How to write an investment proposal

Written by victoria duff Google
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How to write an investment proposal
A good investment proposal should be backed by facts that are convincing to the potential investor. (Digital Vision./Digital Vision/Getty Images)

The first thing any investor wants to know is what kind of return he is going to get on his money, and when he will get his money back. If you are seeking investment money for your company, you may need to write a detailed business plan that will form the basis of a private placement memorandum that you present to the investor. If you are proposing most other kinds of investment, an investment proposal will suffice.

Skill level:

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  1. 1

    Put yourself in the mind of your investor. Some investors are looking for income, while others are looking for profits. The income investor will be satisfied with receiving dividends or monthly payments of interest and repayment of principal. The profit seeker will be interested in whether your company will go public or whether the investment target will be sold for a big profit, and when all this will happen.

  2. 2

    Research the feasibility of the investment. The worst thing you can do is propose an investment that is not fully thought out. Eliminate all magical thinking and rely only on facts and provable results to determine whether the investment will actually be successful.

  3. 3

    Begin your proposal with a full description of the investment, including the expected inception and conclusion dates; the full terms of the investment contract; and an exact description of the uses of the money, the expected results and the method of distribution of income or profits. Also list any other investors, the amount invested and their share of ownership.

  4. 4

    Prepare arguments in favour of the investment, including a realistic projection of the revenues involved and the percentage return they represent for the investor. Indicate the growth prospects, ancillary benefits such as increased local employment or ecological advantages, tax benefits and any social or business benefits that would accrue to those involved in the investment. Also prepare a contingency plan in case something goes wrong, such as an economic downturn or other negative surprise.

  5. 5

    Use section headings such as introduction, description of investment, terms of investment, expected returns, contingency plan and financial projections. The financial projections should be in the form of a spreadsheet showing all expenses and all revenues projected.

Tips and warnings

  • Greed is a powerful factor in an investor's decision to commit money. Even if you have to tweak the investment to provide a better return for the investor, it is worth the effort. The most difficult thing to do is to close the deal and end up with a check in your hand or, better yet, cash wired into your bank account. Carefully prepare your pitch to lead the investor to a positive decision, then pull out your investment contract and start filling in the particulars for signing.
  • The first thing that will scare your investor away is hype. The second thing is errors. Never hand over an investment proposal that has not been thoroughly checked for factual and mathematical errors. Never try to make insignificant details seem more important than they actually are. Savvy investors spot this easily. Later, if it's found that you exaggerated, you can expect to be sued.

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