Wednesday, May 22, 2013

Entrepreneurs To Use Other People's Business Proposals

Every entrepreneur has been there. You need to write a business plan to get your idea off the ground and have no idea how to approach it. The first thing most people do is Google, "Sample business proposal." Why? Well, it's quite simple really. They want to get a head start on the process by looking at what someone else has written. It is an understandable position to take if you are under pressure and need a boost. What people don't realise is that there are inherent dangers in using a sample business proposal.

There are many very good examples of sample business proposals on the Internet, but there are also some scarily bad examples being held up as first class efforts. Having spent the last 20 years as a professional banker and investor I can say this with some degree of confidence.

The bottom line is that even if you do manage to stumble upon a great example it won't be relevant to your unique business or the market dynamics that pertain to your business idea. The parties who will assess your proposal and decide whether to invest are generally well trained and experienced. They read hundreds of these documents every month and can spot a copy and paste job a mile a way.

Will A Sample Business Proposal Help Me?

Using a sample business proposal is OK if you are just looking for some tips on how to structure your own proposal. Of course this is predicated on the fact that the example aligns well with your business and is a good example. If you are looking around the Internet for sample business proposals it's a fair bet that you are not sure what is a good example and what is a bad one. For this reason you may borrow heavily from a poor example and this will actually detract from the thrust of your effort.

There are too many people on the Internet these days offering quick fix solutions or shortcuts to preparing business proposals to attract funding. On balance these solutions are not adequate to get you funding. Here's why:

1. They encourage entrepreneurs to use other people's business proposals as a template that dilutes the originality and can lead to the inclusion of data that is irrelevant.

2. They lead to entrepreneurs skimming over the research component leading to a proposal that is disjointed and fails to make a cohesive business case.

3. Having a sample business proposal as a guide detracts from the entrepreneur engaging fully in the business planning process in that they will have only a cursory understanding of the finer details of their proposal.

4. It will not prepare the entrepreneur for detailed questioning around their business strategy and by association their financial projections.We have seen this all too often in presentations for equity finance. It is glaringly obvious when someone does not understand the proposal intimately and this devastates credibility and trust, virtually nullifying your chances of convincing an investor to part with their cash.

So How Should I Use A Sample Business Proposal?

We genuinely believe that using a sample business proposal is not a good idea unless you are only looking for a structural outline. Even in this case you would need to scan a fairly broad cross section of examples to get a representative sample to form an independent opinion. There is nothing more frustrating than a pitch which doesn't flow and where the entrepreneur is clearly "winging it". We have rejected more pitches for this reason than any other.
The only time we would recommend using a sample business proposal is if you are approaching a bank for finance and they provide an example of what they would like to see. However, banks don't provide samples, they provide templates, which is basically them trying to educate entrepreneurs before they apply for finance. In this case this is the bank endorsing a structure for the proposal so it is OK. It still leaves all the blanks to fill in though so it isn't really a full solution to your problem.

 How Will The Audience Know That I have Used A Sample?

This is a common question we get asked and while we cannot speak for the entire investment community we can refer to our own experience as investors and former bankers. Here is a list of the top ten reasons why it is obvious that a sample has been used:

1. Executive Summary is dull and formulaic without communicating why we should invest.

2. Market information doesn't align with the specific demographics relating to the proposal or is obsolete.

3. Entrepreneur's knowledge of the market dynamics is sketchy under questioning and it is clear that what they have written in the proposal is the sum total of their knowledge on the subject.

4. Information around target customers is not based in empirical fact, more observational opinion.

5. Competitor Analysis is obsolete and doesn't track minor competitors or industry trends that could present opportunities.

6. The business strategy doesn't intuitively line up with the financial projections of the business. Financial anomalies are frequent.

7. The level of analysis in the financial section is low. Elevator analysis (only observational comments) is a glaring sign that no detailed analysis has been undertaken.

8. The language style in the business proposal is inconsistent and in different tenses.

9. The structure of the business proposal in terms of the content lay out does not flow intuitively. Think trying to fit a square peg into a circle!

10. The proposal doesn't make a definite conclusion or sound argument to invest (or lend). The lack of analysis leads to inadequate risk mitigation leaving many questions unanswered.

What is The Solution?

This might all seem a little bleak but there is an easy solution to this dilemma and it demands a little more of your time and effort in return for a deeper understanding of your business. You have to learn to write a business proposal rather than using a sample business proposal to take a short cut. Don't do the latter as it will make the experience of approaching investors and financiers unnecessarily painful and will dilute your experience of creating your vision from scratch and your strategic understanding of your own business. Plus, you will be found out!

The truth is that it is not rocket science. Even a working knowledge of the key focal points will improve your finished product greatly. Writing a business proposal is a logical process which can't be done is 8 hours or completed in 1 day, at least not if you hope to truly understand it and communicate it effectively to external parties. In actual fact writing a business proposal is a very rewarding experience and if you are serious about starting a business and attracting funding into that business there will be associated pressure to perform well. Going through the business planning process will train you to be a more pro active and strategic business person and will ultimately improve your chances of making your vision a reality by analyzing your business properly and consistently.

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