By Ikenna M. Okafor
A business proposal is a written statement of competence made for a business or an idea or for an organization. A business proposal is also a well-defined plan of action and strategy written to a client suggesting how a particular assignment will be carried out or soliciting for funding. The latter definition stands more in our today’s society. The central idea of a proposal therefore is to convince the reader or client of ones capabilities, effectiveness or efficiency.
Business Proposal can be very concise or wide as well. What determines that is both the purpose, that target audient and the industry culture. It is often used interchangeably with Business Plan, Company’s Profile or Bidding Document. While all these documents are different due to their contents, one can tweak them to be a proposal. Plus to a very large extent, all these documents aside, are mostly serving as a guide to business owners, they are also used to solicit for partnership or funding. So for the purpose of this article, we shall use business plan, business proposal, and company profile interchangeably.
Therefore, there are a lot of reasons why entrepreneurs, business owners and those who manages business should have this document summarily called Business Proposal (Business Plan). One of the reasons for having a Business Plan is to guide the business owner as to financial decisions, process ownership, and operational plans and to meet business projections. This is not commonly seen anyways. For instance, proposal in form of Company’s Profile is also important as it passes important business information and general information about the company. Again, when companies are rebranding, there is usually a need for having a revised company profile or a proposal document. Unfortunately, the above reasons does not take the front seat on why people write proposals. However, the third and major reasons people write proposal or a business plan is for funding purposes. An example of this is bidding document for company. For example, within the whole of last year, I came across more than fifty (50) Business Plans from various sector. My discovery was that many of them were only written to secure funds from donors rather than for business strategic and operational reasons.
When should one write business plan or a proposal? From my observations, people tend to write business plan only when they want to pursue a contract or need funding purposes (to donor agencies or investors). This is a very wrong approach. The implication is that such work is likely to be done in a hurry with most times unverified figures just concocted together. According to best practice, every business must have a business plan and a proposal to guide the business conducts, operations, to serve as a road map and guide various decisions to be made along the business activities. It is important and advisable to always have your business proposal handy which you can always then update as you progress to meet with the current realities. This implies that “when” question of having a business plan should come in as soon as one comes up with a business idea.
The last question then of WHAT should be the contents of a Proposal? The contents of a proposal is relatively different depending on the purpose. Generally speaking, a proposal document should have an executive summary, the business owner’s information, and the operations of the business, marketing plans and strategy (depending on the purpose). I do advise that marketing strategy is taken out when submitting to individuals for funding. Another option is to patent the idea and procedure or sign a Non-Disclosure Agreement (NDA). I have witnessed in several places where people source for funds from an individual or organization with a business plan or proposal, and few months later they see their ideas on the street being used by same entity they had previously solicited funds from. You are also to include your financials especially revenue and cost. Under the financials, you should have the Balance Sheet, Income Statement and Cash Flow as well as other financial information you may deem fit such as expansion and operational financial statement.
However, for a proposal being submitted for funding, the financials must be very robust because that’s usually the major area of interest of investors or those who wish to partner with your business. Anyone investing in any business want to be sure of the security of his or her fund no matter how insignificant the investment fund may seem. Therefore, aside the three major financial statements (balance sheet, cash flow and income statement), a business proposal seeking for funds (whether loan or grant) must demonstrate its capability in paying back by its liquidity ratio. The business should also demonstrate the exact place he/she wants the investor to invest in and the outcome of the investment.
It is important to show the investor in your proposal the contribution you are making as the owner of the business. This will give the investor a sense of assurance that the risk is being shared and that the business owner has also made some level of commitment into the business and bears a larger part of the risk. This level of commitment could be in cash, machineries, land, raw materials and other stocks. In all, there must be some level of commitment aside being an available man power to run the business.
In conclusion, it is believed that the why, what and when of business proposal as highlighted in this write up would help is positioning business owners in, running operations and secure funding.
*Okafor, a Human Resource Consultant, writes from Lagos