What is a proposal in business?

A business proposal is a written document given to a potential client by a seller with the aim to win a project.

Business proposals can be requested by a client or sent unsolicited to an advertised job/project.

Most often, proposals win jobs for businesses that provide a service to sell their services and provide them with work.

However, they can also be used by product-based businesses if they supply a specific product that is a key part of the project.

In many cases, a proposal might include both product and services if the proposal includes material costs.

What is a business proposal?

A business proposal is a written document from a seller/supplier to a potential client to win a specific project.

Business proposals are sales documents that contain information about the services a business can provide for a project. The information is similar to what is given in estimates, bids and quotes.

Although the content of a proposal can vary, generally they include:

  • The extent of the project (what is and isn’t included)
  • The business’ deliverable services/products
  • Costs
  • Project timelines

Business proposals are used to win jobs that are either more complicated or bigger than standard projects. Because of this, they need to be more detailed and provide information specific to the project.

You might need to prove that you pass certain criteria or have the correct certification to do the job. Include this in the business proposal. Examples of these might be health and safety certifications or professional qualifications.

Proposals are also more exact in what they propose than an estimate. The pricing and scope are more specific than in an estimate. However, they are not legally binding until they become a contract. 

What is a Request for Proposal?

A client might individually request a proposal from your business. They might do this in conversation, through a phone call, over email or with a formal document, known as a Request for Proposal (RFP).

RFPs outline the products/services that they are interested in and the project they are for. They also say when they would like to receive the proposal by. They might also ask you to put forth your ideas about how you would use your services to achieve the project outcome.

If a request comes in the form of an RFP, the supplier wants to get the project underway and is actively looking for a supplier/service provider. You can use this to your advantage by showing them how you understand their needs and can provide them with the services they are looking for (and more).

Alternatively, you might submit a business proposal to a potential client unsolicited. In this case, the proposal is more of a sales presentation/pitch where you introduce your business for the first time. It is helpful to not only prove that you can provide what they are asking but that you have done similar for others before.

What is the purpose of a business proposal

The purpose of a business proposal is to win a contract on a new project. Often with business proposals, there isn’t an existing relationship with the client.

When a business submits a proposal, it is often competing for other proposals from competitors. Therefore, you’ll need to stand out from your competitors and prove that the value of your product/services is exactly what the client needs. The value that your product can give them could be saving time or money. Alternatively, the quality of the service/product might be superior.

Testimonials and past projects are also often included and act as great social proof. They show that your business can complete the work required and to the standard needed. Having real, physical proof will help the client trust your services/products.

Even if you don’t think that you will win the proposal, sending one can help your exposure and potentially help you win future jobs with the buyer.

Types of Business Proposals

Business proposals are formatted differently depending on the industry.

How you showcase your product/service depends on the type of business you have. If your service involves design, you’ll have to make a more visual proposal. Whereas if your service is consultancy, work references are more important.

While most service-based can make their proposal using a standard format, some businesses will need to follow a different format. These industries include:

  • Trades 
  • Architecture, landscaping, design
  • Advertising and marketing

For these businesses, it can be helpful to use an old proposal and write your new business proposal based on its format.

Also, include additional resources to judge the quality of your services. You can use a visual model if your design skills are being judged or a presentation if you are trying to sell your ideas or skills.

You might also need a meeting if your business can’t be judged based on a general business proposal. In a meeting, the seller has the opportunity to showcase both the skills they are trying to sell and their business skills (communication, flexibility, ease to work with). In these cases, a written business proposal acts more like a summary or administration.

What is a business proposal letter?

A business proposal letter is essentially a cover letter and makes up part of a business proposal. 

In most cases, a business proposal is made up of two parts – a cover letter and the proposal document. A short proposal might combine the two parts to prevent the proposal from being too repetitive.

The reason for a business proposal letter is to give some context on the rest of the proposal and your reason for sending it.

The document should be brief, ideally only one page with two being the absolute maximum. It should only highlight the proposal which will go into further detail. Make sure it entices the client to read your proposal rather than turn them away.

The proposal letter is written in standard letter former using the first person. It might need to be adapted slightly depending on both the buyer and seller’s industry if either belong to an industry that typically uses more formal language.

Things to include in a cover letter are:

  • When and why the proposal was requested (or why it has been sent if it was unsolicited)
  • Who prepared it
  • A summary of the rest of the proposal
  • Contact information
  • Any information that might be surprising (different to what was discussed)

What is the difference between a proposal and an estimate?

Both a proposal and an estimate are a sales document that a seller will give to a client to win a project. However, a proposal goes into much more detail than an estimate and are used for more complex projects. Estimates are more suitable for simple projects,

A business proposal’s purpose is to help the client see the value that a company will provide its project. Often, it will include some previous projects, testimonials and references.

For small businesses, an estimate might be all that is needed. They might choose to use the estimate to outline the costs and tasks of the project and then call the client to prove their value.

In some cases, a business might not even need to prove their value because their reputation demonstrates their fit for the job. They might also have won the client due to a referral from a trusted friend/associate. Other times, they might just see that the business has positive reviews online. Or in small communities, they might be the only business that offers this particular service/product. Usually, in cases like all these, the job will be relatively uncomplicated.

For complicated jobs or areas where there are lots of companies offering the same service, more proof is needed than a simple phone call or a good reputation. A business proposal is proof that the supplier can deliver on schedule, design, approach, aesthetics, etc.

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