How to Write an Investment Proposal

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When writing a proposal to attract investors to your business, it’s best to tell, rather than sell. Using more facts and figures than assumptions and projections will give potential partners more confidence in what you’re pitching.

The Proposal Format

  • Your proposal should start with a cover page, followed by a contents page. Begin the body of the document with an executive summary that highlights what the business is, its recent, documented performance and successes, projected revenues and profits for the next several years, the amount of the investment required and the potential return for an investor. Don’t explain, justify or defend your numbers in your summary: you will do this in the rest of your proposal. Follow the executive summary with these sections: business description, marketplace overview, current and historical financial data, financial projections, key personnel, investment offer and appendix. The marketplace overview should include information on your target customers, competitors and emerging technologies or trends.

Gather Your Numbers

  • Your current financial numbers might be the most important information to potential investors. Include a copy of your latest bank statement, balance sheet, annual budget and tax return. A balance sheet is a detailed list of your assets and liabilities. Create a chart showing your revenues, expenses and profits for the last three years. Provide cash-flow statements and account-receivables aging reports if these show you operate on a sound financial footing year-round.

Show Trends

  • Explain your sales numbers based on subjective and objective factors. Tell why your sales have increased or declined using information specific to your business and any credible data you can find from industry associations, business publications or government agencies. For example, your sales might have dipped recently because of a new competitor. Tell how you are addressing that. Your sales might have increased because you added new distribution channels. Use your data on recent sales and marketplace conditions to project future revenues. This will tell potential investors you are not pulling revenue and profit assumptions from thin air.

Make Your Offer

  • Tell investors what you want from them and what they will get in return. They will want to know how much money they will need to put into your business, what it will be used for, when they will get their initial investment back and what return they can expect after that. Let investors know whether they would be getting partial control of the business, a percentage of profits or something else. You might ask for a line of credit instead of a lump sum of cash. A limited partner has little or no say in how the business is run and less liability in the event of a lawsuit. Ownership can bring liability, but also a share of the assets in the event of a dissolution and part of the sale price if you sell the business.

References

  • Photo Credit Noel Hendrickson/Photodisc/Getty Images
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