Throughout this article, you'll find edited audio annotations excerpted from my interview with Mitch Hobish, Ph.D. of Sciential Consulting.

A little while back, I sat down with Mitch regarding the elements of a winning Small Business Innovation Research ("SBIR") proposal.  Mitch has a uniquely eclectic background that includes an amalgam of undergraduate and graduate concentrations in electrical engineering, English literature, biology, and biochemistry.  His career spans academia, technical laboratory management, and his own consulting firm. Audio  Mitch has a way of compressing highly technical concepts into language that any reasonably attentive adult can grasp. Audio  His approach works, as the success rate of Mitch's clients attests.

• Everyone is a Customer
• The Elements of a Winning Proposal
• If the Shoe Fits

Everyone is a Customer

Though I always learn something when I speak with Mitch, I didn't really expect to learn much about SBIR's.  I thought I already knew what I needed to know.  To me, SBIR's were a kind of government largesse.  SBIR's represented free money for those who couldn't earn it in the marketplace.  As is usually the case when I slip into snide generalizations, I found that I was wrong.  Not that SBIR's aren't sometimes awarded to "SBIR mills," I was just thinking about SBIR's in a bass-ackwards way.

Jeff Shuman and Jan Twombly at The Rhythm of Business are fond of saying that "everyone is a customer."  In other words, you are more likely to be successful as an entrepreneur if you approach all of your relationships with the attitude that you've got to give before you get.  Mitch showed me how successful SBIR proposals are written by people who take this approach.  The individual at the federal agency seeking SBIR proposals represents a (potentially major) customer with a set of needs - some specific, some general - that you must satisfy, if you are going to make the sale and receive funding in return.  The SBIR program isn't primarily about government as patron of small business; it's about customer needs waiting to be fulfilled.

If you look at the SBIR program as patronage, you are likely to see bureaucracy and arbitrary red tape.  I mean, what's with the specifications regarding font size and page margins?  On the other hand, if you view the process as a request for proposal from a prospective major customer, new patterns emerge:

• The requesting federal agency (Department of Defense, Department of Transportation, etc.) is looking for innovative solutions to current and anticipated needs.  They don't really need your ideas.  Consequently, you must provide compelling evidence of your business and technological acumen.  Have you thought through the commercialization process?  At the end of the day, will you be able to reliably deliver - that is, sell - the agency a solution that works?
• Innovation entails risk - in development, production, and commercialization.  Show your prospective customer that you understand the risks and have plans for mitigating them.
• Your customer is represented by an individual reviewer whose time is limited.  She will put in the hours, but she must invariably choose which of hundreds of proposals to focus upon.  The seemingly inane formatting requirements of an SBIR proposal have a real world function - they help the reviewers make initial assessment efficiently.  It's pretty basic - respect your customer's time by presenting your proposal in the desired format.  If you don't, you are signaling that you don't care about your customer's needs.
• If, and only, if the preceding are addressed do the broader objectives of the SBIR program - stimulating broader innovation and small business development - come into play.  In other words, small business innovation is a necessary, but insufficient, condition.

The Elements of a Winning Proposal

Having enlightened me, Mitch agreed to walk through a prototypical Phase I SBIR proposal Audio (proof-of-concept) structure and share his experience regarding the essential characteristics of a proposal that is going to lead to a sale.  I summarize the high points below in regard to each section.  Click the audio links to hear Mitch's elaboration.

Cover Page
This is your elevator pitch, your executive summary.  You have a couple of minutes to grab the attention of your customer.  Make the best of it.  The abstract, in particular, must be written in a compelling manner.  It has to make clear that you understand your customer's needs; you have a truly innovation approach to a solution; and you have the wherewithal to execute. Audio

Significance of the Problem or Opportunity
This is the place to show that you truly understand the agency's needs.  It's a good spot to show that you've been listening carefully during your previous discussions with the agency Technical Point of Contact ("TPoC") Audio.  Resist the temptation to pitch your technology - the focus needs to be on the customer and its needs.  If you don't connect here, you won't get the opportunity to propose a solution. Audio

Statement of Objectives
In this section, you spell out the objectives of your proof of concept or feasibility study and present success metrics.  Because risk is inherent in innovation, you need to identify the risks and suggest work-arounds or other mitigants.  By presenting clear, measurable objectives and by coming clean regarding risks, you can demonstrate that you've considered all the angles and that you can be trusted to execute the program. Audio

Work Plan
The technical work plan is the guts of your proposal - the who, what, where, when, and how in regard to the tasks necessary to accomplish each of the objectives spelled out in the previous section. Audio

Summary of Related Work
Here is where you demonstrate your knowledge of the state of the art.  That doesn't mean, however, that you limit your review to just your company's contributions.  If you want to avoid diminishing your credibility, you also need to include references to the work done by other parties, including competing technologies. Audio

Relationship with Future R&D
It bears repeating, the SBIR program really isn't a make-work program.  The funding agency doesn't want to make a Phase I investment unless it sees a real chance for commercialization.  Consequently, this transitional section asks you to explain how (a) a successful Phase I is going to set you up for Phase II development and (b) how your overall company growth and development strategies support the commercialization of the technology in question. Audio

Commercialization Strategy
According to Mitch, applicants frequently make two mistakes when they write this section of the proposal.  First, they underestimate its importance, because the recommended length of the section is just one page.  Second, they write marketing puff pieces rather than a high-level commercialization strategy statement.  Again, the agency ultimately wants to become a customer - though not the sole customer - for your solution.  Consequently, you need to demonstrate that there is a good chance your company is going to be around.  Quantify the potential market.  Describe whether you intend to license the technology for manufacture by others or whether you intended to manufacture the produce yourself.  Explain how you are going to finance your product launch.  An expensive prototype collecting dust on a shelf is only a little better than a bright idea.  Innovation is ultimately about making things happen. Audio

Key Personnel
In the work plan, you specify who is going to accomplish each task.  In the key personnel section, you need to tie the credentials and experience of each of those (in-house) people to the tasks for which they are responsible.  Demonstrate that they can get the job done.  Your customer wants to have a reasonable expectation of results, not fund on-the-job technical and management training. Audio

Facilities & Equipment
It's not enough to simply assert that you have the facilities, tools, and equipment necessary to accomplish the SBIR objective - be specific.  Very specific.  If there is a gap in your toolset that you intend to fill through an expenditure funded by the SBIR grant, this is the place to justify the expenditure.  (Make sure you tie it back, precisely, to the subsequent cost proposal.) Audio

Subawards & Consultants
As the effectiveness of networks increases, the pressure to specialize become more intense.  That makes it increasingly likely that your company won't have everything it needs in-house to provide a comprehensive solution for your customers.  SBIR agencies understand that partnering is a way of life, so they encourage the use of consultants and partners.  That said, your company needs to do most of the tasks specified in the work plan.  Furthermore, you need to tie the expertise, talents, and confirmed commitment of each external resource to the work plan and the cost proposal. Audio

Prior, Current, or Pending Support
If another agency has providing, is providing, or will provide support for work similar to that covered in your proposal, disclose that information here.  If not, just say so, but don't ignore the question. Audio

Cost Proposal
At this point, you have demonstrated that you understand your customer's need; you have presented a compelling case that your approach is likely to yield an innovative solution; and you've provided evidence that you have the wherewithal to achieve the specified project objectives.  Now it's time to present the price tag.  Do your agency reviewer a favor - do yourself a favor - and follow the directions.  Make it easy for your customer to tie the cost of your proposal back to the work plan and facilities sections.  Note, too, that you should build in justifiable indirect costs, overhead, and "fee" (i.e., a profit margin) into your cost proposal.  Sure, your agency-customer wants a competitive bid, but it also needs for you to be successful as a business in order for you to be a source of your customer's long-term solution.  Skimp here, and you're likely to damage your credibility. Audio

Company Commercialization Report
Notwithstanding the intent of the SBIR program, it is a program that can, and has been, gamed by SBIR mills - organizations that survive by receiving Phase I grants.  They don't ever get around to producing a marketable product.  Some people would love to make a living spending the money of venture capitalists, too.  They are prevented from doing so by the relatively tight knit social connections among venture capitalists.  Your first failure is forgiveable, but your second is not.  Government, on the other hand, is too big and dispersed to rely on personal reputation.  Consequently, you have to document your past success in commercializing technologies funded, in part, by the program. Audio

If the Shoe Fits

In a sense, money from the SBIR program is a form of "free" equity capital that can be used to fuel the growth of your company.  For that matter, so is the profit on all kinds of sales.  If your business has an innovative technological solution that can address the needs of a federal agency participating in the program, it might make a lot of sense for you to follow the SBIR path.  On the other hand, if you view the SBIR program as a form of small business patronage, you are very likely to hit a business dead end.  After all, relying on handouts, failing to reliably deliver on your business promises, or taking on work that is either unprofitable or distracts you from more profitable ventures are proven strategies for business failure.