What is a proposal in business?

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/product
• Costs
• Project timelines

Business proposals are used to win jobs that are either more complicated or bigger than standard projects. This means that business proposals 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. It’s important to include attachments like health and safety certifications or professional qualifications, in a business proposal.

Proposals are also more exact in terms of pricing and scope than an estimate. However, business proposals aren’t legally binding until they become a contract. 

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. RFPs state when a client would like to receive a proposal by. A potential client may ask you to put forth your ideas about how you would use your services to achieve the project outcome.

Usually clients who use RFPs have started the project and are 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.

Alternatively, you might submit an unsolicited business proposal to a potential client. In this case, the proposal is more of a sales presentation or 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.

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 the value of your product/services to clients. 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.

Business proposals are formatted differently depending on the industry.  Your industry and services offered will shape how you showcase your products and services in a business proposal.  

For example, if your service involves design, architecture or landscaping, you’d have to make a more visual design proposal.  In contrast, if your services are consultancy work, work references are more important.

You can use 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.

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.  Firstly, there’s a cover letter or business proposal letter.  Secondly, there’s a 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.  This section in a business proposal should be brief.   Ideally, a business proposal letter is only one page with two pages being the absolute maximum. This cover letter should entice the client to continue on and read the main proposal section.

The business proposal letter is written in standard letter form using first person.  You may use more formal language depending on your industry. 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)

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

For small businesses, an estimate might be all that is needed.  An estimate can provide a brief outline of costs and tasks of the project.  A small business may then simply call the client to prove their value.  This may be the case when they have many online positive reviews or work is won through customer referrals or references.  

In contrast, a business proposal is used to help the client see the value of a service provider in more detailed written form with visual attachments.  Business proposals suit more complicated service jobs and particularly where there is a lot of competition. More proof may be needed beyond simple having a good business reputation.  A business proposal is proof that the supplier can deliver on schedule, design, approach, aesthetics, and more.  Often, a business proposal will showcase previous projects, testimonials and references.