You have an amazing idea for a product or service that offers value and monetary potential. You have performed thorough research and carefully constructed your business plan. All you need now is some seed funding. Your next step? Write a convincing proposal for potential investors.
Start with the Problem
The first step in writing a proposal is to identify the problem that you are trying to solve and validate that the problem exists. Back up your claim with a relevant and staggering statistic. For example, you have compounded a new drug that unclogs arteries with no side effects. A relevant fact to report would be, “According to Centers for Disease Control and Prevention, coronary heart disease is the most common type of heart disease, killing over 370,000 people annually.”
Reveal Your Solution
The most exciting part of writing a proposal is describing your solution and explaining why it is so awesome. Begin with an impactful mission statement like, “We are committed to developing safe and effective products for the treatment of heart diseases.” An impactful mission statement conveys purpose and direction for your startup. Be sure to clearly communicate how your product or service solves the problem identified above, and emphasize why everybody needs your solution.
Next, it is important to briefly describe your target market. Your target market depends on the problem you are trying to solve. If you are offering a new drug for coronary heart disease for example, you will be targeting a very niche market; a small segment comprising of customers with specific needs and requirements.
SWOT is an acronym for strengths, weaknesses, opportunities, and threats. SWOT analysis is used by all types of businesses to evaluate the respective components of their industry and competition.
Let’s use our ‘heart medication’ example to illustrate.
Strength- According to the U.S. Bureau of Labor Statistics, the healthcare industry is reported to grow faster and add more jobs between 2014 and 2024 than any other sector.
Weakness- Your solution is new to the market and there is a lack of initial credibility.
Opportunity- There are only nine major prescription drugs on the market that treat coronary heart disease.
Threats- There is a potential increase in government regulation.
It is also important to briefly describe your strategy for each component to your investors. A favorable SWOT analysis with a plan of action adds credibility to the market you are trying to enter and to you as an entrepreneur.
Pro Forma Financial Statement
This is the most important component of a convincing proposal. If your solution provides substantial value, investors will often skip to your pro forma statements. A pro forma financial statement prepares projected balance sheets, income statements, and statements of cash flow. Research and speak to industry experts to determine these projections. You want to be sure to present realistic data to potential investors.
Build the credibility of your team by including short bios of your key influencers. It would be good to know if your Chief Financial Officer has a Master of Business Administration, a Certified Public Accountant license and has seven years of experience working as a financial analyst for one of the “Big Four” companies.
Always Be Closing
In order to attract investors, you must be able to demonstrate the viability of your venture and communicate how you are turning their investment into a profit. If you are looking to network with the entrepreneurial community, and share your idea with angel investors and venture capitalists, come join us at CodeLaunch!