments, including annuities, fixed-indexed annuities, CDs and other banking products, digital assets, commodities, and real estate, whereas previous rules like Reg BI and PTE 2020-02 applied only to securities like stocks, bonds, and funds.

In addition to issuing the Final Rule, the DoL modified existing Prohibited Transaction Exemptions (PTE 2020-02 and PTE 84-24) as part of its rollout of new rules around retirement advice. The amendments to the exemptions notably include revisions to PTE 2020-02's disclosure requirements to bring them more in line with SEC's Reg BI. 

In sum, the Final Rule expands ERISA's stringent fiduciary obligations to cover almost any situation where advice  is provided  for a fee to a retirement investor where there is an expectation that the advice  being given  is in the investor's best interest. The Final Rule covers advisory firms and their representatives providing "fiduciary investment advice" to ERISA and non-ERISA plans, including IRAs. The Final Rule also covers broker-dealers and their representatives, insurance agents, bank branch employees selling bank products, and almost any other entity providing recommendations to retirement investors about investing their retirement assets.  And  with the new rules taking effect on September 23, 2024 (with a one-year transition period after the effective date for some of the conditions in the Prohibited Transaction Exemptions), the time is rapidly approaching for advisors to begin complying with DoL's expanded fiduciary standards!

Author: Jaqueline Hummel

Jaqueline M. Hummel, J.D., IACCP®, is the Director of Thought Leadership for SEC Compliance Consultants, Inc. (SEC3) and an Independent Compliance Consultant working with registered investment advisers. Before joining SEC3, she served as Director of Thought Leadership for ACA Group. She previously served as a partner at Hardin Compliance for more than 10 years.  She also has experience as a Chief Compliance Officer and in-house counsel for various financial services companies. Jaqi received her bachelor’s degree from the University of Wisconsin-Madison and her J.D. degree from Emory University School of Law.

Read more of Jaqueline’s articles here .

On April 25, 2024, the Department of Labor (DoL) published its latest attempt to update the definition of an investment advice fiduciary, the Retirement Security Rule  (the "Final Rule"). This new rule imposes an ERISA fiduciary standard "that applies uniformly to all investments that retirement investors may make  with respect to  their retirement accounts ",  which means that financial advisers who  give advice to  clients about whether to roll over assets from a 401(k) plan into an IRA, or many other investment products, are now subject to ERISA fiduciary obligations.

This  may seem like old news, given that many Registered Investment Advisers (RIAs) and broker-dealers already comply with  Regulation Best Interest  (Reg. BI), the  Commission Interpretation Regarding Standard of Conduct for Investment Advisers  (the "Interpretation"), and the DoL's  Prohibited Transaction Exemption 2020-02 (PTE 2020-02). The DoL, however, felt that these regulations did not go far enough to protect retirement investors from improper investment recommendations and harmful conflicts of interest. The expanded definition offered by the Final Rule will cover more financial services providers (e.g., insurance agents and bank employees) and more investment products (e.g., annuities, real estate, CDs, commodities, and digital assets). 

The new rule takes effect on September 23, 2024, with a 1-year transition period after the effective date for some of the conditions in the prohibited transaction exemptions. From a practical standpoint, however, the Final Rule will have a minimal effect on investment advisers that already comply with PTE 2020-02 and the Interpretation. Specifically, the DoL made changes to PTE 2020-02 along with the Final Rule  that will require  advisers to update their disclosures, policies  and  procedures for compliance with the exemption. 

Historical Perspectives On Fiduciary Duty: Shaping The Retirement Security Rule 

The release of the DoL's Retirement Security Rule (the "Final Rule") and its amendments to existing prohibited transaction exemptions  PTE 2020-02  and  PTE 84-24  are the latest in a long line of attempts to update ERISA's definition of "investment advice fiduciary" to provide greater protections to retirement investors. Back in 1974, when ERISA  was initially passed , the DoL enacted regulations imposing fiduciary liability on advisers for managing assets subject to ERISA if the adviser provided individualized investment advice for compensation  on a regular basis  that  was intended  to serve as the primary basis for investment decisions  with respect to  plan assets. The advice also had to be provided  pursuant to  an agreement. 

The ERISA criteria that determined whether advisers were subject to fiduciary liability are known as the "5-part test". Under this fiduciary test, a person is an "investment advice" fiduciary with respect to a plan (including an IRA) under the Employee Retirement Income Security Act of 1974, as amended (ERISA), and the prohibited transaction rules of the Internal Revenue Code when: 1) providing  advice or recommendations  regarding purchasing or selling, or the value of, securities or other property  for a fee  2) on a  regular basis  3) pursuant to a  mutual understanding  that 4) the investment advice will serve as  a primary basis  for an investment decision, and 5) the advice is  individualized.

According to  the DoL's Retirement Security Rule Fact Sheet , "advice that  was provided  on a 'one-time' basis, like many recommendations to roll retirement savings out of a workplace retirement plan and into an IRA, was typically not treated as fiduciary advice and therefore was not protected by ERISA's fiduciary safeguards."

Over time, the DoL discovered that this combination of criteria made it difficult for regulators to impose fiduciary liability on investment advisers, broker-dealers, and other financial professionals  who were  providing investment services to retirement investors. Moreover, as noted by the  DoL  in the final release of the Retirement Security Rule: 

…t he private retirement savings landscape has changed dramatically [since 1975 when ERISA  was enacted ]… Since then, much of the responsibility for investment decisions in employment-based plans has shifted from these large private pension fund managers to plan participants and beneficiaries, as well as IRA owners and beneficiaries, many with low levels of financial literacy. [footnotes omitted]… Moreover, workers have become more reliant on their retirement savings as Social Security benefits have eroded in recent decades.

DoL's Many Attempts To Amend ERISA

In 2010, the DoL  proposed a rule  to amend ERISA to impose a fiduciary standard on investment professionals  giving advice for  a fee regarding asset rollovers from a retirement plan or an IRA to another plan or an IRA. However, this version received  huge  pushback from the financial services industry and  was ultimately withdrawn . 

In 2015, the DoL tried again and released an  updated  rule commonly referred to as "The Fiduciary Rule ",  which sought to impose fiduciary obligations on firms providing investment advice to retirement investors, including broker-dealers, investment advisers, and insurance agents and providers. This rule  was passed  in April 2016, along with the  Best Interest Contract Exemption  (BICE), which allowed firms and their representatives to receive certain types of compensation, such as commissions and 12b-1 fees, subject to certain conditions. But again, the DoL's attempt to update ERISA failed. The Fiduciary Rule was  vacated  by the United States Court of Appeals for the Fifth Circuit in March 2018 because it was an "arbitrary and capricious exercise" of administrative power. 

Regulation Best Interest – The SEC's Approach To Elevating Standards 

While the DoL went back to the drawing board, the SEC entered the breach in June 2019 by adopting a  package of rulemakings, including Regulation Best Interest, Form CRS, and related interpretations , which were "designed to enhance the quality and transparency of retail investors' relationships with investment advisers and broker-dealers, bringing the legal requirements and mandated disclosures in line with reasonable investor expectations, while preserving access (in terms of choice and cost) to a variety of investment services and products."

As part of this package, the SEC  issued  the  Commission Interpretation Regarding Standard of Conduct for Investment Advisers  (the "Interpretation"). Briefly, the Interpretation breaks down an adviser's fiduciary obligations into 2 essential duties: a duty of care and a duty of loyalty.  The duty of care means an adviser must provide advice in the client's best interest, seek  best  execution where the adviser has the responsibility to select broker-dealers to execute  trades,  and monitor the client's portfolio over the course of the relationship.   The duty of loyalty hinges on the adviser making full and fair disclosures of conflicts of interest to its clients so they can make an informed decision about  whether to hire the adviser and invest  in the recommended products.

Similarly,  Regulation Best Interest  (Reg BI) requires broker-dealers to "act in the best interest of a retail customer when  making a recommendation of  any securities transaction or investment strategy involving securities to a retail customer ".  (See  SEC's Press Release ) Under this new regulation, the preexisting suitability standard was replaced with a "best interest standard", meaning  that that broker-dealers  and their representatives must act in the best interests of their retail customers when making investment recommendations. 

Wrapping up the package with a bow, the SEC also established  Form CRS  ( also known as  the Client Relationship Summary form), a disclosure document filed with the SEC and provided to retail investors. The form  is designed  to help retail investors understand the fees and services  being provided , the legal obligations of the firm and its financial professionals, conflicts of interest, and whether the firm and its representatives have any reportable legal or disciplinary history. 

Although , arguably , these regulatory changes  addressed many of the DoL's concerns,  there were still some loopholes that  needed to  be plugge d .   For example, the securities laws (i.e.,   the Advisers Act and Reg BI) do not apply to advice on investments such as real estate, annuities, commodities, digital assets, and bank products such as certificates of deposit. Additionally, Reg BI only applies to recommendations made by broker-dealers to retail customers. Advice by broker-dealers to plan fiduciaries, such as plan investment options, plan design, and investment strategies, are not covered. 

PTE 2020-02 Expands The ERISA Definition Of A Prohibited Transaction 

In December 2020, the DoL tried a different tack and adopted  Prohibited Transaction Exemption 2020-02  (PTE 2020-02). In the exemption's preamble, the DoL  essentially  threw out its longstanding position that advice regarding a one-time rollover was not "fiduciary investment advice" covered by ERISA (see the  Deseret Letter ). Consequently, the DoL considered financial professionals  giving advice  about 401(k) plan rollovers to be ERISA fiduciaries and subject to ERISA's (and the Internal Revenue Code's) Prohibited Transaction Rules.

The Prohibited Transaction Rules prohibit an investment fiduciary from receiving additional compensation as a result of their advice unless an exemption is available. Under Section 406(b) of ERISA and Internal Revenue Code 4975, a fiduciary is prohibited from:

• Using ERISA plan assets for their own interest or for their own account;
• Representing an adverse party in a transaction involving an ERISA plan; or
• Receiving consideration for a personal account from any party dealing with a plan transaction involving plan assets.

Exemptions are essential since penalties for violating the prohibited transaction rules of ERISA and the Internal Revenue Code are severe and can include an excise tax of up to 100% of the amount involved, compounded over time.

In effect, PTE 2020-02 allowed investment advisers and broker-dealers to receive otherwise prohibited compensation, including commissions, 12b-1 fees, revenue sharing, and mark-ups and mark-downs on certain principal transactions (see the earlier blog post,  Complying With PTE 2020-02 Under DoL's New IRA Rollover Requirements ). The exemption requires that firms acknowledge their fiduciary status, comply with the impartial conduct standards, provide written disclosures to clients that the advice given is in their best interest, and conduct an annual compliance review of the firm's compliance with the Impartial Conduct Standards in PTE 2020-02 (discussed in more detail later).

Some industry grumbling and hand-wringing about the difficulties of meeting these conditions caused the DoL to extend the compliance date from February 16, 2021, when the exemption first went into effect, to February 1, 2022.  Nevertheless, many firms serving retirement investors put  in place  policies, procedures, and processes to comply with the exemption.  

State Challenges Against PTE 2020-02

Some members of the financial services industry , however,  did not give up the fight against the DoL's expansion of the definition of fiduciary investment advice.   In  2023 ,  there were 2 court challenges to PTE 2020-02 (in  Florida  and  Texas ).  The courts found that the DoL had overstepped its bounds by stating that an initial recommendation to roll over retirement plan assets to an IRA without a prior relationship could satisfy the "regular basis" requirement and, therefore, be considered fiduciary investment advice under the 5-part test in ERISA Title I and Title II. 

The DoL decided not to appeal the Florida court's decision, but the Texas suit is ongoing. The same plaintiffs in the Texas suit (Federation of Americans for Consumer Choice, Inc., James Holloway, James Johnson, TX Titan Group, LLC, ProVision Brokerage, LLC, and V. Eric Couch) brought a new lawsuit challenging the Retirement Security Rule and the amendment to Prohibited Transaction Exemption 84-24. 

Presumably, the  Final Rule was drafted  in part  to address the legal challenges from Florida and Texas.  In both cases, the plaintiffs argued that the DoL  was attempting  to use informal guidance to change existing rules in violation of the Administrative Procedure Act (APA). By adopting the Final Rule, the DoL  is  attempting  to formalize the new definition in compliance with the APA. 

The Final Rule And Prohibited Transaction Exemptions

The DoL's goal in enacting the Final Rule is to ensure that advice given to retirement investors by financial professionals  is treated  as fiduciary investment advice under ERISA and the Internal Revenue Code (IRC). The Retirement Security Rule broadly treats financial services professionals as ERISA fiduciaries when providing individualized advice to retirement investors, even outside retirement plan rollovers. Therefore, even a one-time recommendation from an investment professional to a retirement investor would be considered fiduciary advice under the new rule, subject to the fiduciary duties of care and loyalty and  to  the prohibited transaction limitations imposed by ERISA.

Section 4975 of the Internal Revenue Code (IRC) and section 406 of the Employee Retirement Income Security Act (ERISA) both prohibit similar transactions and impose an excise tax on those transactions. However, the definitions of plans covered by section 4975(e)(1) of the IRC and Title I of ERISA are not identical.

The IRC covers IRAs and disallows certain interactions between an IRA and people that are related to the IRA account holder (i.e., "disqualified persons", including the IRA account holder; the account holder's spouse, children, parents and spouses of those people; business entities owned 50% or more by these people; and certain business partners, directors, and employees in these businesses).

Similarly, section 406(a) of ERISA prohibits fiduciaries of ERISA plans from entering certain transactions with parties in interest. Parties in interest include any plan fiduciary (e.g., plan administrator, officer, trustee, or custodian), the employer that sponsors the plan or any affiliate, any employee of the employer, and any service provider to the plan (e.g., attorney, auditor, etc.).

The Scope Of The Retirement Investment Rule (Aka The Final Rule)

Essentially, the Final Rule expands ERISA's stringent fiduciary obligations to cover almost any situation  where advice is being  provided for a fee to a retirement investor  where  there is an expectation that the advice  being given  is in the investor's best interest.  

The Final Rule covers advisory firms,  including  private fund managers, and their representatives providing "fiduciary investment advice" to ERISA and non-ERISA plans, including IRAs.  The Final Rule  also covers broker-dealers and their representatives, insurance agents, bank branch employees selling bank products, and almost any other entity and its representatives providing recommendations to retirement investors about investing their retirement assets.  

The Final Rule also covers many  types of  investments, including annuities, fixed-indexed annuities, CDs and other banking products, digital assets, commodities, and real estate. For example, an insurance agent recommending that a retirement investor take a distribution from their 401(k) plan to purchase an annuity would also be considered an ERISA investment advice fiduciary under the Final Rule. 

Fiduciary Definition Expanded

According to the  DoL's fact sheet , a person is an investment advice fiduciary under ERISA if the following conditions  are met :

The service provider makes an investment recommendation to a retirement investor; The recommendation is provided for a fee or other compensation, such as  commissions; and The financial services provider holds itself out as a trusted adviser by Specifically stating that it is acting as a fiduciary under Title I or Title II of ERISA; or Making the recommendation in a way that would indicate to a reasonable investor that it is acting as a trusted adviser making individualized recommendations based on the investor's best interest.

Notably, the DoL revised the Final Rule to refer to "professional" investment recommendations, a change designed to exempt ordinary communications of human resources employees with plan participants from being treated as investment recommendations. 

In addition to being subject to ERISA's fiduciary obligations, "investment advice fiduciaries" under ERISA are prohibited from engaging in certain transactions and, more specifically,  from  using ERISA plan assets for their  own  account. Consequently, routine transactions, such as an adviser recommending that a retirement investor take a distribution from their 401(k) plan and invest it in an IRA, are now considered prohibited transactions under ERISA Section 406(b) of ERISA and  IRC 4975 . 

The penalties for violating the prohibited transaction rules of ERISA and the IRC are severe  and can  include an excise tax of up to 100% of the amount involved, compounded over time. Therefore, an exemption  is required  for investment professionals and their firms to continue serving retirement investors. 

Notably, the penalties for prohibited transactions under ERISA and the IRC differ. Under ERISA, the DoL can assess a penalty against a party in interest of up to 5% of the amount involved for each year or part thereof during which a prohibited transaction continues. IRC Section 4975 allows the IRS to impose a 15% excise tax.

Both ERISA and IRC can impose penalties of up to 100% of the amount involved if the transaction is not corrected in a timely manner. A prohibited transaction may also violate the exclusive benefit rule in IRC section 401(a), potentially resulting in an IRA losing its tax-exempt status.

So, in addition to the Final Rule, the DoL also amended existing Prohibited Transaction Exemptions, including  PTE 2020-02  and  PTE 84-24 .  As discussed in more detail  later , PTE 2020-02 allows financial institutions to give fiduciary investment advice to ERISA plans, ERISA plan participants, and IRAs and to receive otherwise prohibited compensation resulting from that advice, provided that certain conditions are satisfied. Similarly, PTE 84-24 provides relief for certain parties to receive commissions when plans and IRAs purchase recommended insurance and annuity contracts and mutual fund shares sold by principal underwriters (since PTE 84-24 deals primarily with insurance products and mutual funds, it is outside the scope of this article). 

Changes From The Proposal Clarifying The Definition Of Recommendations

In its original  rule proposal , the DoL defined "fiduciary" as a person (or its affiliates) who gives investment advice or makes an investment recommendation to a retirement investor  and  has "discretionary authority or control" over the assets. However,  the discretion requirement was dropped  because commenters raised concerns that it would include affiliates  that have  discretion but no direct relationship with the retirement investor. 

But what  specifically is  a recommendation? The Final Rule defines a "recommendation" to include advice about: 

• The advisability  of acquiring, holding, disposing of, or exchanging securities or other investment property, investment strategy, or how securities or other investment property should  be invested  after the securities or other investment property are rolled over, transferred, or distributed from the plan or IRA;
• The management of securities or other investment property, including, among other things, recommendations on investment policies or strategies, portfolio composition, selection of other persons to provide investment advice or investment management services, selection of investment account arrangements (e.g., account types such as brokerage versus advisory) or voting of proxies appurtenant to securities; and
• Whether  to roll over, transfer, or distribute assets from a plan or IRA, including recommendations as to whether to engage in the transaction, the amount, the form, and the destination of such a rollover, transfer, or distribution.

As discussed in the Final Rule's release, the rule covers  not only securities recommendations but also recommendations by investment professionals  to retirement investors regarding account types, plan investment line-ups, and investment strategies and policies.  In addition to securities recommendations, the Final Rule  also  applies to annuities, fixed indexed annuities, CDs and other banking products, digital assets, commodities, and real estate. The Final Rule does not provide an exception for investments in private funds. 

The DoL clarified that the term "investment property" does not include health, term life, and disability insurance policies as long as they do not include an investment component. 

Sales Pitch And Educational Exceptions

In the Final Rule's release, the DoL stated that investment advice does not include:

• A sales pitch for a product or investment strategy where the recommendation  is not made  using professional expertise or considering the retirement investor's specific needs and  circumstances;  or
• General conversation about retirement planning;
• General investment and financial information; and
• Asset allocation models.

While private fund managers may take advantage of the "sales pitch" exception to avoid being considered an investment advice fiduciary under ERISA when soliciting investors, such managers should be  very careful  when discussing their funds with retirement investors to avoid making a recommendation. They should adopt an overall communication strategy for retirement investors to help them stay on script and avoid sending  any messages that recommend  their funds as appropriate investments to meet their specific needs.

How The Final Rule Defines A "Retirement Investor"

The Final Rule defines "retirement investor" as a plan, plan participant or beneficiary, IRA, IRA owner or beneficiary, or IRA fiduciary. This definition includes defined contribution plans, Health Savings Accounts (HSAs),  certain  403(b) plans, Keoghs, Savings Incentive Match Plans for Employees (SIMPLEs), SIMPLE IRAs, and Simplified Employee Pensions (SEPs). 

This definition of retirement investor is narrower than the original proposal's definition. Specifically, the Final Rule does not apply to plan and IRA fiduciaries who are "merely themselves investment advice fiduciaries." This change appears to exempt advice given to financial professionals as fiduciary investment advice (e.g., wholesalers). 

Liability Disclaimers Not Allowed

The Final Rule explicitly states that written statements by a person disclaiming status as a fiduciary will not control "to the extent they are inconsistent with the person's oral communications, marketing materials, applicable State or Federal law, or other interactions with the retirement investor." 

What The Final Rule Means For Investment Advisers

The Retirement Security Rule applies both ERISA fiduciary standards and its prohibited transaction rules to investment professionals who  provide investment advice to retirement investors about  how to invest their 401(k) plan and IRA assets.  Investment advisers and broker-dealers may be asking, what's the big deal?  Fiduciary duties have already  been imposed  on us through  Reg BI and the Advisers Act.  How much worse can this be?

There is a difference between the fiduciary duty imposed under the Advisers Act and that imposed under ERISA and the IRC.  A fiduciary  under the Advisers Act must consider conflicts of interest and address them through disclosures, internal controls, or policies and procedures.   Under ERISA and the IRC , however ,  certain  conflicts cannot be resolved  through disclosure and the client's consent.  These conflicts  are described  in the Prohibited Transaction Rules under ERISA and the IRC. The DoL grants exemptions to these rules to allow certain transactions, but only under conditions that mitigate the conflicts. As previously discussed, exemptions to ERISA and IRC Prohibited Transaction Rules are essential since penalties for violating them are severe and can include an excise tax of up to 100% of the amount involved, compounded over time.

When the DoL expanded the definition of fiduciary investment advice to cover recommendations regarding 401(k) plan rollovers in the Final Rule, this meant that investment professionals who advised retirement investors on how to invest these assets – and received a fee for doing so – were engaging in a prohibited transaction. Recognizing that retirement investors still needed professional advice to manage their assets, the DoL  needed   to provide  an exemption to allow investment professionals to provide this advice and get paid for it. 

Long story short, the DoL was concerned that retirement investors were not  being provided  appropriate disclosures about the role of investment professionals and the fees and costs associated with investment products offered. The DoL's goal was, and continues to be, to require financial professionals to put their  clients'  interests first when  giving advice to  retirement investors. 

Changes To PTE 2020-02

According to  the Final Release to the Amendment to Prohibited Transaction Exemption 2020-02  (the "Amendment"), the changes to PTE 2020-02  are intended  to make it "more broadly available" for "Financial Institutions and Investment Professionals to receive reasonable compensation for recommending a broad range of investment products to Retirement Investors, including insurance and annuity products."

The most significant changes to existing PTE 2020-02 include:

• Expanding its scope to include "recommendations of any investment product, regardless of whether the product  is sold  on a principal or agency basis"; 
• Adding non-bank Health Savings Account (HSA) trustees and custodians to the definition of "Financial Institution";
• Revising the disclosure requirements to be more in line with the SEC's Regulation Best Interest (Reg BI), the  Commission Interpretation Regarding Standard of Conduct for Investment Advisers  (the "Interpretation"), and other regulators' disclosure requirements; 
• Allowing robo-advisers to use the exemption;
• Allowing Pooled Plan Providers (PPPs) providing investment advice to Pooled Employer Plans (PEPs) to use the exemption (however, a PPP's decision to hire an affiliated or related party as an advice provider  is excluded );
• Increasing the circumstances for disqualification from reliance on the PTE;
• Requiring firms to correct, report, and pay excise taxes to the IRS for any non-exempt prohibited transactions that occurred as a result of providing fiduciary investment  advice;  and 
• Changing  the correction procedures  to allow  firms to self-correct violations without reporting to the DOL.  

Comparing The Original PTE 2020-02 Requirements To Amended PTE 2020-02

While the amended PTE 2020-02 applies starting September 23, 2024, a  1-year  phase-in period begins on September 23, 2024 , which  allows investment professionals to receive reasonable compensation if they comply with the fiduciary acknowledgment requirement and "Impartial Conduct Standards" (as discussed below). The following discussion compares the original  PTE 2020-02 as adopted on December 18, 2020  to the  amended PTE 2020-02 .  

Acknowledgments And Disclosures

In the original PTE 2020-02, parties providing fiduciary investment advice to retirement investors  were required  to make certain disclosures and acknowledgments, including their fiduciary status under ERISA. Amended PTE 2020-02 makes the following changes:

• Adds clarification that the disclosures can be made  when recommendations  are  made ,  or  on the date  when the financial institution or investment professional becomes entitled to compensation as a result of the transaction. 
• Requires that the acknowledgment make it "unambiguously clear" that the recommendation is being made  in a fiduciary capacity under ERISA or the Code. 

The original PTE 2020-02 requires disclosure to the client about the scope of the relationship and all material conflicts of interest. Where the  existing exemption required  a written acknowledgment that the firm and its investment professionals are fiduciaries, an explanation of the services to  be provided , and an accurate description of material conflicts of interest of the firm and its financial professionals, Amended PTE 2020-02 also requires:

• A written statement of PTE 2020-02's care and loyalty obligations; 
• The written acknowledgment of fiduciary responsibility (described above);
• Disclosure of the material fees and costs that apply to the retirement investor's transactions, holdings, and accounts;
• Disclosure of the scope of services being provided  and any material limitations on those services; and 
• All material facts relating to conflicts of interest associated with the recommendation. 

The DoL stated that these disclosures  were intended  to be consistent with a broker-dealer's obligations under Reg. BI. 

The original PTE 2020-02 requires that  prior to  engaging in a rollover recommended under the exemption, the financial institution should provide documentation of specific reasons for the rollover recommendation. The Amended Exemption adds  prior guidance  from the DoL stating that factors to  be considered  must include: 

• The retirement investor's alternatives to a rollover, including leaving the money in their current employer's plan, if applicable; 
• The fees and expenses associated with both the plan and the recommended investment or account; 
• Whether the employer pays for some or all of the plan's administrative expenses;  and 
• The different levels of services and investments available under the plan and the recommended investment or account. 

According to the final  release for the Amended PTE 2020-02 , the exemption no longer requires disclosures regarding advice for a retirement investor to roll over its account from one IRA or another IRA or to change account type. This disclosure requirement only applies when the investment professional provides advice to engage in a rollover to a plan participant or beneficiary regarding the post-rollover investment of ERISA plan assets. Additionally, the rollover disclosure requirement does not apply when the investment professional does not make a recommendation.

Impartial Conduct Standards

The original PTE 2020-02 required investment professionals and financial institutions to comply with the Impartial Conduct Standards, which included a "best interest" standard, when providing fiduciary investment advice to retirement investors. 

Best interest  is defined  under Original PTE 2020-02 as:

Exercising reasonable diligence, care, skill, and prudence in making a recommendation, meaning that the firm and its investment professionals must have a reasonable basis to believe that the recommendation  being made is in the best interest of the client, based on that client's investment profile and the potential risks and rewards associated with the recommendation.

Amended PTE 2020-02 drops the term "Best Interest" and replaces it with the SEC's language from the  Commission Interpretation Regarding Standard of Conduct for Investment Advisers  (the "Interpretation"), which requires that the financial institution and investment professional provide investment advice which satisfies a duty of care and a duty of loyalty, as discussed earlier. 

Simply put, an  investment professional is supposed to make investment recommendations that  are in the  best interest of the client  based  on their stated needs and not on the amount the investment professional will get paid.  The DoL provides specific examples,  stating  that an "Investment Professional generally could not recommend that the Retirement Investor enter into an arrangement requiring the Retirement Investor to pay an ongoing advisory fee to the Investment  Professional,  if  the Retirement Investor's interests were better served  by the payment of a one-time commission to buy and hold a long-term investment."

While the DoL did not provide any further explanation, the SEC has applied a reasonability standard, stating in the Interpretation  that,  "[i]n providing advice about account type, an adviser should consider all types of accounts offered by the adviser and acknowledge to a client when the account types the adviser offers are not in the client's best interest."

The remaining Impartial Conduct Standards from the Original PTE  2020-02 did not significantly change  in the amended version.  These standards include the following requirements for financial institutional and investment professionals:

• Receive only reasonable compensation (as compared to the marketplace) and seek the best execution of the transaction;
• Ensure that statements made to retirement investors about the recommended transaction are not materially misleading (in Amended PTE 2020-02, however, the DoL added language stating that the definition of "materially misleading" includes "omitting information that is needed  to prevent the statement from being misleading to the Retirement Investor" under the circumstances); and
• Provide written disclosures to retirement investors of the reasons  the rollover recommendation is in their best interest. The DoL also narrowed the required rollover disclosure  so that it applies  only to recommendations to roll over from an ERISA plan to an IRA. Original PTE 2020-02 also required disclosures for recommendations to roll over from one IRA to another or to change account type.

New! Correction Of Good Faith Disclosure Errors

Amended PTE 2020-02 allows financial institutions to correct errors or omissions in the required disclosures if they  are made  in good faith.  The corrected disclosure must be provided   no later than  30 days after the  date the  error  is ,   or should have been , discovered .  

Changes To Policies And Procedures Requirement

The original PTE 2020-02 requires that financial institutions "establish, maintain, and enforce" written policies and procedures  designed  to ensure that the firms and their investment professionals comply with the Impartial Conduct Standards. Amended PTE 2020-02 changes this obligation by requiring that the policies and procedures address all the requirements of PTE 2020-02, not just the Impartial Conduct Standards.

While the original PTE 2020-02 prohibited firms from using practices that create an incentive for a financial institution or investment professional to place their interests ahead of retirement investors, amended PTE 2020-02 includes specifics, stating that firms may not use "quotas, appraisals, performance or personnel actions, bonuses, contests, special awards, differential compensation, or other similar actions or incentives" that would lead investment professions from meeting their care or loyalty obligations. 

Annual Retrospective Compliance Review And Self-Correction Procedure 

The original PTE 2020-02 required financial institutions to conduct an annual review of the firm's compliance with the Impartial Conducts Standards and its policies and procedures governing compliance with the exemption.  and  document the results in a written report to a "Senior Executive Officer" of the financial institution. 

The amendment requires  that the review must  test compliance with all the conditions of PTE 2020-02, not just the Impartial Conduct Standards. The review also must include a certification from the Senior Executive Officer that the financial institution has corrected, filed reports with the IRS, and paid excise taxes for any non-exempt prohibited transactions discovered by the financial institution. 

The original PTE 2020-02 included a procedure  to allow  financial institutions to self-correct violations of the exemption. If the procedure was followed, a non-exempt prohibited transaction would not be deemed to  occur . PTE 2020-20 also required firms to report each self-correction to the DOL.  Amended  PTE 2020-02 drops this reporting requirement.

Disqualification Provisions

The original PTE 2020-02 prohibits financial institutions and investment professionals from relying on the exemption for 10 years for certain crimes arising  out of  investment advice to a retirement investor. Other activities that make PTE 2020-02 unavailable include engaging in a pattern of violating the conditions of PTE 2020-02 or providing materially misleading information to the DoL regarding a financial institution's conduct. 

Under Amended PTE 2020-02, the DoL added more crimes  to its list , including affiliate and foreign convictions. The exemption also removed the stipulation that the crime arises from the provision of investment advice. Finally, the amendment limits the 10-year disqualification for non-criminal conduct (such as a pattern of violations of PTE 2020-02's conditions) to serious misconduct  that has  been  determined  in a court proceeding. 

Under the original PTE 2020-02, the DoL had the authority to determine whether  an investment professional or financial institution should be disqualified  for non-criminal conduct. 

Relief For RFP Responses

Amended PTE 2020-02 clarifies that responding to a Request For Proposal (RFP) to provide services as an ERISA section 3(38) fiduciary does not qualify as fiduciary investment advice if certain conditions are satisfied.  To qualify,  the RFP responder must comply with the Impartial Conduct Standards of PTE 2020-02.  This relief is limited to the RFP process; activities after being hired  are not covered . 

Tips On Retirement Security Rule And Compliance With Amended PTE 2020-02

The following points offer investment advisers suggestions  to consider  how to approach  the  Retirement Security Rule  and the amendments to PTE 2020-02.

Tip #1: Be Specific When Acknowledging Fiduciary Status.  Advisers should review the written acknowledgment of fiduciary status currently being made in compliance with PTE 2020-02 and ensure that it is clear and unqualified. In the preamble to the Amended PTE 2020-02, the DoL stated that "It is not enough to alert the Retirement Investor to the fact that there may or may not be fiduciary obligations in connection with a particular recommendation without stating that , in fact,  the recommendation  is made  in the requisite fiduciary capacity."

Firms should avoid using terms such as "may be acting as a fiduciary" or language that states the firm and its investment professionals are fiduciaries "to the extent" they meet the definition of fiduciary investment advice under ERISA or the IRC. 

The DoL provided the following model language to satisfy the disclosure requirements In Section II(b)(1) and (2) of PTE 2020-02: 

We are making investment recommendations  to   you  regarding your retirement plan account or individual retirement account as fiduciaries within the meaning of Title I of the Employee Retirement Income Security Act  and/or  the Internal Revenue Code, as applicable, which are laws governing retirement accounts.   The way  we make money or otherwise  are compensated  creates some conflicts with your financial interests, so we operate under a special rule that requires us to act in your best interest and not put our interest ahead of yours. Under this special rule's provisions, we must: Meet a professional standard of care when making investment recommendations (give prudent advice) to you; Never put our financial interests ahead of yours when making recommendations (give loyal advice); Avoid misleading statements about conflicts of interest, fees, and investments; Follow policies and procedures designed to ensure that we give advice that is in your best interest; Charge no more than what is reasonable for our services;  and  Give you basic information about our conflicts of interest.

Tip #2: Revise Rollover Disclosure Requirements.  The amendments to PTE 2020-02  continue to  require financial institutions and their investment professionals to provide documentation supporting their rollover recommendations where the recommendation involves moving assets from a retirement plan subject to ERISA, such as a 401(k) plan, to an IRA. But this rollover disclosure will no longer be required for recommendations to switch from one IRA to another or from one account type to another (e.g., from an advisory account to a brokerage account). 

The fiduciary obligations of care and loyalty still apply, however , so  advisers still need to perform and document the analysis supporting that their recommendation for a change is in the retirement investor's best interest. Although the analysis does not need to  be provided  to retirement investors in those situations, it still must be documented and retained. 

Amended PTE 2020-02 also requires that financial institutions document and disclose the following to retirement investors:

• The alternatives to a rollover, including leaving the money in the current employer's plan, if applicable;
• The fees and expenses associated with the employer's plan and the recommended investment or account; 
• Whether an employer or other party pays for some or all of the plan's administrative expenses;  and
• The different levels of services and investments available under the plan and the recommended investment or account.

Firms should ensure that their rollover disclosures address these points.

Tip #3: Update Disclosures To Include Descriptions Of The Care Obligation And The Loyalty Obligation.  Advisers should review disclosures provided to retirement investors to ensure they describe the care  obligation and loyalty obligation , as described in Amended PTE 2020-02. The DoL included a model disclosure for these obligations (see Tip No. 1). 

These disclosures could be included  in Form ADV Part 2A or  in  a separate  disclosure  document. Firms should also consider incorporating these descriptions into investment management agreements to have written confirmation from clients that they have received the disclosures. 

Tip #4: Amend Policies And Procedures To Address Compliance With PTE 2020-02's Conditions.  The original PTE requires that financial institutions establish, maintain, and enforce written policies and procedures to ensure that the firm and its investment professionals comply with the Impartial Conduct Standards. The amended PTE 2020-02 also requires compliance with all other exemption conditions. Firms should confirm that their policies and procedures include this additional requirement. 

Tip #5: Update The Process For The Annual Retrospective Compliance Review.  Under the Amended PTE 2020-02, the retrospective review requires that financial institutions test compliance with all of PTE 2020-02's conditions, not just the Impartial Conduct Standard. 

Additionally, the amendment requires that a senior executive officer  must  certify that the firm has corrected, filed  Form 5330  with the IRS, and paid excise taxes for any non-exempt prohibited transactions discovered by the firm in connection with investment advice covered under the IRC.

Tip #6: Review The New List of Disqualifying Crimes.  The list of crimes that can disqualify a financial institution and its investment professionals  is expanded  under Amended PTE 2020-02. Firms should review this list and ensure that the firm, its affiliates, or investment professionals have not committed these crimes or engaged in  any  other activities that could lead to disqualification.

Tip #7: Update Self-Correction Procedures.  PTE 2020-02 includes a self-correction procedure that allows financial institutions to avoid non-exempt prohibited transactions. The original PTE 2020-02 mandates that firms report each self-correction to the DOL, but Amended PTE 2020-02 drops this requirement.

Keep in mind, however, that self-corrections still should be reported in the annual retrospective compliance review. Firms should review their current policies and procedures and amend them to drop this DoL reporting requirement once Amended PTE 2020-02 becomes effective.

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