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What is a business proposal?
A business proposal is a sales document detailing the offer from a seller to a potential buyer. With the intention to solicit business, a company can present a prospective client with a business proposal offering a particular product or service.
For a company to expand in today’s competitive business world it has to be able to produce powerful business proposals. Whether a company succeeds or fails depends largely on the quality of the company’s business proposals.
A business proposal is not to be confused with a business plan. A business plan is a description of the company and its prospects. Its purpose is to convey information to clients and stakeholders. A business proposal, on the other hand, is a quote and a call to action. Its purpose is to solicit business from a specific client.
Types of business proposals
There are three distinct categories of business proposals:
1. Solicited proposals
A solicited business proposal is drafted in response to a request for a proposal. This request can be either formally (contained in a document) or informally (verbally).
If a buyer verbally asks a seller to provide a business proposal, the seller would respond with an informally solicited proposal. A buyer would generally informally solicit a proposal from a seller if he/she already has an interest in what the seller can offer. Usually, the request is only extended to a single seller.
Formally solicited proposals are a response to specific requirements published by the buyer. If a buyer formally solicits a proposal, he/she is inviting proposals from competing sellers. The requirements for the proposal can be contained in the following documents:
- Request for proposal (RFP) – when the buyer has specific requirements that cannot be met with generally available products or services.
- Request for quotation (RFQ) – when the buyer wants to purchase large amounts of a commodity and price is not the only deciding factor.
- Invitation for bid (IFB) – when the buyer requires a service and price is the primary factor.
- Request for information (RFI) – issued before an RFP, RFQ or IFB to gather marketing intelligence about the availability and suppliers of a product or service.
An example of a solicited proposal is the reply to a government tender. To compete for large government projects a solicited proposal must be drafted in accordance with the published tender requirements.
2. Unsolicited proposals
An unsolicited proposal is the initiative of a seller who has identified a need for business and attempts to convince the prospective buyer that his/her company can fulfil that need. It is similar to “cold-calling” in marketing.
The potential buyer never communicated the need and the onus lies on the seller to demonstrate the need in a business proposal. Unsolicited proposals differ from solicited proposals in that:
- the intention of the proposal is to introduce the possibility of a sale, whereas solicited proposals are intended to close a sale;
- there is no competition; and
- the proposal has to be drafted with the target audience (the buyer) in mind, rather than drafted in accordance with specified requirements.
The submission of a book outline to a publisher, in an attempt to secure a book deal, is an example of an unsolicited proposal. It details the merits of the author, the popularity of the subject and the uniqueness of the approach.
3. Proposal for funding
A company can write a business proposal to apply for funding or grants from private donors, government agencies or banks. Grants are typically earmarked for very specific kinds of businesses or projects (like non-profit organisations, for example).
To find out how to draft a business proposal for funding in South Africa, see the Education & Training Unit’s funding proposal guide.
How to write a business proposal
Before you start writing your business proposal it is vitally important that you first conduct research. Find out as much as you possibly can about your client’s needs. Even though you want to submit your proposal as soon as possible, if you skip this step and you may as well skip the entire proposal.
In order to propose a solution to a client’s problem, you must first understand the problem. The best way to truly understand the client’s need is to talk directly to the client (if possible). Key employees within the client’s organisation can give valuable insight into the company’s aspirations.
When submitting an unsolicited proposal the client’s need is not as readily provided as with a solicited proposal. You can extend your research to include the potential client’s competitors, customers and colleagues. The internet is also a great source of information.
In the case of a formally solicited proposal, the client’s requirements are set out in the RFP. You still need to do research to enhance your understanding of the client and the project. You also need to familiarise yourself with the requirements, as set out by the client, and ensure that you can meet each of these requirements before wasting time and effort to draft a business proposal.
Using your research, create an outline of your business proposal while giving consideration to the 4 Ps of writing a business proposal:
The introduction to your business proposal should demonstrate your knowledge of your client’s current standing and business requirements. Mentioning the client first, before your own company, is a more effective way to grab the client’s attention from the start.
Also, describe your company’s mission and vision. Be concise and do not risk losing the reader’s attention with a long and detailed explanation of the workings of your company. An anecdote about your company will help the reader/client relate to the company’s brand.
Before you can offer a solution to the client’s problem, you need to convince the client that you fully understand their needs. The client will not trust that you can solve the problem if you do not seem to understand the problem.
Describe the client’s need simply and clearly. Your description of the problem is the driving force behind the proposal. You must prove to the reader that a problem exists.
Next, explain to the client what all the possible scenarios are for dealing with the problem. You must not only include a detailed description of how your company can solve the problem, but also explain what could happen if no action is taken. Also, include all the pros and cons of each scenario in your description.
After you have successfully convinced the client that you are the solution to their problem, their decision will ultimately be based on information in this section. The cost of the project should instantly be evident and clearly specified.
Before you can determine what to quote the customer you need to calculate what the project is going to cost. Labour costs are usually overestimated to make provision for unforeseen complications.
Include all the relevant facts and figures – such as a budget or a breakdown of expected expenses, for example. If a single price estimate will suffice you can quote it at the end of the business proposal.
Business proposal format
Once you have completed your research, you can begin to compile all the information into a business proposal. You can sample old business proposals on a similar project in your industry to help you determine how to format your proposal.
You can also use a template. There are many free business proposal templates in many formats available online. You can find a business proposal template for Microsoft Word, Excel and PowerPoint here.
Bidsketch has many industry-specific format business proposal templates in Word DOC form for free. These templates can be downloaded with all the imaging and PDF instruction guide documents on how to write the business proposal. Proposal management software can help you manage all the elements of a business proposal more effectively.
The length of a business proposal varies based on the requirements of the proposal. It should be as short as possible without excluding key information. Any additional information (e.g. testimonials, charts and graphs) can be added to an appendix.
A business proposal consists of a cover letter, a proposal document and appendices (optional). Sometimes, a brief business proposal can be contained in a business proposal letter of a few pages only. The cover letter should provide a brief overview of what is contained in the proposal document. The business proposal document’s format comprises of an introduction, a body and a conclusion.
Common elements requested in a business plan format include:
- Cover letter
- Title page
- Executive summary
- Table of contents (optional)
- Statement of the problem or need
- Strategy or approach to solving the problem
- Proposed mythology
- Company/bidder’s qualifications
- Schedule and benchmarks
- Cost Proposal, payment schedules and legal matters
After compiling your business proposal be sure to proofread it to make sure the information flows logically and that the document is error-free. A second set of eyes can catch errors you have missed. Also, make sure that all the requirements for the proposal have been met.
A good proposal can hold great value for a company and should look as professional as possible. Print the proposal document on quality paper and have it professionally bound.