Business Plan vs. Business Proposal

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business plan vs business proposal
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Writing a business plan?

When you start a new business or own a young company, you often hear terms like business plan or business proposal. But the question is: do you need a business plan? Or is it a proposal that you need? Or both?

Being new to the game, these terms can seem quite intimidating, and you probably don’t know where to start.

Don’t worry. We’ve created a simple business plan vs. business proposal comparison so you can determine which one to prioritize.

Let’s start by defining them!

Okay! And what about the business proposal?

Now that we know the two business documents aren’t the same let’s see how they are different and in what ways.

Business plan vs. business proposal: How are they different?

Even though used interchangeably (and wrongly), a business plan and proposal are poles apart. Here’s how:

1. Purpose

Before you ask why you need a business plan, it’s, first and foremost, to legitimize a business idea that you’ve been brewing in your head.

But it’s also to document company strategies, objectives, and operations that help you create a clear idea on how to achieve your company goals. All that data becomes one source of truth that works as a communication tool. That becomes your golden ticket to wooing investors and lenders.

On the other hand, a business proposal’s purpose is entirely about convincing a potential client and partner that your project is worth their time and money.

Unlike a business plan, it only focuses on a specific product, service, or opportunity instead of the entire business.

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2. Components and Structure

When you write your business plan, it will typically follow a specific structure containing the following components:

  • Executive summary: This summary summarizes your entire business plan, highlighting the most important aspects, such as your company’s mission, financial projections, and vision statement.
  • Company description: It reveals your company’s history, mission, value proposition, detailed description of products and services, achievements, and target market.
  • Industry or market analysis: This is an analysis of the industry landscape to gain statistics about market needs, size, trends, competitors, and target demographics.
  • Marketing plan: This includes different marketing strategies and approaches your company will take to market its products and services. It can be your pricing strategy, sales and distribution plan, and unique selling proposition.
  • Operations plan: This component reveals how a company’s operations would look on a day-to-day basis.
  • Organizational structure and management team: This section provides an overview of your company’s structure and how its management teams will execute the operations plan effectively.
  • Financial projections and goals: This section contains a company’s financial performance, including income, sales goals, cash flow projections, and balance sheets.

Similarly, when you write a business proposal, you’ll typically encounter a structure as well. It goes like this:

  • Cover or title page: To make a first impression. It can contain aesthetic visuals.
  • Introduction: To introduce yourself and your company. Also, briefly explain how your product or service will solve a specific problem.
  • Statement of the problem or project: To explain your understanding of the customer’s need, its importance in addressing it, and your right-fit, proposed solution.
  • Table of contents: To make your data essay accessible.
  • Project details: To communicate essential data, including objective, scope, timeline, key stakeholders, disclaimers, cost, and conclusion.
  • Agreement with a signature box: To obtain the client’s signature.
Writing a business proposal doesn’t always include following a basic structure because proposals are often based on unique opportunities. However, a business plan for most businesses has a similar foundational structure.

3. Audience

A business plan’s target audience is internal stakeholders, investors, and lenders interested in your company’s long-term goals and path to success.

On the flip side, business proposals go to potential clients from established businesses. They target external or new clients, partners, or funding agencies with a specific focus on:

  • Addressing customer needs
  • Solving customer problems
  • Or seizing opportunities

4. Types

Do you know how many types of businesses exist today? Two words: Too many!

Now, that implies there are many different types of business plans. But here’s a quick list of the most common types:

  • Startup business plan: This plan describes the foundation of a new business with room to adjust as the company grows. It’s given to potential investors to ask for startup funding.
  • Internal business plan: In this plan, company leaders communicate business goals, strategy, and performance. The aim is to keep the board and the team in sync regarding business objectives.
  • Strategic business plan: This plan documents the framework required to keep long-term goals and company vision intact.
  • Growth business plan: Also known as an expansion plan, this plan describes how a company is trying to grow and hence requires greater resources like more employees, funds, materials, etc.

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Business proposal types can be broadly divided into two categories:

  • Solicited business proposals: In this case, a prospective client requests the informational document from you directly or expects to receive it—implicating their interest in your products or services.
  • Unsolicited business proposals: Here, no client requests the documents. Instead, you take the cold email approach and send your unsolicited proposals to people you think are prospective clients or partners.

Business Proposal and Planning Best Practices

It’s already challenging to overcome market entry barriers in saturated markets and persuade potential investors. Creating a compelling business proposal and plan shouldn’t be too!

Here’s how to go about it:

  • Clearly define your business goals and objectives.
  • Make sure you get your audience right. (Business plans and proposals have different audiences, remember?)
  • Conduct in depth research and analysis.
  • Use pictures along with words, such as visuals and statistics, to support your claims and projections.
  • Pay attention to the writing style, structure, and tone depending on your audience and purpose.
  • Use software like an AI business plan generator or proposal templates to save time and effort.
  • Review and revise regularly.

Start creating effective business plans and proposals using Upmetrics

It’s okay if you were confused about the difference between a business plan and a proposal before today. You now know the distinction between the two lies in their purpose, components, structure, audience, and type.

While a business plan provides a thorough overview of the entire business and targets internal stakeholders, investors, and lenders, a business proposal focuses on specific projects or opportunities and targets external clients, partners, or funding agencies.

When you understand these differences and employ the best practices in creating both documents, your business can effectively communicate its vision, strategy, and value proposition, securing a solid spot in this competitive world.

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About the Author

Upmetrics                                                       
            Team

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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