The business proposal offers goods or services from one business to a customer or to another business. The chief parts of the proposal describe the problem to be solved, the proposed solution and the payment arrangements, although supplemental material can be added. Since the purpose is to sell the offering, the writing should be succinct, to the point and persuasive. Simple proposals, such as installing flooring or a new furnace in a home, can be just a paragraph or two in length; more complex proposals may run to many pages. No matter what scope or length is intended, the first step in preparing a proposal is researching the situation.

Research and Preparation

Before writing your proposal, you should know the key facts about your prospective client’s status and problem, and what your competitors have to offer. You will need to show the client how your solution will benefit them by addressing customer needs and why your proposal is cost-effective or better yet, profitable. Above all, you need to tell your client why your solution should be selected and implemented, instead of any competitor’s.

In this example, imagine a small business called Dragonfly Munchies, LLC. It is owned and operated by two sisters, Mary and Donna, who want to make and sell a line of high-quality natural food items. Their first product is Dragon’s Best Granola. They’ve tested it with small offerings to family, friends and patrons at their church bazaar. Everyone who’s eaten the granola raves about it. Now Mary and Donna want to expand their production and distribute it through natural food stores in their area. They’ve chosen to approach Steve’s Wholistic Market, an independent store in their town, and where they frequently shop. After studying the store’s financial information and observing the competitors’ granola products currently stocked there, they met with Steve and his store manager to describe their product and to have a tasting session. When the sisters asked if the store would consider carrying their granola, Steve replied, “Send me a proposal.”

Problem Statement

This section may also be titled “Objective” or “Opportunity.” It should describe the problem or major need of the client in a way that opens the door for you to present your solution. Mary and Donna feel their proposal offers an exciting opportunity for both their business and Steve’s, so they write the following:

Opportunity: Steve’s Wholistic Market currently stocks five national brands of organic and natural granola products, but has no local products in this category. Steve’s customers, in addition to being health conscious and environmentally aware, also share an outlook that supports the Shop Local movement. By adding a local brand to their granola stock, Steve’s Wholistic Market could help satisfy the customers’ demand for local products. This would add revenue, increase customer loyalty and attract new customers.

Proposed Solution

This section should show exactly how your product or service will resolve the client’s problem or need. It should include enough detail so that the client can envision how this would work, why your solution is the best available, and how the solution would fit into their overall business model. For this section, Mary and Donna write:

Proposal: Dragonfly Munchies, LLC, proposes to supply Steve’s Wholistic Market with our signature product, Dragon’s Best Granola, on a wholesale basis. Our granola has been taste-tested by friends and neighbors across the county, and they’ve all given it rave reviews. Our company is owned and operated by long-time local residents Mary B. and Donna M. Our products are manufactured and packaged in a commercial kitchen in the heart of Our City. As much as possible, our ingredients are sourced from suppliers located within a 100-mile radius of Our City. We have all the necessary permits, licenses and certificates to legally make and sell organic food products on both a wholesale and retail basis.

We propose to begin with an initial delivery of one to two cartons that contain 36 pouches, each containing 12 ounces of Dragon’s Best Granola. We intend to help announce this product to your customers by holding a series of day-long, in-store sampling sessions. We will be there to provide free samples to your customers and to answer their questions. Although our product has a tested shelf life of six months, we’re convinced that once your customers taste our granola, it will fly off the shelves in no time.

Pricing and Payments

This section can be a summary of fees for a simple proposal, or it can include a breakdown of component costs for a complex proposal with multiple phases. You can also include delivery schedule and terms, such as “due on receipt” versus “net 30 days,” for example. For this section, Mary and Donna write:

Pricing and Payments: We will charge Steve’s Wholistic Market $86.40 per carton of 36 pouches of Dragon’s Best Granola. This yields a wholesale price of $2.40 per pouch, which translates to a shelf price of $4.80 per pouch at standard markup. This is competitive with the top granola line you currently carry. For subsequent orders, one to five cartons can be delivered within three calendar days of our receipt of the order. For more than five cartons, please allow one week for delivery. Payment for all orders is due upon delivery.

Supporting Materials

Additional sections can include supporting details, such as the principals’ resumes and credentials, products technical specifications, relevant licenses and permits, and other related information. If the proposal expands to more than a few pages, then a title page, table of contents and executive summary should be added to the front. In the example, Mary and Donna kept their proposal brief, so they did not add the front material. Instead, they attached a list of the licenses and permits that allow them to legally sell the product.

Business Plan vs. Business Proposal

The business proposal is often confused with a business plan, but they are two different documents. The proposal document refers to a specific project and is offered by an existing business to a customer or to another business. The business plan is the foundational document of a business, and covers all aspects of business functions. Proposals are typically shorter and more focused than a business plan. However, some proposals require submission of the business plan along with the proposal. Business loan proposals and grant proposals are examples of this.