The value proposition is a vital component of any winning business plan. It informs investors about why they should do business with you rather than your competitors.
It must detail your offer, your target customers and how you plan to reach them. Then, you will need to explain how you will generate demand, secure customers and stand out from your competitors.
Due to the essential role the value proposition plays in highlighting the potential of your business, it’s critical that you spend time and attention crafting this section into a part of your business plan that investors cannot ignore. This is your opportunity to convince investors that you are someone they should want to support with their money.
We have listed everything you need to include to craft a brilliant value proposition – as well as our top tips for securing investor backing when including it in your business plan.
What to include in the value proposition section
There are many things you need to consider when creating your value proposition. The main focus is to explain the essence of your business – namely, what products or services you will be offering. You will also want to explain how you aim to provide those products or services and who to.
The ‘who’ part especially matters as you need to serve people who actively want your offering to prove the potential for demand in the market. So, be sure to explain what audiences you are targeting and why they want to buy from you.
Emphasize what makes you different while writing your value proposition. This could include offering a service that enhances what your competitors provide, filling gaps in the market or taking a new approach to how you operate.
It’s worth including any operational strategies you will undertake if it makes you stand out. For example, if you are employing innovation or introducing new techniques to the industry, discuss how you will do this, why it will be beneficial, and the impact it could have.
You may also want to describe what value you have to offer beyond supplying good and services to customers. If you are a social enterprise or have a philanthropic thread to your company, highlight this. It will help demonstrate the broader value of your venture and give you a ‘twist’ that makes your business more attractive to investors.
Finally, discuss your growth potential too. Even if you start with a very basic idea, showing investors that there’s room to expand into new avenues can persuade them of your business’s longevity and sales capacity further down the line.
Our top tips
Once you’ve pinned down your value proposition, you need to convey it to an investor in a way that convinces them to believe in you. At all times, try to think about what would appeal to an investor considering your company. This will help you translate your potential into terms that align with their motivations, whether they be financial or otherwise, and increase your chances of obtaining funding.
We’ve put together a few more top tips for constructing a value proposition that wins investment below.
Keep it short
You should be able to make the value that your business can offer succinctly clear. If you have to spend a lot of time describing your value proposition, it could suggest that you don’t understand it yourself and lead to investors disengaging.
Start with one sentence that sums it up in a captivating way. You can then go into more detail, but don’t devote pages to your value proposition. Once you have explained the basics of the value proposition, the rest of your business plan should build on the logistics. So, keep it brief and discuss the financial, strategical and operational implications when appropriate later in the business plan.
By the time you reach the value proposition, you will likely have already touched upon it in your executive summary. You need to ensure consistency across all sections to make your business plan fit together and bring investors along your journey.
Make sure that when you discuss the worth of your venture, you are always sharing the same messages. This will prevent confusion and make it decisively clear what you have to offer.
Remember to keep this thread running when you write the rest of your business plan, too, so that everything marries and supports each other.
Remember value can come in many forms
There are several ways you can provide value as a business. Although one of the most common is to offer customers something entirely new to the market, there is potential beyond this. Even if you aren’t offering a unique product or service, you might be able to adapt your business to save customers money, offer convenience for their lifestyles, make their experiences more exciting, allow them to join in on trends or appeal to their moral code.
Many factors tie into a purchasing decision, so you need to focus on all the ways that your business can win customers over. Translate this into how you will generate sales and revenue so that investors see the link between how you will help customers and the financial gains to be enjoyed by doing so.
Look at a minimum viable product
Many start-ups will potentially create an initial proof of concept that demonstrates what the final product might look like. You can run a minimum viable product to check it fits your expectations. If any issues are flagged up, it will give you a chance to adjust your product or your business plan to make it watertight. It can also be shown to investors to provide a visual representation of what you will offer and the demand for the product.
It can also be worth conducting market research to find out if public opinion matches your assumptions. Look at consumer data or hold surveys with people who might fit into your target audience and ask questions about their needs and what they want from your business. This will help you see if your value proposition is actually valuable and give you solid evidence to showcase in your business plan.
Having a promising value proposition is crucial to convincing people to invest in your business. By effectively showcasing your value and allowing it to influence your entire business plan, you will be able to persuade investors of your worth and why your idea deserves to make the transition into reality.
If you need assistance in creating your business plan, we can help. Our advisors work alongside you to craft a robust plan that enhances your chances of securing funding.
We also put you in contact with the right connections to further your financial journey.
Get in touch today to find out how we can help you.