There are many documents that you might create when starting a business. An official business proposal—an entire document that persuades someone to buy your product or service—tends to be the most confusing.
What exactly are business proposals used for? How does a solicited proposal differ from an unsolicited one? And what should you include in your business agreement? This guide answers those questions and more, so you can write a business proposal that closes deals.
What is a business proposal?
A business proposal is a document designed to persuade an organization to buy a product or service. It’s typically used to secure funding from investors, sign contracts with prospective customers, or obtain approval for a project from decision makers, such as project stakeholders or a legal team.
Business proposals can also be used as a sales tool to present a clear idea to potential clients or customers and convey your unique selling proposition. You can send the proposal digitally or present it in person.
Understanding business proposals
What is the purpose of a business proposal?
Business owners create a proposal when they sell products or services to other companies. Unlike a business plan (which is predominantly for personal use), the goal of an effective business proposal is to stand out from other vendors when selling, and outline the strategy to be taken to solve the potential client’s problem.
What is a business proposal letter?
A business proposal letter is a top-line overview of your longer proposal. It’s usually included at the start of a proposal, similar to a cover letter for a résumé, and acts as a formal introduction for the recipient.
Why business proposals are important
A business proposal is important because it outlines the business’s goals, unique challenges, and objectives of a project, and puts forth a plan of action to achieve those goals. It is an essential document for any business owner or manager looking to establish a new venture or expand an existing one.
A well-crafted business proposal can help secure customers, funding, and partnerships, and can also evaluate a project’s feasibility.
📚Read: How To Start a Business With No Money (8 Easy Steps)
Solicited vs. unsolicited business proposals
A business proposal is usually solicited or unsolicited, meaning that the purchasing company is either actively seeking proposals that meet a specific need or reacting to an offer—often from a salesperson—to consider one. Let’s explore both types of business proposals and when you might use them.
Solicited business proposals
Formally solicited proposals, also known as normal proposals, are more involved and often require extensive research and planning. Such proposals are typically used to secure contracts or large grants. There are four types of solicited business proposals:
Request for information (RFI)
This type of solicited business proposal is a screening tool that often precedes the entire proposal solicitation process. It’s designed to help the buyer understand which vendors are in the best position to provide what’s needed.
Request for proposal (RFP)
Organizations use official requests for proposals to solicit proposals from potential vendors. They contain specific information regarding the project, the requirements, and the evaluation criteria used to select the successful proposal. An RFP is often used when the buyer needs to evaluate which company is the best vendor based on a number of factors besides price.
In addition to outlining what the potential customer needs, this document also details what information should be in the proposal, and how it should be organized and presented.
Request for quotation (RFQ)
These are used when price is a primary factor in the purchasing decision, but not the only one. The buyer might need information about product availability, delivery times, and other specifics. Formal proposals responding to RFQs are often shorter than those for RFPs.
Invitation for bid (IFB)
IFBs are used to solicit services based primarily on price. Most simply put, they’re an official request for a response to the question: What would you charge to do this?
Unsolicited proposals
Unsolicited business proposals are a type of business solicitation that hasn’t been formally requested by the recipient. It might result from informal conversations at a trade show where the seller tells a prospect that they have a solution to the prospect’s problem, and says, “Would you like me to submit a proposal for that?”
Here are some other use cases with unsolicited business proposal examples.
Marketing or consulting proposal
Service-based companies can send unsolicited business proposals to pitch their services to potential clients. Unlike an RFP, where the client formally solicits proposals from multiple vendors, an unsolicited marketing proposal is the first interaction between either party. They’re typically short, sales-focused, and recap the problems a prospective client is likely facing (even if they don’t know it yet).
Licensing proposal
If you want to license another brand’s products or use its intellectual property, you can send a licensing proposal to formally request the rights to use it. This type of unsolicited proposal outlines the IP you want to use, how long you want the rights, and why the business should accept your proposal.
Partnership proposal
A partnership proposal is an umbrella term for any unsolicited proposal to collaborate with someone. You might create a partnership proposal if you’re looking to partner with an influencer to produce their own product line, launch a co-branded marketing campaign with another unique business, or reach out to potential influencers.
What are the key components of a business proposal?
While compelling business proposals can take the form of a less-structured proposal letter, they are often long documents. They might include anything from engineering specifications to business plans to project staffing, depending on what’s asked for in the request.
Essential elements, which can also be used in unsolicited proposals, often include the following:
Overview or executive summary
The first key element of a business proposal provides a brief overview of its contents, including a summary of the main points, the overall vision, and any applicable background information. The executive summary should also briefly summarize key details, capturing the vendor’s attention and encouraging them to read the rest of the proposal.
Problem statement
Business owners create a proposal when they have a solution for another company. In this part of your proposal, write a clear explanation of the problem or need that the formal document is addressing and why the proposed solution is necessary. If you’re writing an unsolicited licensing proposal, for example, you could pull on the vendor’s pain point of struggling to reach prospective customers in the specific geographical area where you live.
It’s also worth referencing the prospective client’s competitors and market analysis in this section. This will reiterate why the solution you’re proposing is a problem, making pain points something they desperately want to solve.
Strategy or approach
This section of a business proposal includes a detailed description of the proposed solution, including any relevant information about the product or service being offered, pricing, and project timeline.
Clearly articulate how this proposed solution will solve the client’s problem. Replicate verbatim, where possible. If you’re sending an RFP and the client has asked you to show how you’ll improve their organic search presence, start that section of your proposal with, “We’ll improve organic search traffic by …”
Company qualifications
Consider adding a list of the benefits that the proposed solution will provide to the customer, such as cost savings, increased efficiency, or improved customer experience. This can be an added incentive to choose your proposal over another company’s.
This is where company qualifications, awards, or certifications can help your business proposal shine. The fact that you’re endorsed by a reputable person in your industry, have glowing customer testimonials, or have a product that has won awards, is a value proposition acting as social proof that could help vendors trust you.
Schedule
Is the strategy you’re outlining in your business proposal a short-term plan or a longer-term approach? Include the ideal schedule in your proposal to ensure the recipient is on the same page. This will help them understand the scope of work and confirm that your project timeline aligns with theirs.
Costs and payment schedule
The costs section of a business proposal helps your client evaluate whether to invest in what you’re selling. Provide an itemized list of costs associated with the project, such as:
- Labor costs
- Material costs
- Equipment fees
- Marketing costs
- Travel expenses
- Software costs
Use persuasion techniques like price anchoring to give the client a reason to accept your business proposal. If you’re selling a high-ticket marketing campaign, for example, anchor the $9,000 monthly package against your $7,000 one to show the extra value they’re getting by choosing the more expensive option. Make it clear that you only have space to take on one new client, so they need to act fast.
Do you need a business proposal?
Business proposals are a natural part of operating a business. As official and scary as the title may sound, they’re much more manageable to create if you break them down into smaller sections.
Whether you’re sending a solicited RFP or an unsolicited partnership proposal, your value proposition should underpin each section. Treat the executive summary as a cover letter to outline key details and break down the project’s scope. Your business proposal should make it a no-brainer for the client to choose you.
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Business proposal FAQ
What is meant by a business proposal?
How long should a business proposal be?
What are the steps for following up on a business proposal?
- Address the recipient by name.
- Re-attach the business proposal.
- Remind them of their pain point.
- Recount the benefit or advantage of saying yes.
- Ask a follow-up question.
- Insert a call to action.
- Interact on another communication channel.
What are the 3 main types of business proposals?
- Formally solicited
- Casually solicited
- Unsolicited
