Most people use the words business plan and business proposal interchangeably, clearly think the two documents are the same. Although they have similar characteristics, they are very different documents. They can help you grow your business in very different ways.
A business proposal is usually used as part of your sales process to new clients who accept or reject your proposal.
A business plan is a written document detailing a company’s marketing and management objectives and strategies, typically concerning an established goal or organisation structure.
Let’s dig into the details.
What Is A Business Proposal?
The purpose of a business proposal is to submit a bid for a project or a continuous service. Most of the time, this is for a new client where you havent established a business relationship.
A business’s proposal is often in competition with bids from other similar companies. Therefore the purpose of a business proposal is to highlight your company’s unique selling point (USP) to differentiate from the competition.
Your unique selling point could include demonstrating how you’ll save your prospective clients time or money or even help them make more money.
Many service-based small businesses rely on proposals to sell their services and bring in new work. A business proposal is sent from a service provider to a potential client to win a specific project.
Types Of Business Proposal
Business proposals can be solicited or unsolicited.
Solicited Business Proposals
Solicited business proposals occur when a company or organisation explicitly requests service providers’ proposals. This could be done verbally, via email or formally through a “request for proposal” (or “RFP”) document.
An RFP outlines explicitly what product or services the company requirements and will set a deadline for proposal submissions. They may also invite the business to offer unique solutions to complete the project.
An RFP means that the potential client is actively seeking a supplier. The service providers job is to write a proposal that helps them choose your business by showing you understand their requirements and provide unique solutions.
Vendors responding to RFPs should always follow the buyer’s preferred, stated format with the proposal. Common elements requested, which can also be used in unsolicited proposals, often include:
- Cover letter
- Cover page
- Executive summary
- Table of contents
- Overview or summary of the problem or need
- Strategy or approach to solving the problem
- Representative tactics
- Company qualifications
Unsolicited Business Proposals
An unsolicited proposal is when a service provider sends a company or organisation a proposal highlighting the services they offer and how they can solve a particular problem. This is very similar to a sales presentation and has a lower success rate because you have no idea if the company is seeking a solution.
What Is A Business Plan
A business plan documents the roadmap to start a new business or grow how to an existing one. A business plan outlines the business goals and details how the business will achieve them. This includes what market you are going after, as well as how much funding it’s going to take for your company to survive until it can become profitable.
While a business plan is primarily for internal purposes, it may also be presented to investors and lenders to help raise funding for your business.
All businesses should have a business plan. It is an essential document that provides a description and framework of your business’s future.
At its most basic, your business plan outline should explain what you intend to do and how you will do it. It would help if you outlined your strategies across the business, including financial projections, marketing and operational plans.
Contents Of A Business Plan
Typically, the business plan structure contains the following ten components:
- Executive Summary
- Business Description & Overview
- Market Research & Analysis
- Customer Analysis
- Competitive Analysis
- Marketing Strategy & Plan
- Operations Plan
- Management Team
- Financial Projections & Plan
A business plan is recommended to be updated annually to adjust for changes in the industry trends and the business itself.
Types Of Business Plan
Startup Business Plan
Startups should detail their first steps with a startup business plan. This document typically includes sections describing the company, the product or service your business will supply, market evaluations and your projected management team.
A startup business plan should answer two primary questions about a proposed business venture: who, if anyone, will purchase the service or product a company wants to sell, and if the venture can turn a profit.
Startup business plans include but are not limited to sections describing the need for the product or service, target demographics and required capital. A feasibility plan ends with recommendations for going forward.
Potential investors will also require financial analysis with spreadsheets describing financial areas, including Sales Projections, Profit & Loss, Cash Flow Forecast and a Balance Sheet.
Internal Business Plan
An internal business plan targets a specific audience, such as the marketing team evaluating a proposed project. This document will describe the company’s current state, including operational costs and profitability, then calculate if and how the business will repay any capital needed for the project.
An internal plan specifies implementation markers and deadlines for the coming year. Internal plans provide information about project marketing, hiring and tech costs. They also typically include a market analysis illustrating target demographics, market size, and its positive effect on the company income.
A strategic business plan provides a high-level view of a company’s goals and how it will achieve them, laying out a foundational plan for the entire company. While the structure of a strategic plan differs from company to company, most include five elements:
- Business Vision
- Mission Statement
- Critical Success Factors
- Strategies For Achieving Objectives
- Implementation Schedule
A strategic business plan brings all levels of the business into the big picture, inspiring employees to work together to create a successful culmination of the company’s goals.
Key Differences Between Business Plans and Business Proposals
A business proposal is essentially a sales document. The sales team typically work with the customer to tailor an attractive business proposition to both parties in a business proposal. This usually comes in a written document detailing the services and costs of fulfilling an offer or request,
A business proposal may include more service details. It does not include information about the company’s operations or future plans outside of the specific project.
In contrast, a business plan describes your company on the executive and operational levels aimed at investors to raise financial support or other stakeholders to facilitate long-term growth. For example, an investor will want to know how different departments within your business interact with one another.