Business Proposal Agreement

Business agreements require negotiation of important terms.

Writing a business proposal requires different criteria for different types of businesses. There are important considerations to take into account for any proposal, however. These include the length of the proposal, monetary value, assets to be used and overall business proposition. Main types include new business, sales, partnership and investment proposals.

New Business Proposals

For start-up businesses, providing clear roles and responsibilities among founding members is crucial. Conflicts among business founders is very common, especially when there is an even split in equity. For this reason, divide up the capital structure the same way roles and responsibilities are divided, with those bringing capital and skills garnering a larger stake of the total company. Designate a clear CEO, most likely the founder with the largest share of the company.

Sales Proposals

Sales proposals take a very different outlook than new business proposals. These documents stipulate the price, volume and duration of service or sales. Point of contact and level of service are also important factors. For consulting or sophisticated hardware sales, service level is an important component. For low-end items at high volume, price and delivery time are more sensitive factors. Sales proposals also include the exact technical specifications or ingredients of the material being sold.

Partnership Proposals

A partnership proposal involves merging divisions or working together to promote a product or service. The crucial components of these agreements include time length of the agreement, revenue split for sales and if there is any equity division for a new company established. As with founding a new business, make sure to clearly identify the roles and responsibilities of each partner.

Investment Proposal

An investment proposal is another important business agreement. Company valuation is a negotiated term but is based on comparable company values and the target company's revenue and profits. The proposal also might include a stipulation for board membership. Generally if an investment does not exceed 10 percent it cannot provide a board member seat. Finally, there is a liquidity preference, which is a term in private investment transactions. This allows the new investor to sell or liquidate their stake before any of the other investors.

References

• Microsoft: Writing a Successful Sales Proposal
• Capture Planning: Business Proposals
• BBC: Venture Proposal (PDF)
• SBA: Starting a Business