How to write an effective business proposal
A business proposal is your chance to persuade customers, investors or lenders that your solution is exactly what they need.
It defines a challenge or opportunity, presents your solution, and proves why you’re the best fit to make it happen.
“A business proposal can take many forms, from a quick verbal pitch or email to a video presentation or a highly structured formal document,” says Nikhil Uppal, Senior Client Partner at BDC’s Advisory Services.
“Crafting effective proposals helps rally investors, partners and others you need to turn your plans into reality.”
What does a business proposal define?
Effective business proposals typically define:
- A problem or opportunity
- A proposed solution
- Why the proposer is best suited to solve the problem
- How the solution will be executed
- Costs
- Why the solution is the best and how the client benefits
- Background on your business
“You have to answer a few questions: Why you and not the other guy? Why now? And why that amount,” Uppal says. “You need to be able to position your solution within the situation the client is dealing with. You have to show you understand their needs.”
Uppal says an effective proposal follows the same three-part structure as classic storytelling: challenge, solution and resolution.
“A good proposal tells a story,” he says. “You have to explain your background—that you provide something others don’t. That is a story. People remember stories. We might say we’re data-driven, but the fact is we’re persuaded by stories and emotions. That's what we get excited about. Storytelling is key to an effective business proposal.”
What does the target audience care about? What are their pain points? Knowing this is extremely important.
Nikhil Uppal
Senior Client Partner, BDC Advisory Services
How to prepare a business proposal
To write an effective business proposal, it’s important to first do some homework. This involves gathering relevant information to understand:
- Your target audience
- Their needs and pain points
- How your solution addresses them
1. Know your audience’s needs and pain points
The first step is to understand your target audience—who they are and what they want. “Knowing your audience helps you understand how to structure your message,” Uppal says. “What does the client care about? What are their pain points? Knowing this is extremely important. The proposal has to first and foremost answer the question: What is the problem?”
The most important considerations for your target audience could vary widely. They could be:
- Cost
- Risk
- Speed or reliability of delivery
- Technical expertise
- Product quality
Inform yourself about their current state and what the competition offers to address their challenges.
2. Learn about their whole team
Get an understanding of both the client’s decision-makers and support team.
“In no organization does a CEO make up their mind alone,” Uppal says. “They’re informed by their CFO, CTO, CIO, chief of staff, legal department and others.”
3. How do they think?
Find out how your audience makes decisions. Do you think they’ll want to see the conclusion first and then your data and other supporting evidence? Or will they prefer to first see the details upfront, with results later?
4. Establish how your solution addresses their need
Next, determine how your product or service solves the client’s problem or offers an opportunity. Be sure to think about how your solution appeals to not only decision-makers, but also their team. Also, figure out how you can tailor your pitch to their decision-making style (e.g., results first, data later; or vice versa).
“Once you’ve done your research, you should know the story you want to tell,” Uppal says. “You need to ensure you’re converting it into benefits your target audience appreciates and understands. And you need to have something in that story which appeals to each of the decision-makers and their team members and the way they think.”
5. Understand the alternatives
Finally, research how your solution is a better fit than the competition’s. “A good review of the alternatives shows you understand the target audience and allows you to position your solution as the best answer to their needs,” Uppal says. “It’s very important to know who the competition is and their strengths and shortcomings.”
Uppal stresses that all this preliminary research is vital. “The business proposal breaks down if your research isn’t good. If you don’t understand your audience or the situation very well, and don’t know what they’re struggling with, you risk offering a solution to a problem they don’t think exists.”
The business proposal breaks down if your research isn’t good…. You risk offering a solution to a problem the client doesn’t think exists.
Nikhil Uppal
Senior Client Partner, BDC Advisory Services
How to write and format a business proposal
Build your business proposal based on the homework you did in the previous section. Below are the main elements typically included in a formal business proposal. You can adapt them as needed for a more informal proposal, various audiences and different formats, such as an email message or video.
Executive summary
Start with a one-page executive summary that succinctly summarizes your business proposal’s key elements.
- What are you proposing?
- How much will it cost?
- Why are you suggesting this?
- Why is your solution the best alternative?
- What is the timeframe?
“The executive summary should make it clear on one page what exactly is going on,” Uppal says. “If you have multiple layers of executives who have to go through this, the final decision-maker just has to look at that one page and say, ‘This sounds about right, and I'm sure my team has gone through the rest of it. I can sign and move on.’”
Client challenges
Describe the target audience’s needs, pain points or opportunity. Using your research in the first section, tailor your description to key decision-makers and their team. Be sure to address each of their specific needs.
Proposed solution
Explain your product or service and how it addresses the client’s challenge. Structure your explanation according to their decision-making style.
Include these elements:
- Approach—details on your solution and how it will resolve the challenge.
- Cost—an itemized quote or summary of costs or fees. (Alternatively, if the goal is a loan, outline the financial case for the project and how funds will be used and repaid.)
- Timeline—a table of deliverables and delivery dates.
- Key outcomes—several metrics to use to gauge the project’s success.
Why you
Explain why the client should choose you. Here, you can include:
- How your solution is more beneficial than the alternatives
- Expertise and past experience
- Problem-solving capacity
Appendix
Your appendix can include:
- Terms and conditions—anything not included or out of scope in your solution.
- Company description—e.g. mission, vision, core offerings, competitive advantage.
- Key team members’ bios—e.g. name and role, relevant experience and expertise.
- Awards—e.g. award name and year, relevance and impact.
- Client testimonials
- Tailored product list—list other products the client may be interested in later on to show the potential for a longer-term relationship and the depth of your offering. Don’t include a generic sales brochure. Create a specific product list adapted to the client’s potential future needs.
- Warranty—your warranty policy.
- Confidentiality—your confidentiality policy or assurances of your commitment to keeping client information confidential.
- Contact information
Business proposal example
Uppal gives the example of a web development company making a business proposal to a mattress firm. The firm thinks its website is performing poorly and not delivering enough return on marketing spending.
The mattress firm invests $150,000 a year in online marketing via its website and digital ads and gets $450,000 in revenue. This represents a 300% return, which the firm isn’t happy with. The client asks for a proposal to redesign its website.
The web developer crafts a proposal with the following main elements:
- Client challenge: The client has a middling 300% return versus the industry standard, which is 700%. The proposal notes that more data is needed to understand the reasons for the poor performance.
- Proposed solution: The developer proposes to do an assessment to clarify where and why conversion is breaking down. Is the firm attracting enough of the right visitors online? Is it losing customers when they first visit, while they’re considering or when they decide?
As a second step, the developer proposes to develop a new marketing strategy based on the initial assessment. Depending on the findings, this could include revising branding, improving the company’s social media efforts and revamping parts or the entirety of the website. - Why us: The proposal concludes by saying the company offers the best solution because it uses data to assess challenges and optimize solutions. It lists three other clients whose conversion rates the web developer significantly boosted.
Next step
Download BDC’s free business proposal template to help you structure your sales pitch and better convince potential customers.