You will do yourself a lot of good to carefully look up the meaning of nearly every business related term that you come across. This effort will pay off when you have to do any business that’s related to that term or you need to carry out an activity that is defined by the term you just looked up. One of the terms everyone intending to go into business must look up is ‘proposals.’ Clearly, so many have heard the word but have no idea what it means.
Consequently, when they are writing what they call ‘business proposals’, they simply end up writing a document that shows what they intend to do. Worse still, some of those documents cannot be referred to as a business or marketing plan.
There is a major mistake that many entrepreneurs are making when it comes to writing business proposals and it is the fact that they do not make any proposal. In a business proposal, you are supposed to ‘offer’ something or make a ‘proposition’ which is why you have the word proposal. You are making a proposition to the person who is receiving the document and must bear in mind that the document is not the business proposal.
What some investors who receive proposals have found is people looking for ‘free money.’ That is why they send in a document asking for money but the document is not offering anything in return. Before you can call any document a business proposal, it should contain the following:
Description of the business – Any prospective investor who hasn’t met you should not be worried about meeting you so long as you can do a good job at describing your business. In describing your business, you would have successfully mentioned the vision of your business, the need your business is meeting and the direction of that business in the future. With this, people can tell where you are headed and decide if they want to go in that direction with you or not.
The purpose of the funds required – Yes, you have to state the purpose of the funds. When you go to any bank, one of the first questions you will be asked is what you want to use the funds for. If you are not clear on what to use the funds for, don’t expect anything. Sometimes, you may be clear on what to use the funds for but can be advised against taking a loan. If what you are about to take a loan for or seek investment for does not have definite returns, taking a loan or investment will be suicidal for the business and the owner.
Anticipated profit – Investors, and creditors look at figures before they make critical decisions on where to put their money. Stating how much you expect to make will make a lot of difference in your proposal. You can’t just come up with a figure of how much you want to make. You need to show how you arrived at that figure or what you will do to make that amount.
Offer to the investor – From what you are doing to make, you should be able to ‘propose’ an offer to the investor. The offer you are making goes a long way to determine if the investor will buy into the business or not. While there are not fixed rules on how offers should be made, the offers usually depend on what the other party is bringing to the table compared to what is already on ground. If you are starting fresh and you don’t have any fund, you may be offering 50 percent stake to investors. That means you value your idea as 50 percent and their investment as 50 percent as well. This is just an example. Please consult widely before making decisions.
Payback plan and time – The most interesting part of your proposal to many investors or creditors is the payback plan and time. You can’t just say you will pay back or that your business has the capacity to pay back. You have to show in the proposal that this business for which you are soliciting funds can actually pay back, how it intends to pay back and when it will pay back.
Entrepreneurs should also remember that the proposal is not in the volume. If you can do a complete proposal in one page, there is no point wasting the time of the investor who may have tons of requests to attend to. Take care of this major error in the proposals of many and you can be sure your proposals are about to bring in the anticipated fund.