A critical skill that every entrepreneur should learn is how to write a business proposal. A business proposal is typically a document that you send to a prospective client, laying out the service you’re providing and explaining why your business is the best for the job. In essence, a business proposal is a pitch by a business or individual to work on a specific job or project, provide a service or act as the vendor of a certain product.
Here are the essential steps to take to write a business proposal:
1. Gather Information on the Client and Solutions They Need
A good way to get started when writing a business proposal is the address the three Ps, which stands for problem statement, proposed solution and pricing. These three factors are at the root of what your business proposal should address and will help guide you as to what information you need to gather first. Once you’ve established your three Ps, you can move into the specifics of your business proposal, such as its contents and format.
Although it’s important that you respond quickly to a request for a proposal, also called an RFP, you should really take time to learn about the client and project first in order to create a business proposal that is tailored to them and thus more likely to be accepted. The data you gather about your client will inform the crucial aspects to include in your business proposal, resulting in a more accurate and effective pitch that stands out from others.
Here are some of the key elements you need to identify and address before writing a business proposal:
- The buyers: Establishing who actually makes the call with purchasing is critical to your business proposal being accepted. Very often the person you’re talking with the most might not have the final say in the decision. Consider who else may be involved in the process and ask your prospective client to describe how decisions are made in their approval process.
- Client pain points: Ask your prospective client about past experiences with similar products or services to zero-in on their pain points and how your product or service can solve them. Besides gathering information from your prospect, research your competitors to identify potential weaknesses that you can use to your advantage.
- Project budget: You’ll want to find out your prospective client’s budget or target price for the project or task they’re envisioning. By finding out your prospect’s projected budget you can avoid wasting time on proposals that have little chance of profit for your company.
- Project deadline: Find out if your prospective client has an ideal deadline for the project so you can establish a workable time frame. This is doubly important since many companies set internal deadlines for purchasing decisions, so you’ll want to complement their scheduling process.
- The best solution for their problem: Your company may offer several products or services, but only one might be the best fit for your prospect. Figure out which product or service will provide the most benefit to your client based on who the buyers are, their pain points and their purchasing schedule.
- Cost estimation: There are two components to this step. You should calculate the costs, such as labor or materials, you will incur and estimate the projected revenue for your company of carrying out your business proposal.
You’ll also want to cover any caveats you identify in your business proposal. These are essentially disclaimers that help provide some protection from unanticipated turns the project may take, such as project scope creep, in which the objectives and goals of a project steadily pile up after the project is already underway. Just be sure not to include too many caveats because it can undermine your company’s credibility about being able to complete their project.
2. Define Project Objectives and Scope
A key step before you outline the project scope is to define the objective of your business proposal. It’s important that you know and can communicate your project objectives clearly because it will keep you on track of the reason for writing the proposal. At the same time, laying out project objectives helps craft your outline and your proposal. It is generally a good practice to state the objective early on, such as in your introduction or in the executive summary of your business proposal.
Tackling your business proposal objectives uses a method employed in journalism; you need to address the 5 Ws:
- Who: Who will be the primary stakeholders or beneficiaries, and who will be doing specific parts of the project?
- What: What is the desired goal and what approach will you use to reach it?
- When: When will you complete the particular project and what is the deadline and timeline?
- Where: Where will your work take place?
- Why: Why is your product or service the best for the project?
Project objectives should support the overriding goal, so it is important that each of your objectives contributes and supports in achieving it. What’s more, objectives should follow a logical order, which essentially means that the project should be worked through in a step by step procedure. An added benefit of this that it helps you in planning all the pieces and functions accordingly.
Another useful approach for objectives is to use SMART objectives in which each letter represents a different feature of the objective. Here’s how to craft SMART objectives:
- Specific: Objectives should be clear, unambiguous and concise, with details on how and what you intend to achieve.
- Measurable: Objectives should be quantifiable so that there’s no confusion on what has been achieved or not. Measurable numeric objectives eliminate the dangers of vague goals, which can hurt both you and your client.
- Achievable: Objectives should be reasonable, possible and within the capacity of your business to attain. When you write project objectives, be sure to consider your company’s own abilities and constraints to reach the objective.
- Realistic: Objectives that are realistic means they can be reached based on the available resources, time frame, money and capabilities of your company in relation to the goals of the client.
- Time-bound: Objectives need to have a time frame for completing a specific objective. Vague timelines can lead to adverse effects like project scope creep and escalating costs.
Many business experts recommend limiting your business proposal to three to four objectives, which helps keep your priorities to a minimum that you can focus on in detail rather than spreading yourself out too thin. Plus, each objective has multiple pieces and activities, so three to four of them can add up quickly in terms of time and resources.
The project scope is a concise summary of what will be delivered at the end of the project, how the work will be done and any other stipulations that stakeholders have made. The project scope should account for all functions, tasks, costs and schedules involved in the project that you can foresee at the time of writing the proposal. This outline will help define the statement of work as it related to your business proposal and budgetary costs.
3. Estimate Costs
From the beginning, you’ll want to figure out how much the project will cost, and therefore, how much you should charge the client for your services. Your cost estimation should be broken down into two main categories:
- Direct costs: Those directly associated with the project, such as wages for your team doing the work, costs of resources like equipment or vehicles and money spent on risks inherent in the project.
- Indirect costs: Indirect costs are those that are not tied directly to a specific aspect of the project, and instead emerge as by-products that can cost varying amounts. Good examples of indirect costs include utilities, security costs and project management expenses.
When doing cost estimation, it’s a sound idea to overestimate a bit. The reason is that projects often have unexpected twists and turns, so creating a buffer in terms of time and money can help account for potential roadblocks that will occur as you work on the project. The added benefit is that, if the project goes smoothly, it may come in below your estimates, which saves the client money and serves as an incentive for your client to continue their business relations with you.
4. Write Your Business Proposal
With all your information gathering, project objectives and scope and cost estimation complete, you can get into the actual business proposal document. Business proposals tend to follow a general model. They start with an introduction that gives an overview of your business and the project, followed by a body that lays out all the details and a conclusion that informs the client how to proceed.
A typical business proposal should include the following six sections:
Your business proposal should start by introducing your company and purpose in a manner that relates to your potential client’s needs and desired goals. This is a great spot to highlight what makes your company, accomplishments and credentials distinct from others, especially competitors.
B. Executive Summary
The executive summary is where you make the case for why your company is best for the job, providing your client with the key takeaways of your business proposal. Keep this section clear and concise, focusing on conclusions you want the client to reach after reading it, rather than summarizing every part of your proposed solution.
This isn’t an absolute necessity, although a table of contents can be useful for longer proposals. With a table of contents, you list each section and subsection with their respective page number, which can be very convenient for the client if your proposal is unavoidably detailed and involved. If it is, consider cutting it down to the necessary information.
After you have laid out the broad case for hiring your company to your client in the executive summary, you can drill down into the specifics of your business proposal in the body section. A good place to start is with the project details, including a pricing grid or breakdown of the timeline, schedule and logistics. A pricing grid provides a clear and concise format for the products or services included in the proposal, each item’s price and any terms related to their delivery.
The body is also where you include caveats or disclaimers about the type of work you can deliver, referred to as the terms and conditions. This part of the business proposal is one of the most crucial and also one of the most difficult aspects to execute well.
A common trend in business projects is for clients to expand their requirements once they’ve already agreed to a set plan from their provider, a process mentioned before as scope creep. At the time, these additional requests might not seem like a big deal. However, too often, seemingly minor asks snowball into major unintentional consequences. This is why including caveats is so important as is avoiding exaggerated claims about what your company can accomplish for the client.
The conclusion is where you reiterate the solution your company can provide the prospective client. Using text that features a call to action that encourages the client to reach out to you for more information. Even if the call to action is minor, getting your client to make any kind of move toward hiring you is a win.
An appendix is an optional section that can be useful for housing extra information that doesn’t fit well in other parts of the proposal. For instance, this is a great section for additional figures, graphs, projections and customer reviews.
5. Edit Your Business Proposal
Like with any important written document, make sure to proofread your proposal before sending it out to a prospective client. You don’t want grammatical errors to invalidate your business proposal right out of the gate. Always aim for getting a second set of eyes on your proposal. Even better, hire a freelance editor to make sure your business proposal is error-free and ironed-out in terms of language. A freelance editor can also help immensely with the tone and length of your proposal. You’ll want your business proposal to be brief enough to read in one sitting while containing language that is professional and straightforward.
6. Submit Your Business Proposal and Follow Up
There are a variety of ways to send out your business proposal. Probably the most common way is to simply send your proposal as an email attachment. Sending it as an attachment is preferred because including it in the body of the email can lead to the loss of key details in translation which can happen when emails get forwarded or have multiple people on the email chain.
Another common method of submitting your business proposal is through the prospective client’s website and portal. You usually are required to log in to their portal and submit proposals in their desired format, but it’s also convenient in that you know your proposal is getting to the prospect.
Equally important to sending out your business proposal is following up with a client about it. Business people are very busy, and it is understandable that your business proposal could get overlooked or lost in the mix. Following up serves a reminder and a chance to reiterate or answer any additional questions in the proposal process. Following up the next morning is advisable, as is using email tracking that notifies you when the client has opened the message.
Business Proposal Tips and Formats
Although the substance of your business proposal is most important, the format matters too. A business proposal that’s bland or unappealing stylistically can make it not memorable for the client — especially if they’re considering several other proposals from your competitors. Fortunately, there are tons of resources for formatting, such as business proposal templates and business proposal samples, that you can utilize to draft a business proposal. The ideal format is one that will to grab a buyer’s attention and stand out from competing business proposals.
If you’re unsure of the best business proposal format to use, you can hire a third-party business proposal service. These businesses and services provide tools that are more advanced than a business proposal done with traditional word processors. Some of these added benefits include electronic signatures, tracking notification, credit card processing and much more. Another option is to hire a freelance graphic designer to format your proposal in an aesthetically pleasing way.
Business Proposal vs. Business Plan
A common area of confusion and one that should be made clear is that a business proposal is not the same as a business plan. Although there are certainly areas of overlap, such as with having an executive summary, the two are fundamentally different. That being said, you can certainly pull information from your business plan while writing your business proposal.
A business proposal is directly from an established business or freelancer to a prospective client. A business plan, on the other hand, is usually created for a new business starting out. A business plan is also usually used for laying out your business in order to acquire funding from investors or lenders.
Thus, with a business proposal, you’re trying to sell a potential client on your product or service, instead of selling the idea of your business itself. A simple way to view the difference is that you’re not after funding, like with a business plan, but rather you’re attempting to get a client.
Solicited vs. Unsolicited Business Proposals
Generally, a business proposal is either solicited or unsolicited. With the former, a prospective client will put out a request for proposals that businesses and individuals respond to. For example, a corporation or government organization may seek the services of an outside company to complete a task, and therefore will issue a request bids from companies who compete on getting the project. With an unsolicited proposal, you or your company go to a client you’re targeting in order to attract their business, despite the fact they did not explicitly request a proposal.
Both types of business proposals are common, but a solicited proposal is easier to sell since your prospective client has already decided that they want to make a purchase or use a service. Your job then is to make your service or product more appealing than the other possible vendors or businesses they’re assessing to do business with.
The Bottom Line
Knowing how to write a business proposal is an essential skill that every entrepreneur should master. In order to be a successful company, you need to bring in revenue and that means working with other businesses. Your business proposal is how you sell your product and services to other businesses, while also guiding your company in its operations. Your business proposal should, therefore, be tailored to both your client’s needs and your company’s internal capabilities, culture and operation.