Do you know the difference between a business plan and a business proposal? These are two very different business documents, each serving a distinct purpose.


A business plan documents your vision for your business and how you intend to achieve that vision. It contains financial projections of what the business will cost to develop and operate plus an estimation of the revenues to be generated. Its purpose is to provide a reasonably detailed explanation of your business for use by potential investors, suppliers, prospective employees, accountants, attorneys and other people who need a quick but comprehensive understanding of what your company does and its potential for success. The primary reason for a business plan is to record and convey information.


You will need a business plan for two reasons. First, your business plan is your blueprint to success — it outlines the steps to move from business idea to business success. If your research reveals that your idea isn’t destined for success, isn’t it better to know it now than a year later when you may have lost thousands of dollars?  Spending time to do this provides you with information previously not considered, and gives you a workable strategy to follow for the period covered by the plan.


Secondly, if you are hoping to raise funds through a bank or an angel, don’t even consider approaching them unless you have a thoroughly researched business plan in your hand. Experts estimate that it takes approximately six weeks to develop a business plan, so whipping one up the day before your appointment with your banker won’t work.


A business proposal is a document that you submit to another enterprise proposing a business arrangement.  They are limited in scope to a particular project or need. A business proposal also generally has a specific audience. There are two main categories of business proposals: invited and non-invited.


An example of an invited proposal – government and large corporations wanting to purchase services or products from private suppliers often post public tenders inviting contractors to bid. You will be competing against all bidders that noticed the posting and responded.


Similarly, some businesses will send Requests for Proposals (RFPs) to a selection of businesses that they are willing to consider as a potential supplier. In this case, you will be competing against perhaps five businesses that the client has already handpicked as suitable.


In a non-invited proposal, you might have an idea for a product or service that would be of benefit to Company X. You submit a proposal to that Company suggesting a business relationship.


In this case, you don’t know if the company is open to your proposal or whether they will like your proposed idea. However, if they do like the idea, you won’t be competing against numerous other bidders. Your proposal has to sell not only your concept but also your company. It must convince the client that not only is the service/product potentially valuable to them, but you and your company are credible and stable.


Whether invited or non-invited, your proposal must be well researched, well written and contain a reasonable budget. Spend time on this document and you’ll be ahead of the people who threw something together on the maxi.


In conclusion, a business plan and a business proposal have different purposes and goals. A business plan is a factual broad description of a company and its prospects. A business proposal is a focused sales document intended to describe how a company will approach a project.   A business plan is a written presentation of fact. A business proposal is a quote and call to action.


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