BUSINESS PLAN VS.

BUSINESS PROPOSAL

The terms “business plan” and

“business proposal” are sometimes
used interchangeably, however,
they are very different. The main
difference between a business plan
and a business proposal is that a
business plan documents your
growth strategy while a business
proposal is a specific ask for
someone to take an action you
desire (e.g., buy your
product/service, invest in your
company, partner with you, etc.).

In this article, we will define a business plan and a business proposal and give you examples of
when each is appropriate for you to use.

What is a Business Proposal?

A business proposal is a focused sales document intended for use in a business arrangement
with prospective clients and/or investors. It is usually an offer, proposition, or contract for the
company’s products or services, or a stake in the company to someone else for money in return
for interest/principal payments, a percentage of the company, or some other form of
compensation.

In terms of what you are asking from them, it can be anything that involves funds and time on
their end including cash investment, product development assistance, and even employees if
they have applicable skill sets.

Business Proposal Structure

An invited business proposal is written in response to an RFP. A request for proposal (RFP) is a
document that invites potential suppliers to submit business proposals. How to write a business
proposal depends on the format requested and the questions included in the RFP.

The following are the components that usually make up a business proposal:

 Brief description of your company’s services/products as the proposed solution to the

goals of the RFP
  Reiteration of the scope of the particular project
 Responses to questions asked in the RFP
 Cost of the project, including drafting services, materials, tools, labor, delivery and other
expenses

An unsolicited business proposal is essentially the same format, but it will solicit the client’s
business while anticipating the clients’ concerns and issues. A business proposal is more of a
marketing document than an offer because it attempts to persuade the potential client to do
business by demonstrating your value proposition and a call to action.

What is a Business Plan?

A business plan documents the roadmap to start a new business or grow an existing one. This
informational document 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 this document is mostly
for internal purposes, it may also be used to present to investors and lenders to help raise
funding for your business.

Business Plan Structure

Typically, the business plan structure contains the following 10 components:

1. Executive Summary
2. Business Description & Overview
3. Market Research & Analysis
4. Customer Analysis
5. Competitive Analysis
6. Marketing Strategy & Plan
7. Operations Plan
8. Management Team
9. Financial Projections & Plan
10. Appendix

It is recommended that a business plan is updated annually to adjust for changes in the industry
trends and the business itself.

So, What’s the Difference Between a Business Proposal vs. a Business Plan?

In a business proposal, company representatives typically work with the customer to tailor a
business proposition that is attractive to both parties. This usually comes in the form of a
written document detailing the services and cost associated with fulfilling an offer or request
but can also include electronic contracts.
In contrast, a business plan is a description of your company on the executive and operational
levels aimed at investors for raising financial support or other stakeholders in order to facilitate
long-term growth. For example, an investor will want to know about how different
departments within your business interact with one another, while somebody who will be
implementing your product probably only needs more limited information such as design specs
because they are not going into production themselves.

A business proposal may provide you with more details of the project, but it does not include
information about your company’s operations or future plans.

Examples of Business Plans vs. Business Proposals

 When you give a potential investor your business plan which includes all sorts of
information about how we will achieve your goals together as well as the amount of
money it’s going to take. The business proposal is for them to write you a check in return
for interest/principal payments or a percentage of your company.
 You might be getting partners involved in your business who will help with product
development and distribution. You are offering them a business proposal to work
together. However, they may request to see your business plan to better understand
your goals, potential profitability, and how you plan to reach these goals before deciding
to work with you.
 Your existing business has been so successful that you decide to outsource the social
media marketing efforts to a freelancer to free up more of your time. The freelancer
would provide a business proposal stating their terms and conditions along with the
agreed-upon pay arrangement for their services. This change in organizational structure
may be noted in your business plan to demonstrate expansion and financial stability to
continue growth.
 In your business plan, one of your goals is to grow your client base by 5% each month.
You identify potential clients in need of your services or products and send an
unsolicited business proposal to demonstrate how your products or services can benefit
them in order to develop a new prospective client list.

Conclusion

The business plan is a roadmap for your company’s present and future, while the business
proposal has to do with what you are asking someone else for money. Applying this difference
into practice can be difficult at times because business plans are often marketed as business
proposals. However, it is important to be able to identify the difference between a business
plan and business proposal in order to maximize their effectiveness and importance with
potential investors or partners.
Business Plan: What It Is, What's Included, and How to Write One

KEY TAKEAWAYS

 A business plan is a document describing a company's business activities and how it

plans to achieve its goals.
 Startup companies use business plans to get off the ground and attract outside
investors.
 For established companies, a business plan can help keep the executive team focused
on and working toward the company's short- and long-term objectives.
 There is no single format that a business plan must follow, but there are certain key
elements that most companies will want to include.
Understanding Business Plans
Any new business should have a business plan in place prior to beginning operations. In fact,
banks and venture capital firms often want to see a business plan before they'll consider
making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on
its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write
formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning
entrepreneurs."1

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that
have been achieved or that may have changed. An established business that has decided to
move in a new direction might create an entirely new business plan for itself.
How to Write a Business Plan
While there are any number of templates that you can use to write a business plan, it's best to
try to avoid producing a generic-looking one. Let your plan reflect the unique personality of
your business.

Many business plans use some combination of the sections below, with varying levels of detail,
depending on the company.

Common Elements of a Business Plan

The length of a business plan can vary greatly from business to business. Regardless, it's best
to fit the basic information into a 15- to 25-page document. Other crucial elements that take
up a lot of space—such as applications for patents—can be referenced in the main document
and attached as appendices.

These are some of the most common elements in many business plans:

 Executive summary: This section introduces the company and includes its mission
statement along with relevant information about the company's leadership,
employees, operations, and locations.
 Products and services: Here, the company should describe the products and services it
offers or plans to introduce. That might include details on pricing, product lifespan, and
unique benefits to the consumer. Other factors that could go into this section include
production and manufacturing processes, any relevant patents the company may have,
as well as proprietary technology. Information about research and development (R&D)
can also be included here.
 Market analysis: A company needs to have a good handle on the current state of its
industry and the existing competition. This section should explain where the company
fits in, what types of customers it plans to target, and how easy or difficult it may be to
take market share from incumbents.
 Marketing strategy: This section can describe how the company plans to attract and
keep customers, including any anticipated advertising and marketing campaigns. It
should also describe the distribution channel or channels it will use to get its products
or services to consumers.
 Financial plans and projections: Established businesses can include financial
statements, balance sheets, and other relevant financial information. New businesses
can provide financial targets and estimates for the first few years. Your plan might also
include any funding requests you're making.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic
categories: traditional and lean startup. According to the U.S. Small Business Administration
(SBA), the traditional business plan is the more common of the two.2
U.S. Small Business Administration. "Write Your Business Plan ."

 Traditional business plans: These plans tend to be much longer than lean startup plans
and contain considerably more detail. As a result they require more work on the part of
the business, but they can also be more persuasive (and reassuring) to potential
investors.
 Lean startup business plans: These use an abbreviated structure that highlights key
elements. These business plans are short—as short as one page—and provide only the
most basic detail. If a company wants to use this kind of plan, it should be prepared to
provide more detail if an investor or a lender requests it.2

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its
assumptions and projections to begin with. Markets and the overall economy might change in
ways that couldn't have been foreseen. A competitor might introduce a revolutionary new
product or service. All of this calls for building some flexibility into your plan, so you can pivot
to a new course if needed.

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on the nature of the business.
A well-established business might want to review its plan once a year and make changes if
necessary. A new or fast-growing business in a fiercely competitive market might want to
revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick
explanation of its business. For example, a brand-new company may feel that it doesn't have a
lot of information to provide yet.

Sections can include: a value proposition; the company's major activities and advantages;
resources such as staff, intellectual property, and capital; a list of partnerships; customer
segments; and revenue sources.

The Bottom Line

A business plan can be useful to companies of all kinds. But as a company grows and the world
around it changes, so too should its business plan. So don't think of your business plan as
carved in granite but as a living document designed to evolve with your business.