You might have a path-breaking business idea and a clear roadmap but is that enough to bring your dream company to life? Not quite.
In order to grow, you need investors who will believe in your business the way you do. They need to see the potential in your idea and this is where business proposals come into play.
The purpose of a business proposal is to pitch a business idea, communicate your vision, and convince investors that your startup is worth their money (and time).
What’s more, raising capital in today’s challenging market scenario is all the more difficult, making it important to have a strong proposal in place.
Here are the seven key components of a business proposal:
- Executive Summary
- Company Description
- Market Analysis
- Marketing Strategy
- Management Structure/Core Team
- Funding Requirements
- Financial Forecast
Let’s take a look at six tips to create an effective business proposal that attracts investors.
1. Demonstrate scalability
One of the most important components investors look for in startups is scalability. Scaling a startup refers to the ability to grow it in a cost-effective manner.
Consider the following questions to demonstrate scalability in your business proposal:
- What is your business goal?
- How profitable is your idea?
- How repeatable are your solutions?
- What sets you apart from the competition?
For example, let’s say you’ve started a t-shirt printing business. While heat transfer printing might work in the initial period, it’s not a long-term solution and certainly not scalable. What’s important is adopting a more sustainable printing model that can help you sell in bulk without compromising on the quality.
2. Conduct market research
Conducting a comprehensive market research sets the groundwork for a more informed and logical discussion with investors. The idea behind this step is to use the findings from your research to back your business idea and demonstrate why it’s a viable one.
Start with doing competitor research, understanding the market situation and outlook. It’s important to know what your competitors are doing to be able to find gaps and address those.
Apart from competitor analysis, make sure you clearly state the audience your business will cater to. Find your target audience and segment them on the basis of demographics, geography, and behavior.
3. Share realistic financial projections
If you want investors to invest in your business, you need to lure them with compelling financial projections that are essentially a forecast of future revenue and expenses.
It’s advisable to make projections for a period of 3-5 years to accurately demonstrate the kind of returns investors can expect.
Many startups make the mistake of being too ambitious in an attempt to attract investors without realizing that if their proposal gets approved, they will be expected to achieve those numbers. Hence, it’s very important to be realistic while planning financials and state the assumptions you’ve based them on.
In addition to revenue projections, also present a detailed plan on how you’re intending to use the investor money. The most effective way to present this is to lay your projections out on a timeline, helping investors visualize this information with ease.
4. Present a credible team
“Investors don’t invest in ideas, they invest in people.”
This is a golden investor rule and rightly so because it is the leadership team that will drive the business forward. Investors need to be confident that they’re putting their money in capable hands.
So, while writing the business proposal, dedicate a section on the key team members, along with their individual backgrounds, skills, and expertise. You should also mention what every team member will be responsible for.
Use a flow chart maker to create an organizational chart that illustrates the team structure and job duties.
5. Focus on the executive summary
The executive summary of your business proposal is possibly the most important section because it’s sure to be read by all stakeholders. While it appears early on in the proposal, it’s advisable to write it at the end in order to not miss out on any vital information.
The executive summary is meant to offer a brief overview of your proposal. Many investors use this section for screening purposes, making it imperative to spend time writing a compelling and persuasive executive summary.
From your business offering, goals, and operational model to your target audience, financial projections, marketing plan, team structure, and funding requirements — the executive summary needs to include everything investors need to know to consider investing in your business.
Keep this section concise and not more than two pages.
6. Maintain a clear and consistent design
While it’s essential to focus on the content of the business proposal, make sure you don’t overlook the design aspect.
Submit a well-designed business proposal that is clear and attracts attention. Let the design engage readers as opposed to distracting them.
What you need is a consistent color scheme, bold fonts, and a simple layout that aids readability. It’s also a good idea to break chunks of paragraphs and use bullet points, helping people scan the content.
You can also use business plan templates to save time and maintain consistency.
Your business proposal is a roadmap for what lies ahead. From generating interest and demonstrating passion to emphasizing on the growth potential — writing business proposals is all about effective storytelling.
Investors come across several business proposals. So, be authentic and write a powerful one that manages to convince them to sign off.