What is a Business Proposal?

A business proposal is a working document that reflects the business strategy, its operating structure, and most importantly, its financial plan. It needs to show the company’s strategy going forward, to ensure sustainability and growth of the business. The document should be maintained by all businesses and updated continuously to reflect any changes which may potentially affect the business. A business proposal should also be drafted for a start-up business and then updated when necessary thereafter. When submitting a business proposal to a financier as part of the funding application process (either for an existing or start-up business), the business plan should provide sufficient information to convince a financier or potential investor of the prospective success of the business venture.

Importance of Business Proposal

What is the purpose and significance of a business proposal to an entrepreneur?

1. Helps in getting funds for your business: This is one of the best purposes of the business proposal for an entrepreneur. We all know how money is important to start or run a business. For a startup, your savings and personal funds may not be enough to start your business. Also for those who are already in business and maybe wishing to expand or try out new things or innovations, money will be required for doing all these. You may need to approach investors to seek funds for your business.
2. Helps spot potential problems before they occur: A good business proposal helps you to forecast into the future and look at trends that could occur that may help or affect your business. When preparing a business proposal for various parts of your business like accounting, marketing, legal among others, you may find out some mistakes you have done in calculating the cost for expenses or you would have gone against laid down rule and regulations if you had gone ahead with a certain idea.
3. Helps you stay on track: When making a business proposal, it includes planning for the future as well. Targets are made for people to meet which helps the company to know if they are meeting their objectives.  For example, in your business plan with proper advertising your company is expected to have a 10 percent (%) increase in sales within a year. If within that period, you have not met that target you can look into various aspects of your business to see what is wrong.
4. It helps managing the business better: With a good business proposal, you find out that managing the business becomes much easier and better. The business proposal makes you know what goes where and who is responsible for various duties. Delegating responsibilities is easier with well laid out plans.
5. Staying on a budget is much easier: As we had said earlier, finance is so important to a business and is critical for its survival, so it will be such a shame if the money that took a lot to get is wasted. A good proposal allows you to plan how the money will be properly allocated to various aspects of the business.

It is crucial that the foundations of the business proposal be based on verifiable facts and market research including changes in market forces affecting the business, key risks and mitigating factors, as opposed to opinion and belief. The more facts in the business proposal, the easier it is for a potential financier to decide on whether to invest in a business. The business proposal should demonstrate that the business venture is commercially viable with possibility of expansion and that all those involved in the project, from management to employees and consultants, have the skills, knowledge and/or qualifications, to deliver on the plan.

Below is the complete structure of a good bankable business proposal, remember there is no one approved format for business proposals but however, there are recommended formats;

1.0: Executive Summary: The Executive Summary should be short then go into more details later on in the plan. It must consist of the following in brief; 

• Problem & Solution: Describe very briefly why your business needs to exist. What problem do you solve for your customers and the positive impact it will have in the community? And briefly outline what measures or solutions you have to the problem your business has identified.
• Market Overview: Describe your target customer or market segments. Summarize your key competition. Who will your customers also consider? Where are they found? Write a brief overview of why customers must choose you and not the competition. What makes you stand out from the rest? Again, keep things very brief in the executive summary and add more detail later in the plan.
• Expectations: Write a brief overview of your financial targets. How much do you need as capital? How much do you plan to sell in the next year? What are your long-term sales goals?

Having written your executive summary, the following should be written in full details in the plan, to give the funders or investors a full picture of the entire business or project.

1.1: Opportunity

1.1.1: Problems & Solutions

Problem Worth Solving: Write a little more detail than you provided in the Executive Summary about the problem you are solving as a business. What do your customers need? Do they need a better product, a cheaper product, or just a store in a better location?

1.2.1: Our Solution: Provide additional details, beyond what you wrote in the Executive Summary, about your product or service, and how they will help solve the problems you have identified.

2.1: Target Market

2.1.1: Market Size & Segments: Describe your key customers – who they are and what their key attributes are. If your company is targeting multiple customer groups (also called ‘segments’), describe each group here. If you can, include details about how many people are in each segment and how large the total market is.

2.1.2: Why Us: Why should customers choose you from the competition? Explain why your product or service is better than the others. Also, be sure to describe any competitive advantages you may have, such as a patent or other unique component to your business.

2.1.3: Competition: Describe your current competition in details than you have provided in the Executive Summary. Who are they? Where are they found? What advantages do they have over your business? What are their strengths and weaknesses?

3.1: Execution

3.1.1: Marketing & Sales

3.1.2: Marketing Plan: Explain how you plan on getting the word out about your product to your target market(s). Will you use advertising? Perhaps you are developing a content marketing strategy. Whatever your marketing plans may be, advertisement channels you wish to use to reach out to your clients, include them in this section in full details.

3.1.2: Sales Plan: If your company relies on sales people to close sales deals, you need a sales plan. Your sales plan should explain how you convert people who express interest in your product or service into paying customers, you need to document in full details how you will nurture leads and close deals.

4.1: Operations

4.1.1: Locations & Facilities: Describe your company’s physical locations.  How is it is or will be for customers to find you. This might be your office, store locations, manufacturing plants, storage facilities — whatever is relevant to your business. How much space do you have available, and how well will it meet your current and future needs?

4.1.2: Equipment & Tools: List any specialty equipment that you have or plan to acquire to do your work. This is an important component of the business plan for many industrial companies.

5.1: Milestones & Metrics

5.1.2: Milestones: List your key milestones and the dates that you hope to accomplish them by. If you’ve already accomplished key goals for your business, list them here as evidence that your business is getting traction – in other words, it’s getting positive attention from potential customers.

5.1.3: Key Metrics: Explain which performance metrics are most important for understanding how your business is doing. What does success mean for you, and how will you know it when you see it? In other words, how will you measure success? And this may include; the scope of the project, schedule, budget, customer satisfaction and quality.

6.1: About the Company

6.1.1: Overview: Use this area to specify who owns your company. If there are multiple owners, describe each of them and how much of an ownership stake they have. Also, identify your company’s legal structure. Is it a sole proprietorship, a partnership, or limited company? When was it registered?

6.1.2: Management Team: List the members of the management team, including yourself. Describe each person’s qualifications, skills, experience and what they will be doing for the company. It’s alright if you don’t have everyone for a complete management team yet. In that case, make sure to identify gaps in your team that you intend to fill over time.

6.1.3: Business Advisors: Describe any professional and qualified mentors, investors, former professors, industry or subject-matter experts, business consultants, knowledgeable friends or family members, small-business counselors, or others who can help you manage and grow your business owner.

7.1: Financial Plan

7.1.1: Forecast: Describe how you came up with the values in your financial forecast. Did you project your revenue based on past results, market research, your best guess at how many people who visit your store and what percentage of them might buy, or some other method? What kind of growth are you assuming? What are your key hires and notable expenses? What level of profit do you expect to generate? This is the part you include your Income Statement, Statement of Financial Position and Cash flow Statements. If you are not sure how to go about it, I recommend you engage a qualified accountant to assist you with these financial statements.

7.1.2: Use of Funds: If your forecast includes loans, grants, investments, or other financing, use this section to explain what you plan do with that money.

7.1.3: Sources of Funds: Describe your financing plans. Are you investing your own money in the business? Do you have a credit card or line of credit? What other types of funds: personal or business loans, grant, venture capital, equity investments from others, etc. do you expect to receive and when?