No organization works in a vacuum. Businesses have suppliers, customers and contractors, and therefore, all kinds of agreements that are made between people and companies. Some of these deals can be made through discussion and agreement, but most often, companies prefer to have a formal contract. This process can start either by one side crafting a Request for Proposal (RFP) asking for offers or by the other side drafting up a formal business proposal and offering it to their contact.
What’s a Proposal Letter?
A formal business proposal is a document used to present the specifics of the offer, be it a project, a solution or goods and services. The proposal should be thorough and present both the company and the work being proposed in a good light. A formal proposal holds more weight than an informal agreement and normally ends in a contract both sides can be held to. It’s the preferred way to offer services in most industries.
Solicited proposals happen when a company has a need and wants to review potential solutions. If solicited, e.g. responding to an RFP, the proposal needs to follow the guidelines within. It’s very important to review the RFP for details and ensure all questions have been answered in the way the soliciting company expects.
Even small details, such as offering a lump sum rather than an itemized list, can negatively affect a proposal’s chances. The people reviewing the proposals aren’t just looking at the answer; they’re looking for attention to detail in the response as well.
Unsolicited Business Proposals
Unsolicited business proposals are sent all the time and are used to get the attention of potential customers, users, clients or buyers – like advertising but much more targeted. An unsolicited proposal needs to clearly express to the recipient what services or goods are being offered and how they can be used to create value for the receiving company. Since the customer isn't expecting the proposal, it should be clear as to what problem the offered services could solve and how it can directly serve that company.
Preparing the Proposal
Before putting anything together, it’s important to spend some time learning how to craft the document. Good business proposals are tailored to the client or customer’s needs, specific about the work being offered and professionally written so that all details are clear. In order to meet all of these, try to gather enough information to answer the following questions:
- Who's the audience? What's their background? Who will be making the decision about this proposal? Knowing who the proposal is being written for should affect the approach so the document can be specifically tailored to that audience.
- If there's an RFP: What is the request? What do they need and what do they want? Spend some time reviewing the RFP in detail; also, gather information about the company, what they already have within their own portfolio and what advantages can be offered in the proposal that would be attractive.
- If this is an unsolicited proposal: Spend a lot of time reviewing advantages that are unique to the services being proposed against the rest of the industry. Unsolicited proposals can occasionally be a hard sell, so be sure to know the competition.
- Consider the why: Why should this proposal win? What does the proposal offer that no other competitor will? Why are these solutions better than other ones?
Discuss What's Being Offered
Once this information has been gathered, it’s time to discuss the services, goods or plans to be proposed. This is normally done through discussion with a group of relevant subject experts to make sure nothing is overlooked.
The proposed work needs to have an objective, which should align with either the work outlined in the RFP or with the specific type of work being offered. The project also needs a scope: This details what is and isn't being included in the proposal. It will include the deliverables being offered but should also make note where exceptions are needed (for example, "We will complete all construction, but electrical work isn't included.") so everyone is clear on the content of the offer.
This information – the deliverable package being offered – is then used to develop estimates for cost and time. It’s best to offer an estimated cost that includes a buffer because even the simplest-seeming projects can develop surprises that cost money. Most proposals also include an estimate of completion time, again, with a buffer, so the recipient has some expectations on the schedule of completion.
Deciding Which Proposal Type to Use
At this point, with all of the information available, it’s time to construct the actual proposal. As discussed, there are multiple types of business proposals, so consider whether you want to fully draft a formal proposal or go a simpler route by writing a proposal letter. For solicited RFPs, it’s best to complete a formal proposal that contains all the details needed to meet the request. For a new service or project proposal that's unsolicited, consider which of the two formats will best fit the offer.
How to Draft a Business Proposal
The business proposal should be scaled based on the services being discussed. For a simple job (for example, a weekend cleaning service or a one-time repair), a few sentences should suffice for each section. Overloading the client with too much detail can be just as off-putting as too little.
However, if the contract may last months or even years (for example, long-term pet care or electrical service) or if the job proposed is complex (imagine an engineering project to install a new piece of equipment), the proposal should probably contain a few paragraphs about the company, as well as additional information in the deliverables.
- If this is the first business proposal exchange between the two companies, start by constructing an introduction to the company.
- Construct a general objective statement explaining how the proposed work intends to solve the problem at hand. This should summarize the details of the RFP, presenting the issue, and then summarize the proposed solution in a concise manner an upper-level executive could read and understand.
- Outline the scope of the project proposed. This should provide the reader with a general idea of what will be included and what has been specifically excluded from the document.
- Construct the deliverables beneath the project scope. This is where the details live. Based on the work done in the preparation stage, list out each item, service, task or project step, along with information about what will be done, where and when, and how it will be covered by the offering company. The deliverables should echo the structure of the initial RFP so the recipient can clearly see how all of their questions have been answered.
- Present the budget and timeline after the deliverables. There are a couple of ways to present a budget estimate:
Offering a Timeline Estimate
The timeline estimate should be presented with as much detail as possible. Often at this level, not enough information is known to make a clear projection, but label major milestones as best as possible.
- If there are any major exclusions – things that may be needed but aren't part of what's offered in the proposal – it can be best to call them out in their own section for everyone’s reference. Too many exclusions will make a company think twice about the proposal, but it’s best to be up front about big things that aren't within the wheelhouse.
- If this proposal will act as a contract, add space for the appropriate signees to sign off. If the proposal will lead to development or a more detailed, more specific contract, note this in the text.
- Terms and Conditions: Most major companies have blanket terms and conditions they use for work proposals. For small businesses or individuals replying to RFPs, terms and conditions can be developed independently or can be part of the proposal agreement between the two interacting parties.
- Sometimes, the conclusion comes before the terms and conditions, especially if they're lengthy and written in legalese. The goal of the conclusion is to summarize why this proposal should be chosen.
A business proposal can be drafted by anyone but should be proofread by a technical writer or editor to make sure the language is clear and would stand up to any legal argument.
How to Draft a Proposal Letter
A proposal letter, as compared to a traditional formal proposal, is a slightly more informal way of making a proposal or replying to a request. It takes the pieces of a formal proposal above and rewrites them in a much simpler and more personable way in the form of a professional letter. This is a good approach for smaller, more personal businesses and other situations like sending a sample manuscript to a potential publisher or requesting a grant. Individuals often send proposal letters, while businesses and corporations make detailed formal proposals.
To start a proposal letter, be sure to use the generally accepted letter formats within the relevant industry. This may mean including a header with address, return address and other information. From there, customize the steps listed above to suit the context.
Introduce the person or people behind the letter in the beginning paragraph. Then, explain the purpose of the letter: what's being proposed, what's the purpose of the proposal and what’s the expected value to the recipient. From there, discuss the details of the proposal; the depth of detail should depend entirely on the type of proposal and the expected audience.
Ending a Proposal Letter
The proposal letter should end with a conclusion, as well as a request for a response. These sections should work together to make clear what’s being offered, as well as what sort of response is desirable. Include any additional information as an attachment to the original letter so as not to clutter up the first page.
Since the letter is meant to lead to a future discussion or contract, it isn’t important to include as many specifics unless they’re integrally important to the proposal itself. These things can be worked out at a later date.
Knowing how to put together a proposal, whether it be a detailed formal document or a friendly letter, is an important skill when starting any kind of business deal. A proposal should engage its reader, clearly offer a package of goods, services or work and ensure that both parties will be able to get what they want out of the deal. A carefully crafted proposal that knows how to hit these key points will bring in business every time.