N
Chapter 25
business startuP ProPosals
Like other types of business proposals, startup proposals are sales documents, but of a different kind. Business startup proposals are a
specifc type of business proposal. These documents include many of the
principles and formatting similarities as other business proposals, but with
some differences. The typical business proposal is written to obtain a sale
or to present a product or service agreement. Business startup proposals,
on the other hand, are usually written to obtain fnancing from a bank,
lender, or investor.
The business startup proposal includes many of the same elements as other
business proposals:
• The startup proposal should contain an executive summary. In this
case, the executive summary is useful to the banking or lending
executive, or the principal in a venture capital organization, who
needs to have an overview of the business, the amount requested,
and the plan for paying it back.
• The startup proposal includes background information. In this case,
the background section discusses the formation of the company (if
it is currently in operation), the current situation, and the fnancial
situation of the business.
266 The CompleTe Guide To WriTinG effeCTive & AWArd-WinninG Business proposAls
• Startup proposals include detailed fnancial data showing the effect
of the requested fnancing on the fnancial viability of the company.
Most often included in the fnancial section are: a startup fnancing
worksheet, cash flow and proftability statements for up to three
years, and a sources and uses of funds statement showing how the
requested funds will be used.
• Startup proposals include information about the people involved
with the company, and details about their background and
expertise.
• Startup proposals, like all other types of business proposals, are sales
documents.
Unlike other types of business proposals, on the other hand:
• Startup proposals must include much more detail on fnancial
implications of the proposal, since a banker or lender will be looking
closely at these fnancial statements.
• Startup proposals usually do not include much background
explaining the rationale for the proposal, since it is obviously a
proposal to obtain money for startup.
• Startup proposals typically include information on how the business
will be marketed, whereas in many other types of business proposals,
marketing is not an aspect to be considered.
Here is a side-by-side comparison of the format of a startup proposals
with other types of business proposals. The business plan format used
is based on the format suggested by the Small Business Administration
(SBA):
ChApTer 25: Business sTArTup proposAls 267
| Startup Proposals | Other Business Proposals |
| Executive Summary | Executive Summary |
| General Company Description | Introduction and Background |
| Product/Service Plan | Goals and Objectives |
| Demographic Analysis | Methods and Tasks |
| Competitive Analysis | Timelines |
| Marketing and Promotion Plan | |
| Management Plan | |
| Operating Plan | |
| Financial Plan and Financial Spreadsheets |
|
| Conclusion and Request for Funding | Conclusion |
| Supporting Financial Statements and Other Appendixes |
Appendixes |
Sections of a Startup Business Proposal
1. Executive Summary. In a startup proposal, the executive summary
provides the reader with a short narrative describing the company and
includes information on the funding needed and the expectations of
the business to pay back these funds. A typical executive summary
in a startup business proposal may include:
a. A short description of the business, including location and
startup date.
b. Information on the owner or owners and the people who will be
in top management positions.
c. A statement about the type of legal structure of the company.
d. A sentence or two describing the total funding required for
startup, the form of this funding (loans, equity capital, other
268 The CompleTe Guide To WriTinG effeCTive & AWArd-WinninG Business proposAls
sources of funds) and the expectation of the business for paying
back loans and distributing earnings to investors.
2. General Company Description. This section provides more detail
on the company, its location, expected start date, type of business,
and the legal form of business. While this section mirrors much
of the information in the executive summary, remember that the
executive summary is a stand-alone document that can be read
without the rest of the business startup proposal.
3. Product/Service Plan. This section describes in detail the products
and services sold by the company. It may include product descriptions,
information on manufacturing processes or sales processes, or details of
sources of products for resale. Service descriptions include information
on how services are provided and to whom. Details on pricing for
products and services are included, as well as distribution channels.
4. Demographic Analysis. For a business that sells locally, the city
and location of the business is described in this section, along with
population demographics, including total population, number of
households, average household income level, average educational level,
ethnic distribution of population, and other information specifc to
the products or services of the company. Areas from which expected
customers will be drawn should be included. For businesses that operate
regionally, nationally, or globally, a detailed description of the market
segments for the company’s products and services should be provided.
5. Competitive Analysis. The largest and most important direct
competitors for the company’s products and services should be described,
along with their relative market share, their unique selling proposition,
and an analysis of their competitive threat to the company.
6. Marketing and Promotion Plan. In this section, you will describe all
of your marketing and promotion activities, focusing on the frst year
ChApTer 25: Business sTArTup proposAls 269
of your business, but including possible future promotional activities.
This section is important because your lender or investor will want to
see how you plan to promote your business to get customers or clients
on a regular basis, and to provide the income to pay back your loans
or provide dividends earnings for investors.
7. Management Plan.Descriptions of the qualifcations and experience
of the individuals who are part of the business are included in this
section. For all of these people, you will need to write a short resumé
or biography showing how this person’s education, experience, and
knowledge will help make this business successful. You may also want
to include more complete resumés in an appendix. The management
plan is usually divided into three categories of individuals:
a. Owners: These are the individuals who are making the executive
decisions for the company. Include information for yourself and
others who are owners or general partners, or members (for an
LLC).
b. Employees: Discuss what your organization structure will look
like and your plans for hiring individuals. Include position
descriptions for key individuals. If you already have hired
employees, describe their backgrounds and how they will be of
value to you and your business.
c. Advisors: Your business advisors may include your company
attorney, CPA, banker, and insurance agent. You may also want
to include any coaches or outside business advisors who will be
working with you to help get the business started. Do not forget
to include your board of directors.
8. Financial Plan and Financial Spreadsheets. A key to acceptance
of any business startup proposal is an excellent set of fnancial
documents. Your lender or investor will want to see at least three
270 The CompleTe Guide To WriTinG effeCTive & AWArd-WinninG Business proposAls
years of fnancials, to gauge the long-term viability of this startup
proposal. The most important documents to include in your startup
proposal are:
a. A startup spreadsheet, showing the facilities costs, equipment,
supplies, initial inventory, and other costs needed to open the doors.
Sometimes this spreadsheet is called a “Day One” spreadsheet.
The more details you include on this worksheet, the better.
b. Income estimates on a monthly basis, by product or service
category. These estimates should include reasonable estimates,
not wildly optimistic ones.
c. A cash flow worksheet showing details of income by category,
discounts/returns/allowances, and funds received, along with
all business expenses, and net cash flow for each month and
accumulated. This worksheet should be prepared to show monthby-month details for each of the frst three years of the business.
d. An annual projected income statement for each of the frst three
years of the business. This worksheet should show net sales,
expenses (including depreciation), net income before taxes,
estimated taxes, and net after-tax income.
e. A sources and uses of funds statement that provides details of
funding required, including working capital needed during the
frst few months after startup. This document should show how
much you plan to contribute to the initial fnancing for the
business, and the net needed from lenders or investors.
Many business startup proposals include appendixes with additional
marketing demographics, resumés of key individuals, fees and pricing
structures, and other information.
ChApTer 25: Business sTArTup proposAls 271
| CASE STUDY: DR. jANEL VOELKER |
| Coastal Wellness Family Chiropractic 300 Ocean House Road Cape Elizabeth, ME 04107 207-799-WELL www.coastalwellnesschiro.com Dr. Janel Voelker graduated from Palmer College of Chiropractic in February 2007 and was in her chiropractic practice working by March 15, 2007. She opened her doors to the public on April 19, 2007. This very fast work for a new healthcare practice, is due to Dr. Voelker’s planning during chiropractic college, and to her effort in putting together an excellent business plan. She began her planning process well before graduation by purchasing offce and clinic equipment and doing the background research for her startup proposal. She did a lot of market research to fnd a community in which to practice. She and her husband were not sure what city they wanted to live in, but they did know they wanted to be on the coast; they also wanted a city where the population ratio for chiropractors was low. She focused on the state of Maine and found that Cape Elizabeth had a population of 9000 with no chiropractor. She also found that this city had an affluent population, which meant she could more easily establish a “cash” practice there. Much of Janel’s efforts in preparing her startup proposal focused on the fnancial aspects. Using spreadsheets she was given in class, she prepared the following documents: 1. A startup worksheet showing all of the equipment and supplies and other items she would need to open the practice. 2. A personal budget, so she could determine how much money she would need to take from the practice for personal expenses. 3. Month-by-month cash flow statements showing net collections and expenses for each of the frst three years of her practice. 4. A pro-forma income statement showing net collections, business expenses (including depreciation), net income before taxes, estimated taxes, and net after-tax income. These statements were prepared for three years. direct ly from the exper ts CLASS IFIED CA SE ST UDIES TM |
272 The CompleTe Guide To WriTinG effeCTive & AWArd-WinninG Business proposAls
| CASE STUDY: DR. jANEL VOELKER |
| 5. Detailed expenditures for marketing and promotion activities for the frst year, with monthly totals. 6. A worksheet showing estimated costs for employee pay and benefts monthly for the frst year. 7. Finally, a sources and uses of funds statement showing the total amounts needed to be fnanced, the amounts available from her personal funds, and the amount needed from a lender. Janel remembers reworking the fnancial numbers over and over as she found new information on costs and as she re-evaluated her estimates of income. When she had completed her planning process, prepared the fnancial statements, and written the business startup proposal, Janel began taking this document to banks requesting funds. The frst bank, a large national banking institution, laughed at her and stated that no one would ever give her a loan for her new business. The second bank, a local lender, had a much more open and friendly attitude toward her, and they were willing to help. The worst part of the process of presenting her business proposal was the pride issue. She and her husband wanted to set up the business on their own, with no need for a cosigner or a loan from family or friends. She remembers walking out of the interview with the frst bank that turned her down, and thinking, “What are we going to do?” She remembers the event as a huge disappointment. Her persistence paid off, and she did get the startup funding she needed, although it came from her family and not from a bank. But she learned valuable lessons about preparing a business startup proposal which she said has been helpful in her practice. She also had great business role models in her parents. Growing up in a family where both of her parents owned and operated their own businesses, she saw from her parents’ work the rewards of being your own boss. After she found the funding and opened her offce, the biggest challenge she faced was the frst few months. She remembers this as a “scary” time, when she would go to the offce every day and sit and wait for patients to call or walk in the door. Her biggest challenge during this time was keeping a positive attitude about her future success. Slowly the business improved, and she began to see a positive cash flow during her fourth month of business. She was able to take an owner’s draw during her ffth |
ChApTer 25: Business sTArTup proposAls 273
| CASE STUDY: DR. jANEL VOELKER |
| month. Among her mistakes in startup was learning to set limits on her time. On her day off, for example, she would come into the offce to see patients. She now realizes it is important to have a day to rejuvenate and focus on her personal life and growth outside the business. Janel says she has also learned to say “no” to salespeople, who, she says, will never leave you alone if you are not frm with them. She believes there are important characteristics every small business owner must possess. First, she says, is self-motivation. You need to be able to keep yourself pumped up about your business, especially during the process of presenting your business startup proposal and during those frst few months when things are not growing as fast as you imagined they would. The second quality small business owners must possess, she believes, is passion. “If I were not passionate about helping people through chiropractic care,” she says, “I would have had some diffcult days getting going, but my passion has always carried me through.” Finally, she believes vision is important. She says you need to be able to see yourself succeeding with your business proposal and in your business, so you can envision the potential you have to grow. Dr. Voelker’s advice to someone who is thinking of starting a new business and preparing a business startup proposal is not to get discouraged by things that seem like setbacks. For example, when she frst came to town and started looking for offce space for her practice, she found what seemed like the perfect location. She kept going back to the owner with new offers, all of which were rejected. Finally, she gave up on her efforts to get that offce space and she found a new space which is much better. While she was initially crushed that she did not get the original space, she learned there was a better space waiting for her. Even if a big thing goes wrong, she says, there is another plan waiting for you. She believes that if you keep trying, you will succeed. |
274 The CompleTe Guide To WriTinG effeCTive & AWArd-WinninG Business proposAls
Copyright of Complete Guide to Writing Effective & Award Winning Business Proposals: Step-by-Step
Instructions is the property of Atlantic Publishing Company and its content may not be copied or emailed to
multiple sites or posted to a listserv without the copyright holder’s express written permission. However, users
may print, download, or email articles for individual use.