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How to Prepare a Proposal for a Business Idea
Determine whether you have the time, energy and resources required to implement your business idea. Implementing your business idea will be a long and time-consuming process. You should consider what financial resources, ie. cash and credit, that you can access to implement your business idea. Next consider whether you will need to make the implementation of your business idea a full-time job, a part-time endeavor, or whether others can implement the plan on your behalf.
Research similar products and services. If you have a good business idea, your first step should be to research whether other products or services exist that are similar to your business idea. Don’t worry if you find similar business models, this could simply mean that there is a strong market that is worth entering. Furthermore, the presence of potential competitors can be used to identify the needs of consumers that are currently not being met by existing businesses.
- Research customer feedback on the services and products provided by identified potential competitors. Once the limitations of your competitors are identified you can structure your business proposal in a manner that offers solutions to these limitations in order to create a unique offering to the public.
- If you are unable to locate similar services and products, this may be a sign that your business idea will be a great success because it will fulfill the needs of an underserved market.
- However, the absence of a market for your business product or service could indicate the difficulty of successfully implementing the business idea underlying your proposal.
Consider potential marketing strategies. Take the time to brainstorm how you would market your goods, products or services to the public. Consider the successful marketing companies of your potential competitors. Analyze the strengths and weaknesses of these campaigns in order to learn from the mistakes of others. If you can't figure out a potential marketing strategy that will be successful, the idea should be a no go.
- Review competitor advertisements and other marketing tools used by competitors to attract potential customers.
- Determine the key elements of each competitor's marketing approach - low cost, high quality, superior service, and so on.
Research potential costs associated with implementing your business plan. How much do you expect to get paid, if at all, during the development stage and beyond? How much start-up capital will you need to kick it off? To figure this out, start with potential revenues, rather than costs. How many units will you sell at what price, based upon your market analysis? The price of a product is generally determined by the competitor's prices. Unless you have something special, you will not be able to charge more than competitor, most likely less. Once you project revenues and unit sales, develop your cost of goods based upon sales projections (variable costs) and administrative (fixed) costs. Project the full slate of financial statements.
- Contact vendors and other providers of relevant outputs in order to get price quotes on the goods and services required to implement your business plan.
- Estimate the costs related to hiring personnel, and purchasing the physical space and equipment required to implement your business idea.
- If you can't afford to pay yourself you will need to ask yourself if your business idea is worth pursuing. Remember, the business's money is not your money and failure to understand/consider this fact is how many business people end up in hot water.
If applicable, consider business taxation and registration considerations. You may require some systems and processes to meet statutory obligations/legal requirements. Include business taxation and registration considerations in your business proposal in order to prevent unnecessary surprises.
- Check with your local or state business administration office in order to learn whether there any licenses, taxation or other requirements that you must comply with in order to implement your business plan.
Estimate the amount of profit you would need in order to recoup implementation costs. This is quite important, since most businesses fail due to lack of adequate funding. Once you have determined the cost of implementation, you should next determine how much profit you would need to make in order to recover all costs associated with implementing your business proposal. This will allow you to determine how much you should charge for your product or service, and will allow you to begin to structure a timetable for when you will begin to recoup an actual profit.
- Use the total amount of estimated costs for implementation as the starting point for determining your profit forecast.
- Though the profits you make would ideally be greater than the costs of implementation, the reality is that most businesses fail before the first full year of operations. Thus breaking even over the first few years of operation would be a big success.
- A forecast for recouping implementation costs will strengthen your business proposal, especially when you are pursuing financing.
Create a completed draft of your business proposal. A good business proposal should provide a succinct/detailed explanation of what your business idea is, your market research, potential marketing strategies, the cost of implementing the proposal and a pricing strategy. Divide your business plan into the following separate sections:
- An executive summary that concisely outlines your business plan. Communicate the ultimate purpose of your business proposal.
- Market analysis for the industry your proposal is geared towards. Provide reasons for why your business proposal should be successful given both unique and specific market considerations.
- Strategy and implementation plans for executing your business proposal.
- Financial plans and projections regarding the cost of implementing the business proposal, as well as possible profit projections if the business plan is a success.
Consider your reader, and never assume they have relevant previous knowledge. Many good business ideas fail to gain support because the person reading the proposal didn't understand what they were reading. Explain everything in your proposal as if you were presenting it to someone with no previous knowledge in the field.
Make sure your business proposal is purposefully presented. Useful graphs, illustrations of promotions, prototypes, etc., as well as a good, easy-to-read document layout will all make a good impression and look more professional. Consider getting your proposal professionally bound, and always print in color if you have charts and diagrams. Be prepared to give verbal presentations in support of your proposal.
Have the draft proposal independently reviewed. A fresh set of eyes will often pick up errors and omissions that a writer misses. Ask a business professional you trust to review your business plan for anything that they themselves would have included in the plan. After this review consider which suggestions such be integrated into your business proposal draft.
- Having a trusted business professional look at your business proposal draft could also lead to additional business mentoring/guidance and maybe even financial assistance for implementing your business plan.
- Consider doing some business training. There are lots of short courses at local polytechnics, business incubators, chambers of commerce etc., which could help you compile proposals, funding applications, as well as teach you about the regulations and compliance requirements that may apply to your business idea.
- Talk to people in the know. There are lots of places to get free and/or money saving business planning advice. Talk to others working in related businesses, check out small business support start up services, even local colleges and government departments. You will be surprised at how much business planning information and advice you can get if you go looking for it!
- Believe in your idea! At the end of the day, armed with a well-researched and well-written proposal, it is often the commitment and enthusiasm of the presenter that kicks it over the line!
- Get a good accountant and consider consulting a business mentor.
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Category: Business ideas