How to write a business proposal

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person writing a business proposal

They say a successful business starts with one good idea. But here’s a fact: no matter how brilliant your concept is, your business simply won’t take off if you don’t have a solid proposal. Unfortunately, this is where many promising ideas meet their ends.

This guide is for those budding entrepreneurs who have all the ideas, but not the knack for putting it into words. Here’s how you can write a business proposal that will seal that deal and get your business running.

Why write a business proposal?

For many, the main purpose of a business proposal is to attract investors. Usually, investors will send out a request for proposals (RFP) before you get to work on your business plan. People address their proposals to potential investors, essentially selling their business in hopes of getting that financial jumpstart.

But in the long run, your proposal is really for your own good. Think of it as your plan of action: without it, you just make it up as you go along, make the wrong moves, and eventually lose that hard-earned cash. Your business proposal will help you stay on track and manage your business goals. That’s rule number one: write for yourself, not for some third party.

The business proposal format

If you’re responding to an RFP, chances are you’ll be given a format and specifications for the proposal. However, some investors make it a free-for-all—you’re allowed to write your proposal any way you want. In this case, proposals can range from one-page price lists to highly technical documents spanning hundreds of pages.

The ideal business proposal is somewhere in between. At the very least, your document should include these basic elements:

Executive summary. This is the purpose of your business. Why do you want to start off in the first place? Investors want to know that you’re in it for the right reasons—and that you know how to go about it. Avoid motherhood statements about helping the poor and lifting the economy. Present real problems using solid facts and statistics, and offer concrete ways to solve them.

Introduction. Provide a brief history of the company, starting with the day you got that big idea. Don’t dwell on the details unless they’re relevant or interesting. Remember, the point is to set yourself apart from the competition. From the first sentence, make it clear how you are different and what you can add to the mix.

Biographies. Briefly describe yourself and the key members of your team, if any. Establish credibility by highlighting your strengths. Stick to facts that are professionally relevant: your MBA, your corporate experience, your previous business ventures.

Product description. This is where you get to sell your product—but not in the usual “buy it now” manner. You are talking to professionals who can see beyond the marketing. To convince them that you’re a good investment, you need to show that your product has potential, using figures from actual market research.

Marketing plan. How do you make it known that you’re open for business? Again, this part calls for a bit of research. Observe your market’s behavior and spending patterns, and find the most effective way to reach them.

Financials. This section consists of two parts: the cost of investment and a financial projection. The first part is where you tell your reader how much money you need to get started. Give a real figure and a breakdown of expenses. Wherever possible, provide credible sources for your figures, such as canvass sheets or official price lists. Afterwards, show them how and when you can recover your expenses and pay back the investment. A three- to five-year projection is usually enough.

Exit strategy. Business proposals have to be realistic, and this part is where you balance out the marketing. Use facts and figures to present potential problems, and offer viable ways to get over them. Set specific benchmarks that will tell you when the business is failing and it’s time to fold up. This doesn’t always have to be a dollar figure—you can base it on revenue growth, market reception, or internal consensus.

Some common mistakes

Investors hold high standards when it comes to new businesses. If you’re writing your first proposal, it’s easy to commit minor slips which can send your brilliant idea down the drain. Here are some of the most common pitfalls in business plan writing, and how you can avoid them.

  • Sloppy financials. The fate of your business always boils down to profit, and the last thing you want to do is appear unprofitable by rushing through money matters. Be as detailed as possible in your financial projections, and be prepared to answer any questions during your presentation.
  • Not enough market research. Your money will come from your consumers. As far as your reader is concerned, if you don’t know who they are, you don’t know how to make money. Market research isn’t cheap, but you can’t start a business without it.
  • Inconsistent detail. This often happens when you have several people working on different parts of the proposal. Make sure you’re not projecting a large market and then showing small figures in your research. If you can’t work alone, keep it to two or three people and supervise the work yourself.
  • Proofread. Just as you wouldn’t buy food from a dirty shop, bankers won’t invest in a business that can’t run a simple spell check. Take time to proofread and correct any spelling, grammatical or contextual errors.