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Business Plan vs. Business Proposal

business proposal vs. business plan

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 Plan?

professional business plan

Download our Ultimate Business Plan Template here

Business Plan Structure

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

  • Executive Summary
  • Business Description & Overview
  • Market Research & Analysis
  • Customer Analysis
  • Competitive Analysis
  • Marketing Strategy & Plan
  • Operations Plan
  • Management Team
  • Financial Projections & Plan

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

What is a Business Proposal?

business proposals

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.  

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.

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.

How to Finish Your Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Other Helpful Business Plan Articles & Templates

Business Plan Template & Guide for Small Businesses

Business Plan vs. Business Proposal: Everything You Need to Know

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“Ok, so you sell things.”

Well, honestly, I wasn’t surprised or peeved at the half-baked knowledge of my friend’s father when he made a snap judgment and conveniently labeled my marketing profession as sales.

After all, this wasn’t my first time when someone tagged me as a salesperson. So, I took a deep breath and explained to him how sales are different from marketing.

We, humans, dwell in a herd mentality and hone our word skills from our surroundings. Sometimes, we are simply careless, sometimes oblivious, but most of the time, we actually don’t know that the word has a different meaning.

This can be ignored in a casual conversation, but using the wrong words in a business space can change the implied meaning and lead to miscommunication. For example, cost vs. price , digitization vs. digitalization , warranty vs. guarantee , machine learning vs. artificial intelligence , etc.

“Don’t use words too big for the subject. Don’t say ‘infinitely’ when you mean ‘very’; otherwise you’ll have no word left when you want to talk about something really infinite.” – C. S. Lewis

This Process Street guest post untangles the confusion between two crucial terms – business plan and business proposal. These are used interchangeably in the business world, but their meaning and application are pretty different.

Words are the building blocks of communication. There is a French phrase for using the right word – le mot juste .

Let us strive for le mot juste !

Hop on and be a part of this fantabulous journey.

What is a business plan?

What is a business proposal, business plan vs. business proposal: what are the differences.

  • Bonus: How to make ‘wow’ business plans and business proposals?

Winding-up: Key takeaways

Here we go! 🚀

A business plan is a formal guide that acts as a blueprint, deciphering every root and branch to make a business successful. It is a written document that provides insights to internal and external stakeholders on business vision, goals, and strategies to achieve those goals.

“Without a plan, even the most brilliant business can get lost. You need to have goals, create milestones and have a strategy in place to set yourself up for success.” – Yogi Berra

A business plan, at its core, is an explanation of the below questions –

  • Who are we?
  • What are our offerings?
  • Who are our customers?
  • Who are the competitors?
  • What is our competitive advantage?
  • What are the business projections?
  • What is the roadmap to achieve the goals – marketing, operations, research and development, manufacturing, and financial plans?
  • What are the funding/investment requirements?
  • What is the return on investment?

Why do you need a business plan?

A business plan is not a bag of puffery statements. It is a document with factual information necessary for the survival of a business. You can create a business plan with the right tools or opt for a good business coach to get you started.

Let’s see what Tim Berry , business plan expert, founder and chairman of Palo Alto Softwar and bplans.com , has to say on business plans.

“What I love most about business plans is the business planning: like walking, it’s constant correction and review and revision. Planning, done right, is steering a business, managing growth, aiming the business towards the right future.” – Tim Berry ,  Small Business Trends

According to a study done by Palo Alto Software, those who create business plans double their chances to succeed in business .

Let us get down to brass tacks and understand why a business plan is super-duper important.

business plan

Record and present business information 💾 The primary intent of a business plan is to record and communicate information. It must document the business goals and the methods to attain those goals in a structured manner. It keeps businesses on track with their objectives.

A blueprint for seeking business investment 🗄️ Whether you are a fledgling start-up or an established business seeking expansion or diversification, writing a winning business plan acts as a magnet to attract investors. It builds confidence and trust among investors about the lucrativeness of a business idea.

Lay down the right path ✔️ Not everything discussed verbally at an ideation stage transforms into reality in a pragmatic environment. Jotting down a business plan differentiates achievable from impracticable based on market dynamics, opportunities and threats, and company’s strengths and weaknesses. It sets the right track for business growth.

Establish short-term and long-term goals 🎯 A business plan sets down short-term and long-term goals and the direction to accomplish them, right from baby steps to giant leaps. It becomes a basis to revisit the goals from time-to-time and make iterations depending on the present scenario.

“Any business plan won’t survive its first encounter with reality. The reality will always be different. It will never be the plan.” – Jeff Bezos, CEO of Amazon

Get clarity on your business 🙋 A frequent question that pops-up in business discussions is: “Are we doing it right?”

A well-articulated business plan brings insightful knowledge on each aspect of a business – from what it has to offer to how to market the offerings.

Make informed decisions 💡 A business plan is a reality check to track what is being fruitful and what is causing hindrance. It paves the way to make a business sustainable.

Predict future financial performance 📈 Financial projection is the spotlight of a business plan. It’s the carrot that captivates the eyeballs and tickles investors to fund a new business.

A promising business plan talks about the company’s future financial performance – expenditure, profit, revenue, etc.

Explore new business opportunities 💰 A business plan is a flexible document that enables learning on the go. It bolsters research and infuses businesses with new and more feasible business opportunities. It gives organizations a fresh outlook and ushers them to be a howling success.

How to prepare for a business plan

Now that we have answered the ‘what’ and ‘why’ of a business plan, let us move forward to solve the next riddle – how do you prepare it?

business plan preparation

Identify your company’s vision, mission, and values 🎯 Start by answering and figuring out your business personality:

  • What do you desire to be?
  • How do you want to be perceived?
  • What values put your business in motion?

This is your organization’s compass that acts as a foundation for the succeeding steps.

Know your target audience 🧑‍💼 Dig deep into:

  • Whom are you going to cater to?
  • What is your target market?
  • What is the size and potential of the target market?
  • What are the needs of a prospective customer?
  • How are the needs addressed presently?

Learn market trends 💹 Identifying market trends keeps businesses ahead of the game. Analysis of industry data leads to business growth and profitability in the long run.

Weigh in the impact of unforeseen circumstances 🤦 From financial turbulence to natural calamities and pandemics – a lot can go wrong in the future and leave a business shaking. Expect the unexpected and gird your loins for these testing times.

How to write a business plan

Creating a winning business plan increases the chances of success and spurs investors to fund your business.

According to a study published in Small Business Economics , entrepreneurs that create a plan are 152% more likely to start their business and appoint a registered agent and 129% more likely to push forward with their business beyond the initial start-up phase and grow it.

Here are the key components of an excellent business plan:

Executive summary First impression is the last impression!

An executive summary is a crucial part of this document. It provides the essence of the whole plan:

  • Company details;
  • Size and scope of business opportunity;
  • A description of your offerings and how it will solve the problem;
  • Growth projection;
  • Financial requirements.

It should be informative and able to spark readers’ interest to know more about the business plan.

Overview of the business This section lists down information on:

  • Your business;
  • Your target market;
  • Description of your products/services;
  • Why and how your offerings are a great fit for prospective customers;
  • Your capabilities to handle the demands;
  • Your value proposition and competitive advantage.

…and all other related details.

Market analysis and strategies Put forth a strong case built on the solid rock of data analysis and statistics – present data on target market size, industry trends, sales forecasts, and marketing strategy.

Operating plan The operating plan highlights the operational requirements for the smooth functioning of a business. It includes facilities, supply chain management, inventory, manufacturing, shipment, logistics, staff management – everything under the sun that covers capital and expense (CapEx) requirements.

Growth plan This section answers the question: “Where do you see the business going in the next few years?” It provides visibility to investors on the milestones and how you will make money in near future.

Marketing plan Thee marketing plan section describes how to market the offerings to create and fulfill customers’ needs (who are the customers, product positioning, pricing policy, and promotional strategies?)

Management plan This section outlines how your organization is structured and basically how strong you are together. It describes the skills, background, and responsibilities of the management team. It builds conviction that the business is in good hands and has a proficient human capital.

Financial plan and projections This is the part where numbers become the king.

It draws up deets on inflow and outflow of money, sales forecast, profit and loss statement, balance sheet, cash flow statement, and budget expense. It discloses and forecasts the company’s financial goals, profitability model, and charts a course for the coming years.

Conclusion and appendix Conclude the business plan by succinctly bringing out the key pointers – the business’s vision, mission, goals, strengths, and growth trajectory. Make it compelling and to-the-point. Add relevant appendices to strengthen your business plan.

Pro tip: Use an all-inclusive ready-made business plan template document and Process Street ‘s business plan workflow to create unbeatable business plans.

Business Plan Workflow

Click here to access the Business Plan Checklist!

Types of business plans

There are varying types of business plans depending on the purpose and usage:

  • Business plan for start-ups A winning start-up business plan can be a game-changer to attract funding from investors. It should weave all key components to make it a promising investment – company overview, products/services, estimated costs, market evaluation, competition insights, risk analysis, cash flow projections, marketing strategies, and the management team’s strengths.
  • Strategic business plan It lays down the details of a company’s strategies to fulfill its goals. It outlines the company’s vision, mission, strategy, and goals, the driving force for success, and the timelines.
  • Internal business plan This plan moves the needle and steers focus on in-house planning and growth. It ensures that everyone grasps the company’s overall plan for growth. It prepares organizations to move forward by identifying and removing any blockages and assess and revise the strategies when required.
  • Operations business plan It is an internal plan that maps out the nitty-gritties of a company’s operations plans and activities.
  • Development business plan This is a development or an expansion plan of a business. It is used for both internal and external purposes. An external growth plan is written to attract investment from external sources. An internal development plan counts on its own business capabilities, revenue, and resources. It works as a guide to provide the right directions.
  • Feasibility business plan A company scouts out a feasibility study when it plans to foray into a new venture, new product, or a new market. It articulates: How well will the product or service perform? Is the business promising? What is the expected return on investment (ROI)?
  • What-if business plan At a point where you face unordinary conditions, you need a variation on the existing plan. A what-if business plan arranges to fall back on a contingency plan when things go sideways. For example, an unexpected surge in demand, new competition, drop in market size, etc.

A business proposal is the mantra that draws you closer to win a customer or bag a project.

Generally, it is a formal response to a Request for Proposal (RFP) sent by a prospective client looking for the right solution to their problems. It explains the particulars of a seller’s offerings and convinces the buyer that the proposed solution is the gateway to their business’s success and productivity.

“And, after all, winning business is what writing proposals is all about.” ― Tom Sant, Persuasive Business Proposals: Writing to Win More Customers, Clients, and Contracts

A business proposal comprises of four main points :

  • What are the challenges of prospective clients?
  • How can our solution solve their problems?
  • Why should they choose us over others?
  • What are the best pricing options available?

Why do you need a business proposal?

business proposal

A business proposal is a testimony in itself that asserts, “I am the best you can get.”

Here are the reasons why you should and must make a business proposal :

  • Create or leverage a business opportunity 💲 The prime motive is to win, win, and win! It is a medium to encash a business opportunity by putting forward an I-can’t-say-no-to-this proposal.
  • Stand out from the competition 🏆 It persuades the prospects that you are way ahead of other rivals in the industry in terms of the value you offer.

How to prepare for a business proposal

The heart of preparedness is research and further research. 🔍 After all, the devil is in the details.

Talk to prospective customers, visit their website(s), read published articles, and be a know-it-all for your prospective clients.

Sort out the ‘who’ 🤔 First and foremost, dig every possible information about the client:

  • Who is the client (its vision, mission, and goals)?
  • What does it produce?
  • What are its key markets and target customers?
  • What are its business growth plans?
  • Which markets is it presently serving?
  • Also, figure out the kingpins of a proposal approval process. This will help you to create a comprehensive proposal with all the necessary answers expected by the decision-makers.

Understand the challenges 🤗 Find what’s bothering them and what is causing hindrance to their business success. Learn about their existing solution and its challenges.

Stitch the glitch and offer the best solution 🤩 After a thorough review of all the points mentioned above, find the best solution to your prospective client’s problems.

List down key differentiators 👌 This will help you to beat the competition in the dust. It draws a comparison chart and puts you in a superior position.

According to Gray Mackenzie, founder of GuavaBox ,

“Prior to submitting a proposal, make sure you have clearly defined all the major points verbally with the potential customer. By discussing the scope, cost, timeline, and details prior to submitting a written proposal, you can uncover objections earlier in the process.” – Gray Mackenzie, 10 Sales Experts Share Their Best Business Proposal Tips

How to write a business proposal

Let’s get down to the fundamental elements that form a business proposal. Learn how to create a business proposal that stands out and close sales.

Title page/Cover page 🖼 The name says it all.

Pretty easy-peasy thing to understand, right? After all, you have been creating the title pages since school days.

Still, make a note: Always write a gripping title that intrigues prospective clients’ interest and urges them to read on.

Other components that should be included on the title page are:

  • Your company name and logo;
  • Prospective customer’s name;
  • Submission date.

Table of contents (TOC) 📝 As the name suggests, a TOC is a well-structured layout of the document. It helps to skim and scan and navigate speedily through different sections of a business proposal.

Executive summary 🗒 It sets the tone for a proposal and makes the reader inquisitive about reading subsequent sections. It sums up the entire business proposal – the purpose of sharing the proposal and why and how your solution is the right fit for the prospective client. Leave no stone unturned to boast about your offerings in the executive summary.

Details of offerings 🎁 This is an in-depth description of the products or services your company has to offer.

How will the offerings solve the client’s problems? 💡 This explains why your products/services are the right fit to address a prospective client’s needs and why it is a better alternative than the competition.

The methodology/implementation of offerings 🛠 This section is a blanket explanation of how the promised deliverables will be executed. It provides step-by-step clarity on each action along with timelines. It gives the client peace of mind and builds trust and confidence in the offering.

Pricing, payment, and legal matters 💵 Here, you talk about the pricing structure, applicable taxes, payment schedule, cancellation policy, and how you plan to solve the legal matters (if any arise in the future).

Here are some tips for this section:

  • Ensure that the pricing details are concise and complete.
  • Providing a comparison chart with different pricing options helps to make decisions faster.
  • Don’t go overboard with pricing, and also, don’t underrate yourself.
  • Always refer to the RFP and verify if every request has been fulfilled.
  • Separate out and create a new legal section if your business demands an extensive list of legal requirements.

Details about your company 🔍 This is an exhaustive overview of your company. Don’t forget to add relevant customer testimonials, case studies, or success stories to build your case among prospective customers.

Signatures and Call to action 🖌 This is the moment that gets butterflies in your stomach; the closure. This is the concluding part of a business proposal. Here (if all your prayers get answered), you and your client sign the proposal and secure the deal. Hurray!

Pro tip: Once you send the business proposal, don’t sit idle in your cocoon day-dreaming of winning the proposal. Always proactively do follow-ups with the prospective clients and clarify their doubts.

For start-ups or small businesses, drafting a business proposal can be an unnerving experience. They work fingers to the bone to write a perfect business proposal. Spending too much time on it might lead to missing the deadline and eventually losing out on a golden opportunity.

According to a report by Better Proposal , sending a business proposal within 24 hours increases the likelihood of winning the deal by 25%. 🤝

Here’s the secret sauce to speedily create flawless business proposals :

First, pick a professionally vetted and ready-to-use business proposal template and draft a business proposal like a cakewalk. Such as the Business Proposal Template included below.

Next, always use Process Street ‘s super-powered business proposal template checklist and ensure no step gets missed in the process.

Business Proposal Template Checklist

It even turns out a blessing for big businesses since they have to draft multiple proposals all the time. Templates and checklists save a lot of time, enhance productivity, and increase the chances of success.

Types of business proposals

Majorly, there are two types of business proposals:

Solicited business proposal 👋 Also known as an invited business proposal, it comes into play when a buyer, or a company, outlines its requirements and requests suppliers to present an offer. It can be a response to a public tender issued by big corporations or government agencies.

Alternatively, a solicited business proposal can also be submitted as a response to the RFP shared by a prospective client.

The difference between the two is that while the earlier one is open to all bidders, the latter’s scope is limited as it is shared with shortlisted suppliers.

Pro tip: Do a thorough check before submitting an invited business proposal. Missing out on-minute details can kick you out from their consideration list.

Unsolicited business proposal 🚪 An uninvited or unsolicited business proposal is a proactive attempt to create a business opportunity. This proposal is sent to prospective clients without being asked.

The good news is, there are slim chances of your rival sending a business proposal simultaneously, so less or no competition.

The bad news is, it might breathe in the customer’s inbox for a few days and then, without being read, depart to the heavenly abode -the trash folder.

But still, like a cold call, it leaves some impression on prospective clients and shoots up the chances to cut a deal in the long run.

Pro tip: An unsolicited business proposal is mostly sent through emails. Make certain to write an attention-grabbing headline and a convincing explanation to draw attention.

Here’s a comparison chart that distinguishes between business plan and business proposal:

business plan vs business proposal tips

Bonus: How to make ‘wow’ business plans and business proposals

Here are the secret ingredients to make awesome and captivating business plans and proposals:

what is the difference between a business plan and a business proposal

Follow the principle of KISS (Keep it simple, silly) 😛

This is not the right place to brag about your vocabulary skills. You want the prospective customer to focus on reading rather than wasting time looking up for a word.

Always remember! Communication is the key.

So, go simple and ditch those heavy jargons.

Go visual 📷

Don’t wear-out the pupils of your prospects with long-winded documents. Capitalize on the multisensorial abilities of humans as well.

Visuals increase people’s desire to read content by 80%.

Leverage the power of visuals and make your document easily graspable by adding graphs, infographics, flowcharts, tables, images, and videos.

Add social proof 👌

Do not forget to add positive feedback or customer testimonials. If similar projects have been delivered in the past, do add relevant links and case studies of that work. It helps to build trust and strengthen your case.

“Make sure you have great success stories that you can share with potential clients. At the end of the day, most, if not all, potential clients want to know you will provide value to them and generate positive ROI.” – Mathew Bivens, Podcast and marketing consultant,  10 Sales Experts Share Their Best Business Proposal Tips

Proofread 👁️

Ensure the document is free from grammar and spelling errors.

Follow brand guidelines 📖

Your document should reflect your brand. Bring consistency in all your documents and design them as per the brand guidelines.

Use document builder tools 🛠️

Time is money!

The likelihood of getting a ‘yes’ on your business plans and business proposals depends on how fast you can create a flawless document.

Empower your organization with a smart and all-in-one document builder tool like Revv – create, communicate, collaborate, and close your documents in no time.

Business plans and business proposals are two different worlds with distinct purposes and goals. But, both play a prime role in increasing the odds of business success.

People often get the wrong end of the stick and ask for a business plan when they mean business proposal or vice-versa.

But, we don’t need to worry about that since we are now clear on what is what.

Cheers to us! 🍻

P.S: Don’t forget to subscribe to the Process Street blog to get notified of our upcoming articles. We also have a podcast “Tech Out Loud” featuring content written by respected industry leaders such as Peep Laja , Sujan Patel , Tomasz Tunguz , and more! 🚀

What is your take on business plans and business proposals? Have you ever got your wires crossed with these two terminologies? Don’t forget to post your comments below. 👇

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Molly Stovold

Hey, I'm Molly, Junior Content Writer at Process Street with a First-Class Honors Degree in Development Studies & Spanish. I love writing so much that I also have my own blog where I write about everything that interests me; from traveling solo to mindful living. Check it out at mollystovold.com .

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Business Plan vs Proposal: An In-Depth Comparison

Business Plan vs Proposal An In-Depth Comparison Featured Image

Explore the distinguishing factors and circumstances that make a Business Plan or Business Proposal more fitting for driving success and growth in your enterprise. Gain insights into the purpose, audience, and strategic value of each document, and learn when it’s best to utilize a Business Plan or pitch with a Business Proposal.

Table of Contents

What is the Main Difference Between a Business Plan and a Business Proposal?

The main difference between a Business Plan and a Business Proposal is that a business plan is a formal document that outlines the company’s goals, strategies, market analysis, financial needs, and projections for the future, aimed at providing a roadmap for the business’s success and often used to secure funding or guide the management team. On the other hand, a business proposal is a tailored document created to pitch a specific product, service, or solution to a potential client or partner, detailing how the business can fulfill a particular need or solve a specific problem for the recipient, often with the goal of initiating a transaction or project.

Understanding Business Plans and Business Proposals

A Business Plan is a comprehensive document that outlines a company’s objectives, strategies, market analysis, financial forecasts, and operational structures. It primarily serves as an internal roadmap for the company’s strategic direction and helps to attract investors by showcasing the company’s potential for growth and profit. Business plans are often developed during the foundational stages of a company and updated periodically to guide the company through different stages of growth.

A Business Proposal , on the other hand, is a targeted pitch provided to a specific client or partner to convince them to do business with you. Unlike a business plan, a business proposal is not a broad overview of the entire company. Instead, it is a customized suggestion that outlines how your business can solve a particular problem or meet a specific need of the prospective client. The proposal highlights the benefits of selecting your company’s products or services and typically includes pricing, terms, and conditions for a potential engagement or project.

Key Differences between a Business Plan and a Business Proposal

  • Purpose : A business plan is primarily used for strategic planning and securing investment, while a business proposal is aimed at winning a specific contract or project.
  • Audience : The audience for a business plan is typically potential investors, stakeholders, or company management. On the other hand, the business proposal is directed towards a specific client or partner.
  • Focus : A business plan covers the entire company’s goals and operations, whereas a business proposal targets a specific offering for the client.
  • Details : While business plans include detailed financial projections and market analysis, business proposals focus on how your company can meet the client’s needs and the costs associated with your proposition.
  • Frequency : Business plans are created infrequently, often at startup or significant growth stages, while business proposals are generated as needed when pursuing new business opportunities.
  • Structure : Business plans have a standard structure, including an executive summary, company overview, products/services, and financials, whereas proposals are tailored to the client’s request.
  • Standardization : Business plans tend to follow a similar format from one to the next, while proposals are highly customized to align with the potential client’s requirements.
  • Duration : The time horizon in a business plan can span several years, reflecting long-term planning, but a business proposal typically concerns the timeframe for a specific project or service offering.

Key Similarities between a Business Plan and a Business Proposal

  • Strategic Elements : Both documents outline strategic approaches, whether for the company as a whole or a specific project.
  • Research : Thorough market research is essential in creating either a business plan or a business proposal to ensure feasibility and competitiveness .
  • Objective Setting : Each document includes clear objectives that the company wishes to achieve, be it long-term company goals or objectives of a contract.
  • Persuasive Nature : Both are meant to be persuasive documents that convince the reader to invest in the company or to hire the company for services/products.
  • Professional Presentation : A business plan and a business proposal should both be presented in a professional manner, well-organized and free of errors, to make the best impression.
  • Financial Information : Financial aspects are crucial in both; while a business plan may have more comprehensive financial projections, a proposal should still outline costs and pricing models.
  • Action Plan : Action steps or milestones are outlined in both to guide the intended strategy into practical steps or to give the prospective client a clear timeline for project completion.

Advantages of a Business Plan Over a Business Proposal

  • Clarity and focus : A business plan provides a clear roadmap for your company , detailing your objectives, strategies, and financial projections. It enables you to stay focused on your long-term goals and the steps required to reach them.
  • Risk assessment : It allows for a thorough risk assessment, helping you foresee potential challenges and devise strategies to mitigate them.
  • Investor attraction : A well-crafted business plan is essential for attracting investors and lenders as it showcases the viability and profitability of your business idea.
  • Strategic planning : The business plan acts as a strategic planning tool, helping you to align your short-term and long-term goals with the overall vision of the business.
  • Operational guidance : It provides detailed operational guidance, outlining day-to-day activities, management responsibilities, and the organizational structure.
  • Performance tracking : By setting benchmarks and performance metrics, a business plan makes it easier to track progress and measure success over time.
  • Market analysis : A business plan includes an extensive market analysis, offering insights into your target market, competition, and market trends, which are crucial for making informed decisions.

Disadvantages of a Business Plan Compared to a Business Proposal

  • Inflexibility : A business plan can be quite rigid, with a focus on long-term strategies and projections that might not adapt well to rapid changes in the market.
  • Time-consuming : Preparing a comprehensive business plan requires a significant amount of time and effort, potentially diverting resources from immediate business opportunities.
  • Outdated information : A business plan might quickly become outdated if the market or the company’s circumstances change, requiring frequent revisions.
  • Cost : The production of a business plan can be costly, especially if it necessitates the expertise of consultants or outside advisers.
  • Overemphasis on planning : There’s a risk of over-planning and under-executing, where too much time is spent on creating the perfect business plan instead of taking action.
  • Complexity : A business plan’s complexity might be intimidating or overwhelming for small business owners who may prefer the simplicity and directness of a business proposal.
  • Less tailored : While a business proposal is often customized to the needs and interests of a specific client or investor, a business plan is a broader document that may not address specific concerns or questions from potential stakeholders.

Advantages of a Business Proposal Over a Business Plan

  • Focus on Specificity : A business proposal is usually tailored to a specific client or project, which means it’s highly targeted and practical. This specificity allows the business to directly address the client’s needs and provide a customized solution that a general business plan cannot offer.
  • Rapid Execution : Proposals tend to be shorter and more concise, which allows for quicker evaluation and a faster start on the project. Businesses can get to work immediately after the proposal is accepted, shortening the time from planning to action.
  • Persuasive Element : A business proposal aims to persuade a particular client or investor to buy into the idea, product, or service. This persuasive nature means that proposals often focus on benefits and competitive advantages, potentially leading to a higher success rate in securing funding or partnership.
  • Adaptability : Since a proposal is typically for a particular client or project, it can be easily adjusted for different opportunities or audiences without reworking an entire business plan. This adaptability makes it more versatile in responding to market changes.
  • Ease of Preparation : A business proposal can be less daunting to create than a full-blown business plan as it generally does not require as much market analysis and financial forecasting. It allows the business to focus on the immediate opportunity rather than extensive strategic planning.
  • Potential for Immediate Feedback : When you present a business proposal, you often do so in a setting that allows for immediate questions and feedback. This gives you the chance to quickly address concerns, modify your offer, and improve the chances of an agreement.
  • Enhanced Relationship Building : Crafting a proposal requires understanding the client’s needs and objectives deeply, often leading to stronger client-business relationships. This rapport can be beneficial for both future business and referrals.

Disadvantages of a Business Proposal When Compared to a Business Plan

  • Lack of Long-term Vision : A business proposal is often focused on the immediate project and may not outline the long-term strategic direction of the company as comprehensively as a business plan would.
  • Limited Scope : Proposals generally address specific aspects of a business’s operations rather than providing a complete picture. This narrow focus might overlook broader opportunities or challenges that a business plan would typically account for.
  • Missed Detail : While business proposals are succinct, the brevity can sometimes result in the omission of important details that would be standard in a business plan, such as thorough market analysis or full financial projections.
  • Potential Dependency : If a company relies too much on individual proposals for direction, it might find itself without a cohesive strategy which a business plan is designed to provide. This can lead to a reactive rather than proactive business approach.
  • Risk of Assuming Knowledge : Proposals may assume that the reader has a certain level of understanding about the company or product, which can be a risky assumption if the reader is new to the business or its offerings.
  • Need for Customization : Each business proposal needs to be customized for its intended audience, which can be resource-intensive when dealing with multiple prospects or regular tender submissions.
  • Limited Investor Appeal : Investors often prefer to understand the comprehensive strategy and the broader financial implications of a business, something a focused business proposal may fail to communicate in comparison to a detailed business plan.

Situations When a Business Plan Is Preferable to a Business Proposal

  • Establishing Clear Direction : When a new business is just starting out, laying out a comprehensive business plan is crucial for establishing a clear direction and objectives for the business. It serves as a roadmap for where the owners want to take the company and how they plan to get there.
  • Securing Funding from Investors : A business plan is generally required for entrepreneurs seeking investment or loans. It presents detailed financial projections, market analysis, and business strategies that are essential to convince investors or banks to finance the venture.
  • Long-term Strategic Planning : For setting long-term goals and defining the vision of the business, a business plan is more appropriate because it takes a broader view of the business’s place in the market and its growth strategy over the coming years.
  • Developing Comprehensive Financial Projections : A business plan includes detailed financial forecasts that cover multiple years. This level of detail is necessary for stakeholders to understand the financial trajectory and potential of the company .

Situations When a Business Proposal Is Preferable to a Business Plan

  • Responding to Specific Client Requests : A business proposal is tailored to the needs and specifications of a potential client or partner. When a business wants to offer solutions to another company’s problem, a proposal is best suited for outlining how it will meet those specific needs.
  • Competitive Bidding Situations : When entering a bid to win a contract, a business proposal is more advantageous as it focuses on why the business is the best fit for the project, detailing its approach, unique benefits, and value proposition.
  • Establishing Partnership Agreements : If a company is looking to form a collaboration or partnership, a business proposal lays out the terms and benefits of the partnership, which is more specific than the broader scope of a business plan.
  • Project-driven Opportunities : For businesses that operate on a project-by-project basis, such as construction or consulting, business proposals are the better tool. They provide prospective clients with a detailed breakdown of the objectives, strategies, and costs for each unique project.

What components should be included in a business plan?

  • Executive Summary : An overview of the business and its strategy
  • Company Description : Legal establishment, history, start-up plans, etc.
  • Market Analysis : Industry, market and competitor research
  • Organization and Management : Business and management structure
  • Service or Product Line : Description of what you’re selling
  • Marketing and Sales Strategies : How you’ll attract and retain customers
  • Funding Request : Your current funding requirements
  • Financial Projections : Balance sheets, cash flow statements, and income statement forecasts
  • Appendix : An optional section that includes résumés, permits, and other legal documents

How often should a business plan be revised?

A business plan should be reviewed and revised at least annually, or more frequently if there are significant changes in the market, the business model, or if new challenges or opportunities arise .

In what scenarios is a business proposal unnecessary?

A business proposal may not be necessary when transactions are straightforward and do not require detailed explanations, such as standard retail sales or when there is already an established relationship with the client based on trust and familiarity.

Can a business proposal lead to a long-term relationship with a client?

Absolutely. If a proposal leads to a successful project and client satisfaction, it can serve as the foundation for a long-term business relationship and future projects or collaborations.

What is an unsolicited business proposal?

An unsolicited business proposal is one that is offered without an explicit request from the potential client. It often reflects the proposer’s initiative to identify potential needs of the recipient and offer solutions to unaddressed challenges.

How can you make a business proposal stand out?

To make a business proposal stand out, it should clearly articulate the unique value proposition, be tailored to the client’s specific needs, contain compelling and concise content, and demonstrate a deep understanding of the client’s industry and challenges.

Are there any legal considerations when drafting a business proposal?

Yes, a business proposal should ensure that all claims and statements are truthful and that no proprietary or confidential information is disclosed without permission. Additionally, the terms and conditions should be clearly outlined to avoid any misunderstandings, and if accepted, it can be the basis for a legally binding contract.

Business Plan vs Proposal Summary

The decision between a Business Plan and a Business Proposal hinges on the specific requirements, goals, and context of your enterprise. A Business Plan lays the foundation for your company’s long-term strategy, risk mitigation, and operational guidance, with an expansive view of the business’s aims and the means to attract investors. Conversely, a Business Proposal concentrates on the immediacy of client-specific projects, presenting a tailored solution with a persuasive edge to secure contracts and foster client relationships swiftly.

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what is the difference between a business plan and a business proposal

How do business plans differ from business proposals?

business plan vs. business proposal

Despite the terms being close, business plans and business proposals are two very different things. Their objectives, structure, and content differ vastly.

This guide helps you decipher all of the key differences between the two documents whilst highlighting some of the similarities that cause some entrepreneurs to confuse them. It also outlines what tools you should use to create either type of document. Ready? Let’s get started!

In this guide:

What is a business plan?

What is a business proposal, business plan vs. business proposal: what do they have in common, business plan vs. business proposal: what are the differences, what tools can you use to write a business plan, what tools can you use to write a business proposal.

A business plan is a document providing detailed information about your business and its objectives for the years to come (usually 3-5 years).

To keep it short and simple, a business plan consists of two parts: 

  • A financial forecast which provides information about the expected growth and profitability of your business, your potential funding requirements, and cash flow projections.
  • A written part which provides the context and details needed to assess the relevance of the forecast: company overview, description of products and services, market analysis, strategy, operations, etc.

Formal business plans are usually written: to secure financing, to get buy-in from stakeholders (board members, investors, business partners) on the plan of action for the coming years, to convince suppliers to do business with the company, or to communicate the company's vision to staff members.

Financial savvy businesses regularly track their actual financial performance against the forecast included in their business plan and re-assess their progress against what was planned, and update their plans as needed.

Need a convincing business plan?

The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.

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Business proposals have a completely different objective to business plans: their goal is to convince prospective buyers to buy products or services from your company.

They focus on what the company is offering and how it meets client needs. They include details of products and services offered, including engineering schematics, if applicable, service staff, and other details as or if requested by potential buyers.

Types of business proposals include:

  • Request for Information (RFI)
  • Request for Proposal (RFP)
  • Request for Quotation (RFQ)
  • And invitation for Bid (IFB)

All of these reflect various stages of a proposal and contain information relevant to that stage. The RFQ, for example, covers the pricing factor for the product.

Business proposals can be solicited or unsolicited:

  • Solicited proposals involve companies requesting other businesses to submit their proposal (often as part of a tender) and then a decision is made as to who to go with,
  • Unsolicited proposals, however, are sent by the selling company to potential buyers.

While they are both different concepts, there are some similarities between the two. These include:

Decision-making tools

Business plans and business proposals are both used as decision-making tools. They provide essential information regarding business operations, and this is used to make important decisions about the business.

For example, a business plan may help a potential investor decide if they want to invest in their business. Similarly, business proposals help clients decide whether or not they are interested in a particular product or service to help meet their business needs.

Intended to convince the audience

Since both are decision-making tools, their primary purpose is to convince the reader to make a particular decision. This decision often relates to the audience’s involvement with the business, for example, as an investor, supplier, or buyer.

Both types of documents are intended for external use - meaning they are presented to stakeholders to convince them that the business is worth “getting involved in”.

Cover business strategy

Both documents cover specific elements of a business and as a result discuss strategy in one way or another.

A business plan, for example, explains how a business is set up, how it plans to maintain operations and create revenue streams.

A proposal often focuses on how buying the product or services will help the buyer achieve its on strategy.

Need inspiration for your business plan?

The Business Plan Shop has dozens of business plan templates that you can use to get a clear idea of what a complete business plan looks like.

The Business Plan Shop's Business Plan Templates

The terms may sound close, but the two documents are very different in application. Here are a few key differences:

One-time use vs. long-term use

Business proposals are intended to be used once as they are created in response to one-time requests or for a single proposal to a potential buyer.

Business plans, however, are used to monitor business performance, and its forecasts are closely followed and regularly updated to ensure that the business is on track to achieve its goals.

Timing differences

The two types of documents are created for different purposes at different times. A business proposal is likely made at a time when a business is looking to expand by adding to its clientele.

A business plan, on the other hand, is often first drafted before a business is even started, as it provides direction for how the business should operate. And then regularly updated every couple months.

Length differences

Whilst business plans usually span between 15 and 30 pages, business proposals vary in length, based on what information the client has requested.

10 pages is usually a good starting point for a business proposal and not many will eclipse this number. This means that a business proposal has fewer pages than a business plan, which makes sense because the latter covers the entire business strategy.

Content variations

The two documents vary greatly in the kind of information that is included in them.

A business proposal, will focus on the fit between the product or service being pitched and the buyers requirements, and the return on investment for the buyer. Based on the requested specifications, the business proposal may go into deep detail regarding product schematics.

A business plan is higher level as it encompasses the business operations. It will typically include a full set of financial statements, as well as forecasts. Such information is typically absent from a proposal, which may, at most, include information regarding product manufacturing costs, pricing, and return on investment for the buyer.

Different audiences

Business plans and business proposals are intended for different audiences. Business plans are often shared with potential suppliers, investors, lenders, or even key hires, to give them a sense of what the business is about.

On the other hand, a business proposal is meant for potential customers to convince them to engage in business with that organization.

two managers discussing whether they should use a business plan or business proposal

In this section, we will review three solutions for writing a professional business plan:

  • Using Word and Excel
  • Hiring a consultant to write your business plan
  • Utilizing an online business plan software

Create your business plan using Word or Excel

Writing a business plan using Word or Excel has both pros and cons. On the one hand, using either of these two programs is cheap and easy to learn.

However, using Word means starting from scratch and formatting the document yourself once written - a process that can be quite tedious. There are also no templates or examples to guide you through each section.

Creating an accurate financial forecast with Excel is also impossible for a business owner without expertise in accounting and financial modeling. And as a result, investors and lenders are unlikely to trust the accuracy of your forecast.

Ultimately, it's up to you to decide which program is right for you and whether you have the expertise or resources needed to make Excel work.

Hire a consultant to write your business plan

Outsourcing a business plan to a consultant or accountant is another potential solution.

Consultants are used to writing business plans, and accountants are good at creating financial forecasts without errors.

This means that they will be able to create an effective business plan with accurate financial estimates without much effort.

However, accountants often lack the industry expertise to accurately forecast sales, and hiring either consultants or accountants will be expensive.

You probably need to budget at least £1.5k ($2.0k) for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders).

For these reasons, outsourcing your business plan to a consultant or accountant should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.

Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their own business plan using an online software.

Use an online business plan software for your business plan

Another alternative is to use online business plan software . There are several advantages to using specialized software:

  • You are guided through the writing process by detailed instructions and examples for each part of the plan
  • You can be inspired by already written business plan templates
  • You can easily make your financial forecast by letting the software take care of the financial calculations for you without errors
  • You get a professional document, formatted and ready to be sent to your bank
  • The software will enable you to easily track your actual financial performance against your forecast and update your forecast as time goes by

If you're interested in using this type of solution, you can try our software for free by signing up here .

Simple software such as Word or Powerpoint can be used to create a business proposal.

You could use pre-made templates to create your own proposal, using the layout and content as a guide to what you should and should not include in the proposal.

For solicited proposals in particular, client requirements are the most important attribute. A well-written proposal will cover what the client has requested in-depth and that information will usually be prioritized in the table of contents. You could then move onto other aspects that may not have been specifically requested but that you feel are important to share.

Specialist proposal software can also be used. You can find a list in this article from Hubspot . The main benefit of using proposal software is that they usually integrate directly in your CRM and include eSignature technology making the overall sales process easier and faster.

Also on The Business Plan Shop

  • How investors analyse business plans
  • Business plan vs budget: what's the difference?

Know someone confused about the difference between business plan and business proposal? Share this article and help them out!

Guillaume Le Brouster

Founder & CEO at The Business Plan Shop Ltd

Guillaume Le Brouster is a seasoned entrepreneur and financier.

Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.

Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.

Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.

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Comparison Between Business Proposal and Business Plan

Conducting a comparison between business proposal and business plan enables you to highlight the differences between the two. 3 min read updated on February 01, 2023

Updated November 12, 2020:

Conducting a comparison between a business proposal and a business plan enables you to highlight the differences between the two. Business plans are documents detailing how owners want to set up their business, their goals and objectives, and the processes and methods required to achieve these goals.

Understanding the Features of a Business Plan

A business plan is a document that describes in detail how your business is set up, the vision of the company, and the methods and process for realizing business goals.

A comprehensive business plan should provide detail on your:

  • Products and services.
  • Business structure.
  • Marketing strategy and market research.
  • Budgetary expenses.
  • Financial projections for the next five years.

Benefits of Drafting a Business Plan

Although developing a business plan takes a lot of research, planning, and calculation, it is well worth it. Drafting a business plan is a good idea for existing businesses and startups alike.

The reflection and time spent while creating your business plan will clarify your business ideas, providing you with insights into aspects of your business that you may not have considered, and help you strategize.

A well-written business plan is a blueprint for success because it outlines all the steps required to move your business from the ideation stage to reality.

However, not all business plans are meant to be executed. You could discover during the research stage that your business idea isn't right for implementation. Realizing this earlier on means you can save yourself time and money that you would have invested in a dead-end idea.

Before trying to raise funds for a business loan through an angel investor, incubator, or venture capitalist, ensure that you have thoroughly researched your business plan. Developing a well-researched business plan should take approximately six weeks, so writing your plan a day before meeting with a potential investor won't cut it.

Your business plan should serve two purposes:

  • To provide suppliers and investors with information about the viability of a business.
  • To keep an accurate record of business goals and the steps required to achieve them.

The following is a sample structure you can use to prepare your business plan:

  • Executive Summary.
  • Business Description.
  • Market Analysis & Strategies.
  • Design and Development Plan.
  • Management and Organization.
  • Service/Product Line.
  • Sales and Marketing.
  • Funding Requests.
  • Financial Projection.

What is a Business Proposal?

Business proposals are documents proposing a business arrangement between you and another enterprise. The two main categories are:

  • Non-invited.

When large corporations or the government want to purchase products or services from private suppliers, they usually post a public tender inviting contractors to submit a bid. The winning bid will be selected from those submitted by interested contractors.

Some organizations may also send RFPs (Request for Proposals) to select businesses that they are considering as potential suppliers. In this instance, you will compete against a handful of pre-selected contractors. Usually, the client provides a Bidding document stipulating the categories of information to be detailed as well as the style and type of proposal they expect from interested contractors.

If the Bidding document is not available, it is up to the contractors to decide what style of the proposal to present.

Companies that respond to a call for tender or an RFP are competing with other enterprises similar to theirs. As such, they must present themselves in the best possible light to win the bid.

Non-invited Proposal

Unlike invited proposals where the clients expect a bid for a product or service they need, an uninvited proposal is sent to solicit a business arrangement. You may have an idea for a product or service that will be beneficial to Company X and you have the ability to provide the service/product.

To indicate your interest in undertaking business dealings with Company X, you send an uninvited proposal stating your intentions to form a business relationship.

The company may or may not be open to your proposal; however, if it is interested, you don't have to worry about competing with other bidders.

To boost your chances of your non-invited proposal being accepted, you must market both your concept and your company. You must convince the prospective client of the value of the product or service as well as the stability and credibility of your company.

If you need help with a comparison between a business proposal and business plan, you can post your legal need on the UpCounsel marketplace. UpCounsel accepts only the top percent of lawyers on its site. Lawyers on UpCounsel come from prestigious law schools like Yale Law and Harvard Law and usually have 14 years of legal experience, including work on behalf of or with companies like Airbnb, Menlo Ventures, and Google.

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Business Plan vs. Business Proposal

Back to Business Plans

Written by: Carolyn Young

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on February 27, 2023 Updated on December 11, 2023

Business Plan vs. Business Proposal

A business plan and a business proposal are similar documents. In fact, in some cases the terms can be used interchangeably, such as when both aim to attract investment. 

But generally speaking, a business proposal tends to have broader scope, and this handy guide lays out precisely how these two common terms differ. 

  • What is a Business Plan?

A business plan is a detailed document laying out how the business will function and develop in its first few years. The key is the “plan” part of the name, as it will specify how you will launch, gain customers, operate, make money, and, with any luck, expand. 

Yet what many first-time business owners seem to forget is that a business plan is not a static document. The initial version is based largely on assumptions, supported by research. But as you run your business you’ll learn what works and what does not and make endless tweaks to your plan.

Thus, creating a business plan is not a one-time action – it’s a dynamic and continuous process of crafting and adapting your vision and strategy. 

Components of a Business Plan

A business plan is generally much more detailed and broader than a business proposal, and has several elements :

  • Executive Summary  
  • Company Description/Overview
  • Products or Services Offered 
  • Market Analysis 
  • Marketing and Sales Strategies
  • Operations and Management  
  • Financial Plan
  • What is a Business Proposal?

A business proposal is created in connection to a specific business deal being offered by one party to another. As mentioned, when you take a business plan to an investor, you’re proposing a business relationship, so in this case a business plan and a business proposal are much the same.

But a business proposal could also be for others purposes, including:

  • Bringing on a partner
  • Proposing a management contract to a person you want to hire 
  • Proposing a business relationship with a potential customer 
  • Proposing a partnership with another company
  • Suggesting a deal to a member of your board of directors

A business proposal may offer specific terms for the potential relationship, or it may be just about the benefits the relationship will bring, with terms to be negotiated later. Essentially, it’s a sales tool to get people or companies to do business with you in some way. 

Business proposals can be structured in various ways, but usually, they’ll include a summary of what your company can offer, a scope of the work to be done together, and sometimes, a price quote or a proposed structure of the business relationship.

Clearly, a business plan and a business proposal are similar – and can even be one and the same. At the same time, they can also serve very different purposes. Unlike a business plan, a business proposal can have a variety of aims and thus does not have a “one size fits all” structure. 

Whichever one you need, be sure to take your time with the research and writing so your business has the best chance for success. 

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Business Proposal and Business Plan: What’s the Difference?

Business Proposal and Business Plan: What’s the Difference?

Business proposal and business plan are relatively similar but distinctively different terms, making many use these two words interchangeably.

You’ll see distinguishing features in their content, structure, writing style, purpose, and goals. Even so, there are various similarities between a business proposal and a business plan.

The main distinguishing factor to note is that a business proposal documents the growth strategy and presentation of facts, while a business proposal is a specific ask for an individual to take action (buy your service/product, partner with you in business, and invest in a particular business) . 

Let’s look at the two terms in detail and highlight a few examples when it’s appropriate to use.

What is a Business Proposal?

A business proposal is a company’s documentation that goes directly to its prospective. It’s usually written in an attempt to sell a company’s product or service.

While a business proposal is not an estimate, it’ll have certain financial details. An estimate is unofficial and simply a way to skim over the real costs without presenting the real picture.

In a nutshell, a business proposal shows a particular business idea intended to get investors to support this particular endeavor being suggested.

what is the difference between a business plan and a business proposal

Although a business proposal shows an overview of what the company does (just like a business plan), its main aim is to provide information about the suggested business idea. 

It answers any questions or concerns potential investors may have about the suggested business idea.

Prospero business proposal generator can help you easily draft a competitive and compelling proposal to beat other bids. With its user-friendly interface and various proposal templates , you don’t have to create everything from scratch.

what is the difference between a business plan and a business proposal

Let’s now look at the importance of a business proposal and a business plan.

Reasons for a Business Proposal

The main reason a proposal is written can only be understood based on the type of proposal you want to draft. They’re two types of proposals; invited and non-invited proposals.

Invited proposal

An invited proposal is submitted in response to an advertisement from a potential client. A good example is government agencies inviting contractors to bid on a particular service.

Alternatively, businesses request a proposal from a group of suppliers they’re willing to consider as prospective clients.

Non-invited proposals

Non-invited proposals, on the other hand, are submitted to potential clients even when they haven’t requested one. In both instances, a company must develop a compelling proposal to convince buyers. 

Proposals are limited in the scope of a particular need or project and written to specific audiences.

The main reason why businesses write proposals is to solicit or grow company opportunities. You can think of a proposal as an external document to present or sell the company to external players.

It shows what the business is all about and how it intends to carry out a particular project or use that opportunity to generate revenue for both parties.

What is a Business Plan?

A business plan is a factual description of a company on the operational and executive levels. It’s a written presentation of a company’s grand vision.

The document is typically tactical; it states where and when you want to start a project. Moreover, it will highlight when you’ll want to move on to the next phase of the project and how to accomplish that project.

what is the difference between a business plan and a business proposal

It makes potential investors interested in a company (especially small startups that haven’t made a name for themselves).

A business plan will also provide an idea of what the business requires from professionals, such as attorneys and potential employees. It indicates whether or not a company’s business goals are realistic, let alone achievable.

Reasons for a Business Plan

Business plans are visions for your company and how you intend to execute all these visions. They outline financial projections of what a business will cost to develop and operate, plus an estimate of the revenues the business will generate.

Its main purpose is to provide a reasonably detailed description of the company for use by potential investors, suppliers, accountants, and prospective employees, among other people.

Moreover, it’ll provide a quick but comprehensive view of what your company does and its chances for success.

The main reason companies write business plans is to convey and record information.

Structure of a Business and Plan Proposal

Here, the two documents have various components featured on them. Here’s a detailed description of their structure below:

Structure of a Business Proposal

Overall, the structure of a proposal will depend on whether it’s solicited or unsolicited.

A solicited proposal responding to a request for proposal takes the format of an RFP. Here are the components of a business proposal:

  • Usually, it takes a quick description of products and services relevant to the RFP goals.
  • Outlining the company’s scope of work.
  • Answers to questions posed in the RFP.
  • Estimate detailing tools, materials, labor, delivery, and other elements that’ll affect the project’s cost.

An unsolicited proposal to create a business opportunity follows the same format. It, however, anticipates questions potential clients might have .

A proposal is a marketing document designed to convince prospects to do business by presenting a value disposition plus a call to action.

Try creating your business proposal here .

Structure of a Business Plan

A business plan has three components; sales tactics, business model description, and financial goals. More elaborately, it consists of the following section of information:

  • A summary of the executive
  • Product/service description
  • Industry analysis
  • Operating plan
  • Marketing strategies  
  • Internal analysis
  • Built-out plan
  • Structure of leadership 
  • Introduction of management 
  • Financial goals

The business plan is more like an information document displaying the company’s operation and potential.

Many companies fail to follow this format while writing their business plan or proposal, a reason why most don’t win bids or prospective clients. 

Using Prospero to write a professionally compelling business proposal and integrate your business plan can help you get investors interested in your company so that they want a sit at the table.

What’s the Difference Between a Business Plan and a Proposal?

Business proposals differ from business plans in content, writing style, purpose, goals, and structure.

The sole distinguishing factor between the two terms is that a business plan is a factual presentation of facts, whereas a business proposal is an external market document that highlights a quote and a call to action.

Let’s look at some distinguishing features between the two terms:

Business Proposal vs. Business Plan

A business plan provides a detailed description of how the business was set up, plus its project.

On the other hand, a business proposal is a purposeful sale document illustrating how a business will execute a particular project. Usually, it’s drawn and submitted to another enterprise or organization putting forward a business arrangement.

In addition, the structure of a business plan contains three elements, including a description of the business model , sales tactics, and financial projections.

On the other hand, the structure of a business proposal takes the format of an RFP if it’s solicited.

A business plan shows the scope of a business and, in turn, clarifies your thinking as a business owner and also gives you information that you hadn’t considered before.

Conversely, proposals show a limited scope of a specific project or need for a particular audience.

While trying to craft these two documents, you must seek proficient experts to help you write compelling proposals and plans to convince potential investors and other partners to invest in your business.

Types of Business Plans and Proposals

A business proposal can be divided into solicited and unsolicited proposals. How different are they? Let’s delve right in.

Solicited Proposals

This is presented in response to a request for proposal (RFP). It’s usually submitted responding to a work statement from sponsors.

These sponsors use the request for proposal to solicit a specific proposal for research, training, or to provide services or goods. The RFP includes standard terms, conditions, and assurance that the company is asked to accept. 

A good example is when an organization or government agency wanting to buy products or services from a particular sector invites contractors to place bids.

In other scenarios, some businesses will ask suppliers to provide RFP to those they’re considering a partnership with.

The business is competing against other businesses that want to secure the same contract. It’s, therefore, in their best interest to provide compelling and competitive business proposals.

Prospero can assist you in such instances; it has the experience and expertise to curate excellent proposals that win contracts. Call it today to generate a proposal with its Prospero business proposal generator .

Unsolicited Business Proposals

This proposal is submitted to potential clients, even when they haven’t asked for one.

In such circumstances, a business wanting to secure a contract will suggest a product or service to a potential organization in return for funds.

A good example is when an organization tends a proposal to develop an application or renders some training services to its staff.

Just like solicited business proposals, a company must curate a well-researched proposal that will convince prospective clients you’re the right candidate for the job.

Types of Business Plans

Business plans are also categorized into four types, including

  • short plans,
  • presentation plans,
  • working plans,
  • and what-if plans.

These types require different degrees of labor and are not always proportional to results.

Presentation Plan

Using PowerPoint to outlay information about a business changed the way companies created their business plan. Many businesses lose sleep trying to figure out how you’re going to present a business plan that can affect a company’s future.

what is the difference between a business plan and a business proposal

Working Plan

This is a plan used to operate your business. The plan can be long in detail but shorter in presentation. There’s no room for informality or candor while preparing it.

If you’re considering presenting this plan to a loan committee, you’ll have to describe a competing rival primarily on a price basis.

A working plan used to create outlines for internal use may have some elements omitted; probably, you’ll not need to add an appendix with a resume of key executives.

Internal policy considerations may guide what to include or exclude in the working plan.

What-If Plan

A business must prepare for unforeseen circumstances. The company may want to have a contingency plan when seeking bank financing.

This plan is usually curated in the worst-case scenario that you can foresee your business surviving. It’s important to shelter yourself from things like loss of market share, the defection of a key member of management, and heavy price competition.

A contingency plan can help cover the fears of bankers and investors by demonstrating that your business has considered more than one rosy circumstance.

Moreover, your business can benefit from a what-if plan in situation acquisition. It can help you outline the worth of the acquisition and how it can affect the core business.

In summary, you can say that a business plan is more of an internal document, whereas a business proposal is an external one that is used to sell the product or service of a company to prospective clients.

In addition, a business plan guides the activities of a company internally in terms of revenue projections and marketing strategies that must be achieved in a particular time frame.

On the other hand, a business proposal will show external parties like a government agency and sponsors what the business is all about to convince them to invest in your business. The proposal should outline how you will carry out a particular project to generate revenue.

Whether trying to curate a business plan or proposal, it has to be compelling and competitive to beat other bidders. 

Why Not Give Prospero A Try?

Working with Prospero to generate professionally written proposals or plans is essentially wise. It has a variety of templates for different industries and comes with a lot of customization options. Some ready-made content are also available so you won’t need to write from scratch every now and then.

You can manage and track the performance of your proposals through its built-in analytics, so your sales team would be more productive and efficient.

It’ll increase your chances of securing contracts and proposals that can take the business to the next level.

Sign up for free today and get your free trial!

ABOUT THE AUTHOR

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Abbey Claire Dela Cruz

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How to Write a Business Proposal — 2022 Guide and Template

what is the difference between a business plan and a business proposal

A business proposal can make or break your chances of securing a new client. Write a great one, and you’ll likely snag their business.

Write a poor one, and you might lose out—even if you’re offering the best service out there. So, how do you write a business proposal? What is the proper format? What do you need to include?

While it all depends on your industry, and whether or not you’re offering a product or service, writing a business proposal is pretty straightforward. We’ll answer all those questions and more throughout the course of this guide. 

What to expect with this business proposal guide

Whether you’re starting fresh or need to look at a specific section, here’s what we’ll be covering in this guide. 

  • What a business proposal is
  • The differences between a business proposal and a business plan
  • The format of a business proposal
  • How long to make your business proposal

How to write a business proposal

You can download a free business proposal template here to start writing up your own proposal as you work through this article. By the end, you’ll be prepared to develop a well-written business proposal that can explain your business clearly and win more clients. Let’s get started.

What is a business proposal ?

A business proposal is a document you’d send to a prospective client, outlining the service you’re offering, and explaining why you’re the best person for the job. 

It’s a pitch by a business or individual to complete a specific job or project, to supply a service, or, in some instances, to be the vendor of a certain product.

What are the different types of business proposals?

A business proposal can be either solicited or unsolicited. With a solicited proposal, the prospective client will put out a request for proposals; with an unsolicited business proposal, you are approaching a client in hopes of attracting their business, even though they did not explicitly request a proposal.  

While both are commonplace, a solicited proposal is an easier sell, as your prospective client has already decided that they want to make a purchase or use a service, and they’re evaluating possible vendors or businesses.

With a solicited proposal, your prospective client might have issued an RFP, or “request for proposal.” This is exactly what it sounds like—they want you to send over a business proposal so they can take a look at it.

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Differences between a business proposal and a business plan

A business proposal is not the same as a business plan . This is the most common misconception, but while there are areas of overlap (like your executive summary ) the two are different.

That being said, you can certainly pull information from your business plan while writing your business proposal—in fact, that’s a great way to start.

But don’t confuse the two; they are distinct and separate. In short, a business plan represents the cohesive strategy of how your business operates and makes money. A business proposal is an official pitch to clients selling your products or services. 

A business proposal outlines a particular product or service offered by an established business to a prospective client.

You’re trying to sell your prospective client on your product or service, not on your business itself. You’re not after funding, as you are with a business plan, you’re trying to make a sale.

A business proposal is also not an estimate; although you’ll likely touch on costs and pricing in your business proposal, an estimate is much more informal and just a quick look at the costs, not the whole picture.

What goes into a business proposal?

Your business proposal should address the three Ps:

  • Problem statement: What your customer’s current problem is
  • Proposed solution: How your business solves that problem better than other solutions
  • Pricing: How much that solution costs compared to alternatives

If you’re stuck on how to start, maybe try brainstorming first; start with these three points, and you’ll have a rough, bare-bones version of your business proposal.

Once you’ve done that if you’re ready to go more in-depth, here is a step-by-step look at how to format your business proposal.

Your business proposal should start with a title page, which should include your name, the name of your company, the name of the person to whom you’re submitting your proposal, and the date submitted.

Table of contents

Depending on how long your business proposal is, a table of contents is a nice touch. Include it after your title page, and before you launch into any details. If you’re delivering it as a PDF, including anchor links down to each section, so it’s easy to get to specific areas. 

Executive summary

Introduce your proposal with a great executive summary, one that really sells your business and the products or services you provide—it’s about why you’re the right company for the job. You can draw from your business plan’s executive summary here, too.

Statement of problem, issue, or job at hand

Following your executive summary, go on to discuss the problem that the client is currently facing. Think of “problem” or “issue” loosely; after all, their main problem may just be finding the right person to complete their project. But be sure you understand why they want the product or service they’re seeking. If the proposal is for developing a brand new website, make sure you understand what they want to get out of the site—better sales, more content management flexibility. 

This is the place to show your new client that you understand their needs , and fully grasp the issue they are trying to solve. Take this opportunity to restate the issue they are facing in your own words so that they know you understand what they are looking for.

Approach and methodology

This section shows how you plan to tackle your potential client’s problem, and the steps you’ll take to carry out your plan.

This is where you’ll get into the nitty-gritty of how you actually plan to fulfill your client’s needs. While earlier sections might have been a bit surface-level, this section of the business proposal is where you’ll go into detail about what steps you’ll take to solve their problem.

Be careful of going into too much detail, though—keep the jargon to a minimum. Your client should be able to follow along and get a clear sense of your plan, but you don’t want to drown them in minutiae.

Qualifications

Go ahead, brag a little—this is the section of your business proposal where you get to convince your potential client why you are the most qualified person to take on the job.

You can mention any relevant education, industry-specific training, or certifications you have, your past successful projects of a similar nature, years of experience, and so on.

Schedule and benchmarks

Be clear with your potential client: How long will your proposed project take?

Making sure you and your prospective client are on the same page from the outset will help make sure that the relationship stays positive for both of you, and that you don’t set your client up with unrealistic expectations.

While you might be tempted to underestimate how long it will take you to complete the project, don’t. Don’t promise what you can’t deliver!

If you’re offering a product, this section might not be applicable to you, so feel free to omit it. The business proposal format is flexible, so tailor it to suit your business and industry.

Cost, payment, and any legal matters

Here is where you get down to brass tacks and state the cost, and payment schedule if necessary.

How you structure this section will largely depend on the particular project or service you are offering. A section entitled “Fee Summary” may be sufficient if one-time payment is required; otherwise, a “Fee Schedule” list or pricing table might be more appropriate. Always refer back to the client’s RFP whenever possible, to make sure you’re supplying them with all the information they need to help make their decision.

If there are any legal issues to attend to, such as permits or licensing, include this information here. Feel free to add a section entirely devoted to handling the legal side of the project if need be.

This is your final sell—don’t be afraid to detail for your prospective client all they have to gain by choosing you to complete the project.

Impress upon your clients why you are the best choice, and all the ways in which their business will benefit from choosing you and your business as their solution.

How long should a business proposal be?

When it comes to the format of a business proposal, this is the million-dollar question without an answer. Remember in school, when you’d ask your teacher how long an essay should be, and they’d reply, “as long as it takes to answer the question.”

The same applies to your business proposal. It ultimately depends on your industry, the scope of the project, and the client’s specifications in terms of detail and elements included.

Make your pitch stand out with SBA-approved business plans. All the info investors and lenders need to evaluate your business. Get LivePlan.

That being said, the tighter your initial proposal can be and the more directly you can make your point, the easier it will be to pitch it to clients. Start by following the business proposal format above as a guide, and you’ll be well on your way to creating a winning business proposal—and securing new clients.

Editor’s note: This article was originally written in 2018 and updated for 2021.

AvatarBriana Morgaine

Briana Morgaine

BrianaMorgaine

Briana is a content and digital marketing specialist, editor, and writer. She enjoys discussing business, marketing, and social media, and is a big fan of the Oxford comma. Bri is a resident of Portland, Oregon, and she can be found, infrequently, on Twitter.

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what is the difference between a business plan and a business proposal

April 13, 2023

Can't find what you're looking for?

Difference Between Business Plan and Business Proposal

One of the most searched queries on Google is "business proposal vs business plan", and we are here to break the confusion.

What's Inside?

You are starting a new business, and you aren't sure what you need to do. You heard that you needed a business proposal and a business plan, but you weren't sure what's the difference between them.

You did some research and couldn't find what you are looking for... You decided to create both of them, but you need weeks to write and refine them.

business proposal vs business plan 2

Don't worry, we are here to remove this confusing process. Let's see what's the difference between them. You may, and probably do need both of them. But which one should be your priority?

The Difference Between a Business Plan and a Business Proposal

When you're starting a business, one of the most important things you'll need to do is create a business plan . This document will outline your company's goals and strategies for achieving them over the next five years.

business proposal vs business plan 3

A business proposal , on the other hand, is a sales document that you put together to pitch potential projects to clients. It's not the same as a business plan, and it usually includes cost quotes for potential projects.

The main difference between a business proposal and a business plan is that, while a business plan is informative, a business proposal is intended to showcase operations, goals, and potential.

Executive Summary

The executive summary of a business plan will include information about the company leadership structure or the introduction of management. Generally, business plans include an executive summary part while business plans don't.

We have seen some samples that use executive summaries but since the main goal is to close a deal. We suggest keeping them short and clean.

The business proposal format depends on whether the business is solicited or unsolicited . Details of products and services offered, the scope of work and responses to specific questions in an RFP are included in a business proposal.

business proposal vs business plan 4

A business plan documents the vision of a business and how it will be achieved. A business proposal offers comprehensive information for potential investors, suppliers, accountants, etc.

A proposal shows the external player what the company is all about and how it intends to carry out its project. Keep these differences in mind when you're putting together your next business presentation --you'll need to tailor your content accordingly!

What Are Business Plans?

A business plan is a document that outlines the business goals, strategies, and tactics a company will use to achieve those goals. The business plan also includes an overview of the company, its management team, the target market, and the products and services the company plans to offer.

It usually includes information about the company's products and services, target market, marketing plans , financial forecasts, and management team bios.

Here's a sample template to use while creating a detailed business plan.

What Is The Purpose of a Business Plan?

A business plan is a key document for any business. It lays out the goals and strategy of the business and helps to ensure that everyone involved in the business is on the same page. It can also be used as a tool to help secure funding from investors or banks.

A business plan is a document that outlines the strategy and goals of a company. It can be used as a planning tool , to track progress, or as a basis for making decisions . A well-written business plan provides a roadmap for the business , and it can help attract investors or partners.

There are many reasons to create a business plan. Some of the most common reasons include:

  • To track progress - A business plan can help you track your progress and ensure that you are on track to achieve your goals.
  • To make decisions - A business plan can provide guidance when making decisions about the future of your company.
  • As a planning tool - A business plan can help you identify potential problems and solutions, and it can be used to forecast future growth.
  • To attract investors or partners - A well-written business plan can help you attract investors or partners who share your vision for the company.

What is a business proposal?

A business proposal is a written document that offers a solution to a problem or a way to achieve a goal. It is often used to sell products or services to a potential customer. A business proposal must be well-written, clear, and concise in order to convince the reader to take the desired action.

business proposal vs business plan 5

A business proposal is a formal response sent to an RFP (request for proposals). It is a way for the seller to convince the buyer that their proposed solution is the right one in order to win business. Business proposals are meant to persuade a prospective client.

A business proposal typically consists of four main points: what are the challenges, how your solution solves the problems, why they should choose you over others, and the best pricing options available. The price is typically stated in the document. If a business is requesting proposals, they should be sent in their format. An RFP response should include specific details about the scope of work and the cost estimate.

Here's a sample template to use while creating a detailed business proposal.

Why do you need a business proposal?

A business proposal is a key part of the business development process . It is a document that outlines the business goals, strategies, and tactics that will be used to achieve those goals. A proposal is used to convince potential clients or partners that your business is the best option for them.

It's typically used to pitch an idea to a potential client or customer. A well-crafted proposal can help you win new business and close deals.

business proposal vs business plan 6

Your company might be expanding into a new market and need to propose a new product or service. Or, you might be approached by another company with an opportunity you'd like to explore. Maybe you've identified a gap in the market and want to propose a new product or service to fill it.

How To Prepare For a Business Proposal?

Well, we do have a comprehensive guide to business proposal creation with templates and examples, but if you need a more brief explanation, keep reading!

When preparing for a business proposal, it is important to do your research and understand the client's needs. You should also have a clear understanding of your own company's capabilities and what you can offer the client. Additionally, it is important to be well-organized and to have a strong pitch.

business plan for project teams

You should have a clear understanding of your target audience and what will appeal to them. You also need to have a good grasp of the competition and what they are offering. In addition, you should be familiar with the terms and conditions of any potential contracts that may be involved.

Your proposal should be neatly formatted and easy to read. It should also be free of grammatical errors and typos. Be sure to proofread your work carefully before submitting it.

Make sure you provide complete contact information, as well as an outline of your proposed solution or service. If possible, include testimonials from past clients who have been satisfied with your work.

Remember that you are offering a valuable service that can help the reader achieve their goals. Believe in yourself and your ability to succeed, and you will be able to deliver a winning proposal every time

How To Write a Business Proposal?

When writing a business proposal, make sure to follow this brief outline:

- Introduce yourself and your company

- Outline the proposal's purpose

- Explain the problem that you're trying to solve

- Describe your solution

- Explain the benefits of your solution

- List your qualifications

- Request a meeting

It should include an overview of the product or service, information about the company proposing it, financial projections, and terms and conditions. A well-crafted proposal can help your company win new contracts and increase sales.

Here's another sample template you can use while creating a business proposal:

Business Proposal Template Checklist

Here's a story of our customer John who joined the Decktopus community 2 years ago.

John had been working in sales for years, but he had never worked in a company that sold products. When he was hired by a new startup, he was excited about starting making sales and increasing profits. However, he soon realized that there was no one in the company who knew how to sell. The founder of the company told him that he would need to create a presentation template to share with the other reps.

business plan for marketing consulting

John wasn't sure where to start. He read article after article, trying to gather information about what made a good business proposal. After weeks of research, he finally created a template that he felt confident in sharing with his fellow reps. He was excited to see how it would help them increase sales and profits.

This is the outline we gathered while our support team helped him along the way:

-Executive Summary

-Problem/Opportunity Statement

-Business Plan

- Marketing Plan

-Financial Plan

Types Of Business Proposals

An unsolicited proposal is one in which the company offers a product or service to a potential customer who has not solicited it. Here's an unsolicited proposal template .

unsolicited business proposal cover

A solicited proposal is one in which the company responds to a request for proposal (RFP) from a potential customer. Here's a solicited proposal template .

simple solicited business proposal

A proposal to bid is a document that a company submits to a potential customer in response to an RFP.

The purpose of the proposal to bid is to persuade the potential customer that the bidder's product or service is the best option among those being considered.

Here's a proposal to bid template .

business bid proposal example

Business Plan Structure

A business plan has three main sections: the executive summary, a description of the business model, and financial projections.

The first section is an introduction that should be no more than one or two pages long. It should include a brief overview of your company, its products and services, and how you plan to make money.

The second section, a description of the business model, provides details about your company's competitive landscape, industry trends, and how you plan to reach your target market.

The marketing model is an informative section that should include detailed information about the industry competition and build-out plan. This part of the document can be several pages long and will help investors understand your company's place in the market.

business proposal templates

While all three sections are important, remember that potential investors will likely focus on the financial projections most closely when deciding whether to invest in your company. The financial projections section is important because it shows potential investors how you expect your business to grow over time.

A well-crafted business plan can help convince potential investors to put their money into your company.

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Difference Between a Business Plan and a Business Proposal

what is the difference between a business plan and a business proposal

Table of contents

It’s natural to get confused between a business proposal and a business plan if you are planning to turn your idea into reality. While business proposals and plans may sound similar on the surface, they have differences — such as distinct purposes and formats. 

A business plan describes your business goals, strategies, and financial projections. A business proposal, on the other hand, proposes a specific solution to a problem or opportunity and helps you persuade the relevant stakeholder to invest in your business. 

However, writing a business proposal or a business plan can be challenging, especially if you are confused about their purpose. In this blog, we will explain the difference between a business plan and a business proposal and its major components.

Business Plan

A business plan tells the investors how you plan to ship your product to enough people to clock revenue. It’s about the strategies that will make you the first buck. 

A business plan keeps your team on the same page — you can use it as a guiding light. It can help you track the progress of your business, give you a roadmap, and help you make decisions about your business’s future.

Plus, it can be helpful when it comes to pitching your business idea to a third party, for example, when seeking a loan.

Components of a Business Plan

A business plan is majorly divided into three sections, which include an executive summary, a sales and marketing strategy, and a financial plan. 

An executive summary is a brief, clear, and compelling overview of your business. It is usually the first section of the document, and it contains the most important information, such as your strengths. 

These can be further broken down into the following sections:

  • Description of products and services, including mission, vision, and objectives of the business
  • Target market
  • Competitive advantage
  • Industry and Competitor Analysis
  • Marketing strategy
  • Operating plan
  • Team structure and qualifications
  • Internal business analysis
  • Management introduction 
  • Financial analysis
  • Cash flow statement or sales forecast
  • Break-even analysis

Business Proposal

A business proposal is a separate written document that outlines a specific business opportunity, project, or idea and presents it to potential clients. 

It intends to persuade them to take action, such as accepting a business deal or entering into a partnership, thereby helping you get new customers or partners. 

A business proposal should be customized to the needs and interests of the receiver. A generic proposal will rarely help you meet your business goals. 

At the same time, ensure your proposal is well-organized, persuasive, and creative. Check out these free business proposal templates to impress your clients. 

Solicited and Unsolicited Business Proposals

Proposals are solicited from you, or you send them on your initiative. 

You write a solicited proposal in response to a prospect’s or customer’s request for a product. They may ask you verbally, or they may issue a written request for proposals (RFP). A solicited business proposal contains a detailed description of the product, service, or solution that you offer to solve the customer's problem or need. It’s generally easier to write because you know what the customer wants or expects. 

But if you’re writing the proposal on your own, which is the case with unsolicited business proposals, then you’re convincing the receiver to work with you or buy from you. Such proposals are often challenging to write because you have to convince them they have a problem and you have a solution.

Components of a Business Proposal

The following are the key components of a business proposal :

  • Executive summary
  • Introduction
  • Problem statement
  • Scope of work
  • Benefits of Return on Investment (ROI)
  • Call to Action (CTA)

Business Plan vs. Business Proposal

While a business plan outlines your goals and explains how you will achieve them, a proposal sells your product to potential customers.

In the following table, we have summarized the main differences between a business plan and a business proposal:

what is the difference between a business plan and a business proposal

Streamline the proposal creation process

To wrap up, a business proposal is a document that pitches your products or services to a potential client, while a business plan outlines your goals, strategies, and financial projections for your business. 

With business management software like Cone, you can easily streamline and automate your proposal creation while ensuring your proposals are bespoke and customized. Sign up for free and experience the seamless proposal creation process for yourself. While you’re at it, check out other business proposals and management resources we have for you.

Difference Between a Business Plan & a Business Proposal

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Why Create a Business Plan?

How to rescind a business letter, 6 types of business plans.

  • How to Create a New Business Plan
  • How to Conclude a Business Plan

A business plan and a business proposal are very different documents, with different purposes and goals. A business plan is a factual broad description of a company on the executive and operational level. A business proposal is a focused sales document intended to describe how a company will approach a project, state the value of the project to the client and solicit the client's business. A business plan is a written presentation of fact. A business proposal is a quote and call to action.

Reasons for a Business Plan

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.

Reasons for a Business Proposal

Proposals may be unsolicited business ideas presented to a potential customer or partner, or they may be answers to requests for proposal submitted to your company by a potential client. They are limited in scope to a particular project or need. A business proposal also generally has a specific audience. The primary reason for a business proposal is to solicit or develop a business opportunity.

Business Plan Structure

A business plan has three elements: description of the business model, the marketing model and financial projections. It consists of informative sections, including the executive summary, business description, marketing model, analysis of industry competition, build-out plan, operations plan, introduction of management, and a discussion of financial issues and projection of results. It is introduced by an executive summary, which can be a dense abstract or a longer marketing tool to attract interest in the business plan. The business plan is an informational document designed to factually display your company's operations and potential.

Business Proposal Structure

A business proposal written in response to a Request for Proposal (RFP) should follow the format requested in the RFP. Generally, this involves a quick description of your company's services and products that are relevant to the goals of the RFP, a reiteration of the scope of work, answers to specific questions posed in the RFP and a quote detailing materials, tools, labor, delivery and other elements of the cost of the project.

An unsolicited business proposal intended to create and develop a business opportunity follows essentially the same format but anticipates questions the potential client might have. A proposal is more of a marketing document, designed to convince the audience to do business by presenting a value proposition and a call to action.

  • Entrepreneur: An Introduction to Business Plans
  • Forbes: The Difference Between a Business Plan and Planning

Victoria Duff specializes in entrepreneurial subjects, drawing on her experience as an acclaimed start-up facilitator, venture catalyst and investor relations manager. Since 1995 she has written many articles for e-zines and was a regular columnist for "Digital Coast Reporter" and "Developments Magazine." She holds a Bachelor of Arts in public administration from the University of California at Berkeley.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

what is the difference between a business plan and a business proposal

A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include 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.

Investopedia / Ryan Oakley

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."

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.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

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.

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.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

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.

  • 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.

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 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.

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.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

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What Is a Business Proposal?

Read on to learn what a business proposal is, how to write one, and best practices that can help your organization stand out from the competition.

Writing an effective business proposal is key to winning clients, partners, and investors. Unfortunately, many small business owners don't understand how to write or use business proposals. A business proposal is your opportunity to grow your business, so it's an important document. Every small business plan should outline how you intend to get customers, clients, and partners, but your proposal is how you'll win their business.

Whether you're proposing new products and services or trying to secure funding, your proposal needs to answer your potential partner's questions about your business. This essential business document helps potential partners understand what resources are available and how you'll complete different tasks, setting the right expectations from the beginning.

Writing a business proposal may seem daunting, but anyone can do it with the right tips and tools. So whether you're just starting your small business plan or are learning how to start a business , begin with your business proposal, even if you're not looking for investors or partners yet.

what is the difference between a business plan and a business proposal

Business proposals explained

A business proposal is a document that helps you earn clients and partners by describing your business' service and product offerings. B2B businesses write proposals to other businesses, but they're not usually used in B2C companies. Moreover, a business plan proposal outlines your business, including its unique value proposition and how you can solve a problem for your intended audience.

What is a proposal in business? A proposal is how you'll win clients and partners. While they can be written or spoken, a business proposal is always written, allowing potential customers to review and sign it before receiving a contract. A proposal can also be part of a contract if you propose your services and allow clients to agree to the terms immediately.

Business proposals enable you to pitch to prospective clients and demonstrate your value by effectively telling them why they should choose your business over the competition.

Solicited vs. unsolicited business proposals

Business proposals demonstrate how a company can help another company, highlighting the customer's problems and showcasing how the business can help them. There are different types of business proposals, and the type you send to prospective partners will depend on whether or not they sent a request for proposal (RPF).

what is the difference between a business plan and a business proposal

Two examples of business proposals are:

When prospective customers request a proposal, you'll send them a solicited proposal. Solicited business proposals are either formal or informal, depending on the existing relationship with the prospect.

Existing clients can also request business proposals for different services. In this case, an example of a business proposal would be a customer asking their supplier for information regarding a different service or product than the one they already use. With formal proposals, the prospect must respond within a certain time frame, and if they agree to the proposal, it turns into a signed contract.

Unsolicited

If a prospective customer doesn't send a request for a proposal, but you want to try to win their business, you can send them an unsolicited proposal. Ultimately, you can send a proposal to anyone using a cold approach to convince them to partner with you. Unsolicited proposals are typically more general than solicited ones because you haven't yet spoken to the prospect about their needs. However, they can still explain what the business does and why someone should partner with you.

How to write a business proposal

Now that you understand the business proposal definition and the 2 types of business proposals, you can start drafting one. Of course, depending on the nature of your business, you might want to start with a general proposal that allows you to fill in the blanks based on the prospects' needs.

Here are some steps for how to write a business proposal:

Develop your cover page

Every proposal needs a cover page that acts as a letter of introduction. It should be brief and explain why you're sending the proposal. For example, if you're sending it because a prospect sent an RPF, you should state that in the letter. You can also refer to past conversations that led you to send the proposal if there wasn't a request, or if you're sending an unsolicited proposal, you can explain why you've decided to send it. Your cover page should be professional, but you can write it in the first person to form a more personal relationship with the prospect.

Make a table of contents

Because a proposal is more than a few pages long, it's always best to list the different pages included. If you're sending your proposal digitally, you can hyperlink your table of contents to make it easier for the prospect to use. Even if you don't hyperlink the proposal, a table of contents is still a common courtesy to help prospects navigate and understand the documents.

Provide an executive summary

An executive summary is a brief chapter in which you describe who you are and why you're sending the proposal. Your summary can cover the different types of services you offer, team members, and the benefits of your services for the prospect. Always focus on the problem you're trying to solve. For example, if you run a marketing agency and a prospect asks about your social media marketing services, you can discuss the different ways you can boost your prospects' engagement and visibility online.

Create the main body of your proposal

The main body of the proposal should have all the information a prospect has asked for, including:

  • A statement of the problem
  • Your proposed solution
  • Methodologies
  • Qualifications

If you have goals in mind for what you're trying to achieve for the client, you can list SMART goals in the body of the proposal to help clients understand how results will be measured. Try to be as specific as possible when addressing your solution to ensure the client understands what you plan to do for them. If you're responding to a customer's request for a proposal, it's a good idea to incorporate everything they discussed in their request.

Highlight pricing

Understanding your pricing is key for potential customers, so you'll need to highlight how much your services cost. If your business proposal is solicited, you may have all the information you need to form accurate pricing. However, if you're sending an unsolicited proposal, you might send more general pricing and ask to discuss pricing in depth after your initial conversation with the client.

Your pricing chapter can also contain payment terms, such as when you'll send invoices and how long customers have to pay them.

Determine your terms and conditions

Your terms and conditions are where you can state the project's expected duration, payment methods, scheduling, and other expectations for the client. Your contract may also outline milestones throughout the relationship.

Write a conclusion

The conclusion summarizes the business proposal, reiterating the customer's problem and your solution. You should also thank them for their time whether or not they choose to sign the contract.

Leave room for signatures

Depending on your agreement procedure with the client, they can either sign your proposal or send you a letter of acceptance. Not all proposals need room for signatures. For example, unsolicited proposals that are more general should not be expected to be signed by the prospect and may even put them off of speaking with you because it adds pressure.

However, solicited proposals should have a place for signatures since you've likely already had a conversation with the client or they've sent you an RPF.

Best practices for business proposals

Understanding all the elements of a business proposal is important, but you need to make yours stand out. Clients who send RPFs will likely send requests to multiple agencies or companies, so you can expect some competition.

what is the difference between a business plan and a business proposal

Here are the best practices for making your business proposal stand out from your competitors.

  • Make an outline . Outlining your proposal can help you get organized and understand all the pieces of information you need to share.
  • Leverage data . Using data to help you demonstrate why a company should work with you can help you win their business because it shows proof of your success. You can also use testimonials from previous clients and partners.
  • Include visuals . Visuals make it easier to understand the messages your proposal is trying to convey. It will also allow you to add color to the documents, making them stand out from any other company that writes a few pages of text for their proposal.
  • Use digital signatures . The easier you make signing your proposal, the more likely a client will sign it. If a client has to go out of their way to sign your document, they might forget about it or move on to a proposal that's easier to finalize.
  • Conduct thorough research . Before you write your proposal, you should understand your client's pain points. This may require you to do industry research or have multiple discussions with the prospect about their needs.
  • Proofread carefully . If you want your documents to be professional, it's good practice to proofread before you submit them to the client. Let multiple people within your organization review them for accuracy and grammar.
  • Be straightforward . Prospects want to know how you can help them. If your business proposal is confusing, you won't earn their business because they'll think working with you will be confusing. Your business proposal is one of the first impressions of your business, so it's always best to be as straightforward as possible.

Business Proposals: Key takeaways

You can find many business proposal examples online to help you understand how other companies in your industry win new business. However, you can also send competitors RPFs to see how they write their proposals and brainstorm ways to make yours stand out. Once you're ready to send your proposal, you can use Mailchimp's content tools and email marketing templates.

Mailchimp makes it easy to market your business by giving you all the CRM tools your business needs to manage prospects and proposals. Whether you're sending a new client a proposal for a service or you're cold-emailing companies you think would be a good match for your business, we've got you covered.

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  • Create Multichannel Campaigns
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The Difference Between a Business Plan and a Business Proposal

The Difference Between a Business Plan and a Business Proposal

A business plan and a business proposal are very different documents. If you do an Internet search for how to write a business proposal, the results are predominantly focused on writing a business plan. Nevertheless, the two documents 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, state the value of the project to the client, and solicit the client's business. A business plan is a written presentation of facts. A business proposal is a quote and call to action.

Reasons for a Business Plan

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.

Reasons for a Business Proposal

Proposals may be unsolicited business ideas presented to a potential customer or partner, or they may be answers to requests for proposals submitted to your company by a potential client. They are limited in scope to a particular project or need. A business proposal also generally has a specific audience. The primary reason for a business proposal is to solicit or develop a business opportunity.

Business Plan Structure

A business plan has three elements: description of the business model , the marketing model, and financial projections. It consists of informative sections, including the executive summary, business description, marketing model, analysis of industry competition, build-out plan, operations plan, the introduction of management, and a discussion of financial issues and projection of results. It is introduced by an executive summary, which can be a dense abstract or a longer marketing tool to attract interest in the business plan. The business plan is an informational document designed to factually display your company's operations and potential.

Business Proposal Structure

A business proposal is written in response to an RFP--A request for proposal (RFP) is a document that solicits proposal, often made through a bidding process, by an agency or company interested in procurement of a commodity, service or valuable asset, to potential suppliers to submit business proposals --should follow the format requested in the RFP.

Generally, this involves a quick description of your company's services and products that are relevant to the goals of the RFP, a reiteration of the scope of work, answers to specific questions posed in the RFP and a quote detailing materials, tools, labor, delivery and other elements of the cost of the project. An unsolicited business proposal intended to create and develop a business opportunity follows essentially the same format but anticipates questions the potential client might have. A proposal is more of a marketing document, designed to convince the audience to do business by presenting a value proposition and a call to action.

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25 comments on “ the difference between a business plan and a business proposal ”.

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Geoffrey T.Crosby

I appreciate your thought there with that one, because of course I agree, but I’m confused with why you thought it should be added. Don’t you think plan vs. actual is included with point 3, “It’s specific. You can track results against plan,” and then point 8 “It has to bring the planning process with it, meaning regular review and course correction?”

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Business proposal

Last updated: 30 May, 2023

What is a business proposal?

Types of business proposals, customer request types.

  • How to write a business proposal?

Checkout our Sales Pipeline Templates Freebies

“How to make a business proposal?” — a question that, perhaps, any B2B startup has faced at least once.

Successful selling consists of many components, with the quality product or service being just one of them. Sometimes, a sales presentation or business proposal can boost a customer’s sales funnel movement and increase the number of successfully closed deals. 

Here, we’ll explain the differences between types of business proposals and give some valuable tips on how to write them.

A business proposal is aimed at attracting potential clients with what a company sells.

It’s a document in either digital or printed form that explains product or service features, taking into consideration the lead’s needs and wants. In other words, business proposals show how a company can help solve a customer’s specific problem. 

Business proposals can be solicited and unsolicited.

A solicited proposal is sent upon customer request and can be formal or informal. An unsolicited proposal is sent out as a base test and, in this sense, is similar to a cold email .

Consider these business proposal examples:

Informally solicited proposal

Company A has discovered Company B and got interested in its products. As the result of an informal conversation between the two, Company A asks for a document to learn more details about the product’s quality, shipping terms, pricing options, etc. It isn’t obliged to respond to the offer.

Formally solicited proposal

Company A is a regular client of Company B and has already figured out what it needs. It’s willing to place an order and wants to double-check the terms before paying.

Company A asks Company B to send a business proposal, containing item names, prices, shipping details, etc. After receiving an offer, it’s obliged to respond during an agreed period. In case Company A agrees to the terms, the offer will turn into a legally binding purchasing agreement.

Unsolicited proposal

Company B runs a lead gen campaign and wants to inform Company A about services offered. It creates a general proposal that contains an introduction of Company B, its expertise, terms for cooperation, partnership programs, and other business-related information.

Email drip campaigns

Although solicited business proposals are made upon the request from a prospect , clients’ requests may differ, depending on the number of details included:

Request for information

RFI is a request that buyers issue for discovery purposes, e.g., to compare products, services, or vendors present on the market.

Request for proposal

This is an in-depth document that asks for a formally solicited business proposal. A buyer may send RFPs to several vendors and then choose the best offer.

Request for quotation

Also known as the Invitation for Bid, RFQ is issued when a customer wants to purchase a specific service or product and compares prices on the market. Unlike RFPs where clients consider time estimates, provider’s experience, and other terms, RFQs are issued to make a choice based on the price. 

It’s also issued in case of a prolonged deal registration process. To reduce financial or currency risks, the company requests a quote (as a sort of a promise) from a supplier to assure the right to buy the product at a specified price in the future.

How to write a business proposal in 8 steps

There is no conventional design or structure you should use for the proposal, so you may either compile it by yourself or pick up a fitting business proposal template, for example, on PandaDoc , Jotform , or Canva and adjust it to your case.

Still, there are some common elements to include in your business proposal: 

1. Title Page: Present your company name, client’s name, and proposal date.

Here you should put your name, your company’s name, and a proposal title, say “Web design proposal” or “App software development.” You can also add the proposal’s starting date, your company’s registered address, phone, email, logo, and the name of the prospect.

Example of business proposal title page (Source: PandaDoc)

2. Table of Contents: Provide an overview of the sections in your proposal

If your proposal isn’t a single-page document, it’s a common courtesy that you list all chapters and specify pages. Besides, you can add hyperlinks to the document to make it easier to navigate.

3. Executive Summary: Summarize your proposed solution

This is a separate-page chapter where you briefly describe who you are, what you do, and the purpose of contacting. You can also list how the customer will benefit if they choose your company, for example, “turnkey service provision,” “insurance coverage,” “dedicated manager or consultant,” and so on.

4. Main Body: Detail the problem, solution, implementation plan, and outcomes

Here you should list initial requirements from the client and precisely describe how you’re going to meet them, how much it will cost, and how long it will take. 

For example:

To deliver marketing automation for Company A, we will carry out several works:

  • Gathering data — [Date completed]
  • Setting up CRM — [Date completed]
  • Transferring the existing customer database to CRM — [Date completed]
  • Testing CRM’s work — [Date completed]
  • Connecting CRM with marketing automation tools — [Date completed]
  • Test tools’ work  — [Date completed]
  • Training consultation  — [Date completed]
  • Training deliver — [Date completed]

The level of precision is up to you and your client; however, it’s better to be as specific as possible. If you respond to RFPs or RFQs, you can add a correspondence matrix — a table where customer’s requirements are matched with the proposal’s page numbers or chapters.

Example of business p

5. Additional Clauses: Include any special terms or conditions

If some details may vary, e.g., you predict that some additional costs can occur during the agreement execution, mention them in this chapter.

6. Pricing and Billing: Detail the costs, payment schedules, and methods

Specify the exact sum and payment details. You can also include shipping terms, in case there’s goods delivery.

7. Terms and Conditions: Define the rules of the agreement

Wrap up your offer — mention the expected duration, payment methods, and schedule.

8. Acceptance Page: Provide space for the client to confirm agreement

This is a page for approval signatures. The client can either send you the letter of acceptance or sign the initial proposal, depending on the prior agreement with you.

what is the difference between a business plan and a business proposal

And here’s one more tip!

If you want to learn how to create a business proposal in a particular niche, write an RFI and mail it to competing companies. This doesn’t oblige both parties to proceed with some further actions, and you can check out the document’s general structure, length, word choice, and so on.

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What is the Difference Between a Business Plan and a Business Proposal?

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Tore Medhaug

what is the difference between a business plan and a business proposal

In order to send an official business proposal, you have to have a business plan. These are two different document types that people often confuse and mix.

Let’s take a look at the difference between the two, starting with the document you should have in place before submitting an official business proposal.

What is a Business Plan?

A business plan is a document that describes what your organization looks like and what services and deliveries you would provide.

As a student at BI Norwegian Business School , I learned that a business plan should include the following three elements:

  • Executive summary: Describing your business, organization structure, etc.
  • Marketing plan: Marketing strategy, different marketing analyses (Porter5, SWOT, 7Ps, Pestel)
  • Financial: Revenue, expected revenue, etc.

A business plan is a document you would not typically send to your client but to lawyers, insurance providers, banks, suppliers and other stakeholders that would find this relevant for understanding your business and its value.

What is a Business Proposal?

A business proposal describes what you can deliver, time frame, amount, cost and your terms and conditions. This is a document you would use to respond to a specific request from your client, or you would send it to your client or prospect describing what you can deliver, at what price.

When you respond to a specific request, also known as an RFP (request for proposal), you should follow this rule of thumb:

  • Always reply in their format
  • Reply specifically to what they are asking about
  • Describe how you can achieve their goals
  • Outline the scope of work
  • Provide a cost estimate

Use a proposal solution to create bid-winning content

There are many different ways to write a business proposal, and many different solutions to write it with. For the best possible outcome in terms of control, cost-efficiency, time savings and security, use an enterprise-grade co-authoring and automation tool.

The proposal solution XaitPorter is used by companies all over the world for this purpose. Here are six key advantages of using XaitPorter to create your business proposals and other high-impact, high-value documents:

  • Cloud-based : Seamless team collaboration from anywhere, at any time.
  • One document: Collaboration on the same document – simultaneous editing.
  • Auto formatting and numbering : No manual formatting or numbering.
  • Custom layout: Create professional documents in accordance with brand identity guidelines.
  • Reuse content: Built on a database – enabling easy reuse of content.
  • Export/publish document: Export to a variety of formats, including PDF and Word.

Click me

Tore holds a Technical degree and has a variety of business courses from BI Norwegian Business School. He has previously worked for different oil service companies and IT companies. Tore used to be Norway's biggest self-proclaimed golf talent, and also has a big passion for Ice hockey.

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Major Differences between Business Plan and Business Proposal

Although the words are similar to a business plan and a business proposal are different. The purpose for creating a business proposal and business plan varies in its content even though in a majority of websites it is considered as same. The business plan usually consists of the description of a company and the process inside it. However, a business proposal states how a company is going to deal with a business project. While a business plan is written as a presentation style whereas business proposal was written to take an action.

Business Plan In a business plan, the vision of the company and the methods and process of getting that goal real will be documented. The business plan involves the financial aspects and vision about how the target will be attained. The purpose of the business plan is in providing the investors and suppliers a vision about the business. The main objective of the business plan is to provide information and keep a record of the goals of the business.

Business Proposal business proposals usually consist of a way to impress a potential client of the future partner. It will be consisting of the questions that may arise during the business. The audience for a business proposal will be limited and the main purpose of the project will be explained in a business proposal. The main reason for creating a business proposal is to make a business opportunity.

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The Difference Between A Business Plan And A Business Proposal

Difference Between A Business Plan and A Business Proposal

A business plan and a business proposal are two distinct documents. Most people mistake them for each other, and a lot of articles on the internet that teach how to write a business proposal are actually just explaining how to write a business plan.

While a business plan focuses on a company’s goals, the problems and solutions it’s trying to address, its potential market size, keys to success, products and services, market execution, and more, a business proposal on the other hand usually focuses on how a certain project would be executed, states a quote for the project, terms & conditions, and several other key pointers.

These two documents are very different with each serving distinct purposes. So it is important you know whether what you need is a business plan or a business proposal at any time.

See Also:   10 Reasons To Write A Business Plan

Reasons For A Business Plan

A business plan envisions your pipe dream. It shows how your business goals, objectives, philosophies, industry analysis, target market, products & services, market execution, competitive analysis, financial projections, and a whole lot more will position the business for success.

It is a detailed document that investors, banks, accountants, and financially savvy individuals can easily review to know what your business is about, its chances of success, and how you’ve planned to scale.

Business Plan Structure

In preparing a business plan, here is a sample structure you should follow to get it done right:

  • Executive Summary
  • Business Description
  • Market Analysis & Strategies
  • Design & Development Plan
  • Organization & Management
  • Service or Product Line
  • Sales & Marketing
  • Funding Request
  • Financial Projections

See Also:   How To Write A Business Plan: The Complete Guide

Reasons For A Business Proposal

Business proposals are usually solicited or unsolicited. A solicited business proposal is written upon request from an organization, institution, or individual. For example, if you receive a Request For Proposal (RFP), what you’re preparing would be a solicited business proposal. In this instance, you’d have to follow the requirements as stated in the RFP.

An unsolicited business proposal, on the other hand, is prepared in response to a client after a sales meeting, giving you more flexibility in curating the contents of the proposal.

Business proposals are limited in scope, and are thus, written for a specific audience.

Business Proposal Structure

Here’s a sample business proposal structure:

  • Introduction
  • Table of Contents
  • The Body of The Proposal

In your business proposal, you will detail the scope of the work, materials needed, cost estimates, project timeline, previous clients, team members, achievements, and a whole lot more in the body of the proposal. It’s a marketing tool, and its goal is to convince the target customer to do business with you.

See Also:   How To Write A Winning Business Proposal: The Complete Guide

What Then Do You Need?

The variations between a business plan and business proposal are wide apart. As shown in this article, they serve different audiences and are prepared for different reasons.

If your goal is to seek investment or a bank loan, a bank and investor ready business plan is what you need. But if your goals are to convince a client to use your service whether the client has asked for a document showing how much value you’d add to them or not, a business proposal is what you need.

See Also:   How To Write A Feasibility Study Report: The Complete Guide

What are your thoughts on the difference between a business plan and a business proposal? Let me know by leaving a comment below.

Image Source: businessnewsdaily.com

Stan Edom

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thanks for these information it is really gearing forward toward my goal.

I’m glad you find it valuable, Yusuf.

Do have a great time!

Thanks Edom, I have been reading your publication, they have inspiring, informative, education and above all priceless. keep up the good work.

samuel Chika

Thank you for the kind words and for being a reader, Chika.

I appreciate them.

Great read.I have always confused the two terms.Business plan means you plan for a business and that business has not yet started but business proposal it means you propose something in a business which is ready stand.Thanks for the detailed information.

You’re right Michael.

I’m glad you learned something from the article.

in my understanding, business plan is general road map for the company strategy, but business proposal is one away to find new market or potential client.

I was searching difference between B.Proposal and B.Plan. I found here, Thanks for the publication. IF you also publish “Samples” besides the templates will be more helpful to a person like me, who did not write proposal before.

My Best Regards

Thank you for reading and for the suggestion.

Hello Stan E.,

This is absolutely spot on. No unnecessary embellishments or needless journey. Straight to the point, self-explanatory and informative.

Thanks a million, Sir.

Thank you for reading, Figo.

Not many people really know the differences. They used both interchangeably. Thanks for the clarity.

Thanks Edom, your publication was most helpful to me. I am grateful sir, continue with the good work.

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The difference between a business plan and a business proposal, a business plan versus a business proposal.

Some words are easy to decode while others have unclear precincts, such as the difference between a business plan and a business proposal. Most people use the terms business proposal and business plan interchangeably. People often think they are one and the same thing. In reality, a business proposal and a business plan are two entirely different terms.

Both are documents used in business but each has different purposes and goals. A business plan is a purposeful document that describes in detail how your business is set up. It reflects the way your business plans to establish itself over an extended period. Business plans cover your business structure, marketing strategy, market research, products and services, and your complete financial projections for up to five years ( https://www.forbes.com/sites/davelavinsky/2013/12/03/business-plan-outline-23-point-checklist-for-success/#2562d5b53012 ).

A business proposal, in contrast, is not meant for long term purposes. It is simply a document that you submit to another company proposing a business arrangement. It acts as a focused sales document intended to describe how your company will approach a project and offer a solution. It plainly states the value of the proposal to the client and solicits the client for business ( https://www.inc.com/encyclopedia/business-proposals.html ).

The intended audience of these two documents also varies considerably. A business plan is a document intended for the management and the lenders. A business proposal is however only intended for the other enterprise with whom a business wishes to enter into a contract with.

Simply put, a  business plan is a written representation of facts while a business proposal is a price quote and a subtle call to action.

Reasons to Write a Business Plan

A business plan details your vision for your company and how you intend to realize that vision. It contains financial forecasts of what the business will cost plus a valuation of the revenues to be generated. Its main purpose is to provide a meticulous explanation of your business to potential investors, prospective employees, suppliers, attorneys and any other person who may need a quick understanding of what your business entails and its roadmap for success ( https://www.inc.com/guides/start_biz/20660.html ).

Both new and existing businesses need a strategic plan. A lot of research and planning must be done to develop this document. Business plans can help perform a variety of tasks for a business. First, they are used by investment-seeking businesspersons to convey their vision to potential investors. Secondly, they may be used by firms trying to prospect for new business, attract key employees or deal with suppliers ( https://www.entrepreneur.com/article/38290 ).

The typical plan writer is an entrepreneur looking for funds to help start a new venture. In this case, the business plan is a breathing blueprint for success. It outlines how you will move from business idea to business success. If you’re seeking to raise funds through a loan or a venture capitalist, consider approaching these moneylenders only if you have a detailed business plan. Experts estimate that it takes about two months to come up with a thorough business plan. This is why you should never think of doing last minute preparations.

Note: The primary reason for writing a business plan is to gather and convey information.

Reasons to Write a Business Proposal

A business proposal is designed to sway prospective clients to buy a particular product or service. Proposals may either be solicited or unsolicited. A prospect may simply request a business proposal in the course of a sales call by saying, ‘’That’s a brilliant idea. Why don’t you submit a proposal on that.’’ In other cases, the client may send you a formal solicitation, usually called a Request for Proposal (RFP) ( https://www.clientpoint.net/how-to-write-a-killer-business-proposal-and-attract-investors/ ).

An RFP is a document that specifies the products and services to be provided, the specifications sought and the deadline for submission. In short, solicited proposals mean that the client has already decided to make a purchase. Only the selection of the ideal vendor is to be decided. If you’re responding to an RFP, you are aware of the service or product required, but you will be competing against many other people who bid. As such, you must sell your proposal as the best choice among all the submissions ( https://www.clientpoint.net/difference-business-plan-business-proposal/ ).

In an unsolicited proposal, you might have a solution that would be of benefit to company X. So you submit a proposal to the company offering to provide a product or service to solve a certain problem in exchange for some funding. In this case, you don’t know if the prospect will be open to your proposal. Nonetheless, if they like your solution, you won’t be in competition with other numerous vendors. For this reason, your proposal has to sell not only your solution but also your business. It needs to appeal to the prospect for it to pull through the front door and have a chance at success.

Note: The primary reason for writing a business plan is to solicit a business opportunity.

Business Plan Structure

A business plan has three sections: a description of the business concept, marketing model and financial projections. It consists of the following informative sections: executive summary, business description, marketing design, analysis of competition, operations plan, introduction of management, a discussion of financial matters and projection of results. It is often introduced by the executive summary, which can be a detailed abstract or a comprehensive marketing tool to attract attention to your business ( https://www.inc.com/guides/write-a-great-business-plan.html ).

Business Proposal Structure

A business proposal has five sections: executive summary, cover letter, title page, table of contents and procedures. The cover letter provides a summary of your proposal and introduces your company and qualifications. The title page contains your name, the name of your company, the name of the prospect’s company and the date of submission. The executive summary is the primary argument of your proposal- keep it short and concise. The procedure section is the longest part of the proposal and contains all the technical details and explanations ( https://www.inc.com/encyclopedia/business-proposals.html ).

Everything considered; a business plan is a broad description of a company and its projections while a business proposal is a dedicated sales document that describes how a company intends to approach a project and offer value to the client’s business.

Win more clients by creating impressive digital business proposals, quotes and contracts with ClientPoint Software

If you really want your business proposals, quotes and contracts to stand out and give you the best chance at winning new clients, use ClientPoint Software. It makes creating and formatting professional business proposals, quotes, and contracts fast and easy.

Related Readings

Business proposal sample - how to write a business proposal, the biggest mistakes businesses make when creating business proposals, a business proposal outline for creating a winning business proposal.

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Google’s Gemini is now in everything. Here’s how you can try it out.

Gmail, Docs, and more will now come with Gemini baked in. But Europeans will have to wait before they can download the app.

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In the biggest mass-market AI launch yet, Google is rolling out Gemini , its family of large language models, across almost all its products, from Android to the iOS Google app to Gmail to Docs and more. You can also now get your hands on Gemini Ultra, the most powerful version of the model, for the first time.  

With this launch, Google is sunsetting Bard , the company's answer to ChatGPT. Bard, which has been powered by a version of Gemini since December, will now be known as Gemini too.  

ChatGPT , released by Microsoft-backed OpenAI just 14 months ago, changed people’s expectations of what computers could do. Google, which has been racing to catch up ever since, unveiled its Gemini family of models in December. They are multimodal large language models that can interact with you via voice, image, and text. Google claimed that its own benchmarking showed that Gemini could outperform OpenAI's multimodal model, GPT-4, on a range of standard tests. But the margins were slim. 

By baking Gemini into its ubiquitous products, Google is hoping to make up lost ground. “Every launch is big, but this one is the biggest yet,” Sissie Hsiao, Google vice president and general manager of Google Assistant and Bard (now Gemini), said in a press conference yesterday. “We think this is one of the most profound ways that we’re going to advance our company’s mission.”

But some will have to wait longer than others to play with Google’s new toys. The company has announced rollouts in the US and East Asia but said nothing about when the Android and iOS apps will come to the UK or the rest of Europe. This may be because the company is waiting for the EU’s new AI Act to be set in stone, says Dragoș Tudorache, a Romanian politician and member of the European Parliament, who was a key negotiator on the law.

“We’re working with local regulators to make sure that we’re abiding by local regime requirements before we can expand,” Hsiao said. “Rest assured, we are absolutely working on it and I hope we’ll be able to announce expansion very, very soon.”

How can you get it? Gemini Pro, Google’s middle-tier model that has been available via Bard since December, will continue to be available for free on the web at gemini.google.com (rather than bard.google.com). But now there is a mobile app as well.

If you have an Android device, you can either download the Gemini app or opt in to an upgrade in Google Assistant. This will let you call up Gemini in the same way that you use Google Assistant: by pressing the power button, swiping from the corner of the screen, or saying “Hey, Google!” iOS users can download the Google app, which will now include Gemini.

Gemini will pop up as an overlay on your screen, where you can ask it questions or give it instructions about whatever’s on your phone at the time, such as summarizing an article or generating a caption for a photo.  

Finally, Google is launching a paid-for service called Gemini Advanced. This comes bundled in a subscription costing $19.99 a month that the company is calling the Google One Premium AI Plan. It combines the perks of the existing Google One Premium Plan, such as 2TB of extra storage, with access to Google's most powerful model, Gemini Ultra, for the first time. This will compete with OpenAI’s paid-for service, ChatGPT Plus, which buys you access to the more powerful GPT-4 (rather than the default GPT-3.5) for $20 a month.

At some point soon (Google didn't say exactly when) this subscription will also unlock Gemini across Google’s Workspace apps like Docs, Sheets, and Slides, where it works as a smart assistant similar to the GPT-4-powered Copilot that Microsoft is trialing in Office 365.

When can you get it? The free Gemini app (powered by Gemini Pro) is available from today in English in the US. Starting next week, you’ll be able to access it across the Asia Pacific region in English and in Japanese and Korean. But there is no word on when the app will come to the UK, countries in the EU, or Switzerland.

Gemini Advanced (the paid-for service that gives access to Gemini Ultra) is available in English in more than 150 countries, including the UK and EU (but not France). Google says it is analyzing local requirements and fine-tuning Gemini for cultural nuance in different countries. But the company promises that more languages and regions are coming.

What can you do with it? Google says it has developed its Gemini products with the help of more than 100 testers and power users. At the press conference yesterday, Google execs outlined a handful of use cases, such as getting Gemini to help write a cover letter for a job application. “This can help you come across as more professional and increase your relevance to recruiters,” said Google’s vice president for product management, Kristina Behr.

Or you could take a picture of your flat tire and ask Gemini how to fix it. A more elaborate example involved Gemini managing a snack rota for the parents of kids on a soccer team. Gemini would come up with a schedule for who should bring snacks and when, help you email other parents, and then field their replies. In future versions, Gemini will be able to draw on data in your Google Drive that could help manage carpooling around game schedules, Behr said.   

But we should expect people to come up with a lot more uses themselves. “I’m really excited to see how people around the world are going to push the envelope on this AI,” Hsaio said.

Is it safe? Google has been working hard to make sure its products are safe to use. But no amount of testing can anticipate all the ways that tech will get used and misused once it is released. In the last few months, Meta saw people use its image-making app to produce pictures of Mickey Mouse with guns and SpongeBob SquarePants flying a jet into two towers. Others used Microsoft’s image-making software to create fake pornographic images of Taylor Swift .

The AI Act aims to mitigate some—but not all—of these problems. For example, it requires the makers of powerful AI like Gemini to build in safeguards, such as watermarking for generated images and steps to avoid reproducing copyrighted material. Google says that all images generated by its products will include its SynthID watermarks. 

Like most companies, Google was knocked onto the back foot when ChatGPT arrived. Microsoft’s partnership with OpenAI has given it a boost over its old rival. But with Gemini, Google has come back strong: this is the slickest packaging of this generation’s tech yet. 

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Ai for everything: 10 breakthrough technologies 2024.

Generative AI tools like ChatGPT reached mass adoption in record time, and reset the course of an entire industry.

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Generative AI took the world by storm in 2023. Its future—and ours—will be shaped by what we do next.

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Andrew yang says president joe biden will not make it through the majority of second term: ‘i would be stunned’.

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Former 2020 presidential candidate Andrew Yang believes  President Biden  will not be able to complete a second term in office, saying he has seen a “palpable difference” between now and four years ago.

Yang, a supporter of Biden’s Democratic challenger Rep. Dean Phillips, sounded the alarm about Biden’s mental acuity in  an interview with The Free Press  on Friday, comparing his experience with the president during the 2020 presidential election, when Yang ran against him in the Democratic primary, to what he witnessed at the White House recently. 

“I saw the president speak in person two weeks ago. And there’s a palpable difference between, let’s say now and three or four years ago,” Yang told The Free Press’ Michael Moynihan.

“I mean, I was around Joe a ton four years ago because we were in the same primary. So he would speak, get off stage, and I would speak.”

“So even in that time period,” Moynihan interjected.  

“Oh yeah,” Yang replied.

“It’s rough. And this is what I’m angry at the mainstream press for that they seem to be ignoring things that a lot of us can see.”

“I was in the room when a group of Democrats were chanting ‘Four more years’ at Joe just last week. He’s not going to make it through a second term,” Yang later said. 

“You don’t think he’s gonna make it through a second [term]?” Moynihan asked.

Former presidential candidate Andrew Yang watches President Joe Biden speak at South Carolina's First in the Nation Dinner.

“Oh no,” Yang doubled down, later adding “I would be stunned if he were to get through the majority of a second term.” 

Yang chuckled at the thought that Vice President Kamala Harris “may be the only figure less popular” than Biden among high-profile Democrats and pointed out how she dropped out of the 2020 race before the Iowa caucuses and was looking at a defeat in her home state of California.

“I would not be excited about a Kamala Harris presidency,” Yang told Moynihan. 

Yang called former President Trump  the “heavy favorite” to win the presidential election based on polls that are significantly in his favor compared to 2020, specifically among independents.

He knocked the “magical thinking” of Democrats who are convinced that either Biden’s polling will be better or that Trump will be in jail by November.

Joe Biden speaking in a room with a US flag behind him.

“Part of me is like guys, Joe Biden is undermining his superpower just by running. His greatest superpower is that he’s a good man who we think will try and do the right thing for the country. But he’s doing the wrong thing by running,” Yang said.

“He’s overstaying his welcome. He’s putting his ego ahead of the country’s interests, and he’s gonna get punished for it.”

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what is the difference between a business plan and a business proposal

What is a 401(k)?

What is an ira.

  • Key Differences
  • Pros and Cons of 401(k)

Pros and Cons of an IRA

How to choose between a 401(k) and an ira, 401k vs ira: your guide to choosing a retirement plan.

Our experts answer readers' investing questions and write unbiased product reviews ( here's how we assess investing products ). Paid non-client promotion: In some cases, we receive a commission from our partners . Our opinions are always our own.

  • A 401(k) is an employer-sponsored tax-advantaged retirement account with higher contribution limits.
  • With an IRA, individuals have lower limits, but these retirement plans offer increased investment flexibility.
  • A 401(k) and IRA can both be used to invest in stocks, bonds, and securities for retirement.

Insider Today

When you think about saving for retirement, the two most common retirement savings plans that come up are often a 401(k) or IRA. Depending on your investment strategy, you may want to use one over the other — or a combination of both.

Let's examine the similarities, differences, and overall structure of IRAs and 401(k)s below.

When a new company employs you, they may offer you a tax-advantaged 401(k) retirement savings plan. A 401(k) plan is one of the best retirement plans widely offered since the early 1980s after Congress established the Revenue Act.

There are multiple types of 401(k) plans, including a traditional, Roth, or Solo 401(k) plan.

As one of the best retirement plans , 401(k)s allow employers to automatically deduct a percentage of your income from each pay period (before taxes) to be invested. Some employers will even offer to match your contributions (aka an employer-sponsored match) if you contribute a specific amount, which is considered one of the strongest retirement investment strategies.

For example, if you contribute 3% of your income to your 401(k), your employer can match that 3% contribution. Taking advantage of your employer match is one of the best ways to maximize your 401(k) . 

There's no need for employer involvement with the best IRA accounts . Individual retirement accounts (IRAs) can be opened by almost anyone through a broker or financial institution that offers retirement savings accounts.

"Unlike a 401(k), with an IRA, the investment world is at your fingertips," says Taylor J Kovar, CFP and CEO of Kovar Wealth Management . "Stocks, bonds, mutual funds, and real estate investments are all available while with a 401(k), you are limited to just the funds the plan allows you to invest in."

Investment platforms can take your regular contributions and invest them according to the type of account you open (self-directed brokerage, robo-advisor , etc.). Since you need to make contributions on your own, consider setting up automatic transfers so you can contribute money to your IRA each month and grow your retirement savings. 

Types of IRAs

There are multiple types of IRAs for individuals to invest:

  • Traditional IRA: Similar to 401(k), you fund your account with pre-tax income. As a result, you can deduct your traditional IRA contributions on your taxes each year. 
  • Roth IRA: Contribute after-tax dollars, so you can't deduct any contributions. When it's time to withdraw the money from your Roth IRA account, you won't pay taxes on it since you already paid the taxes upfront. Tax-free growth is a significant Roth IRA benefit. 
  • SEP IRA: Simplified Employee Pensions is a self-employed retirement option that offers both tax advantages and flexibility.
  • Simple IRA: This is another self-employment retirement option that is also available for small businesses. This option is funded with pre-tax dollars, so you only get taxed on the amount you withdraw.

Key Differences Between a 401(k) and an IRA

Eligibility.

Most employees can enroll in a 401(k) retirement saving plan during onboarding at a new job. You will receive documents that overview the investment options when you sign up, and you'll need to specify how much of your income you'd like to put into your 401(k) each pay period.

"There may be a waiting period to participate, and then employees must typically be employed for three to five years before the funds matched by the employer are actually the employees' to keep," says Kovar.

To set up an IRA, you'll need to find brokerages — the best online brokerages have good customer service, low fees, and account flexibility — and meet with a broker to discuss your retirement goals.

But keep in mind, to be eligible for a Roth IRA, your modified gross income must be less than $161,000 if you're single ($240,000 if you're married and filing jointly). 

Contribution limits

401(k) contribution limits in 2024 are that you can contribute up to $23,000 if you're under 50. If you're 50 or older, you can make an additional catch-up contribution for retirement up to $7,500.

IRA contribution limits in 2024 are that you can contribute up to $7,000 annually for 2024. If you're over the age of 50, you qualify to make extra, or catch-up, contributions of up to $1,000 each year. 

With a SEP IRA, you can contribute up to $69,000 or 25% of your income (whichever is less) for 2024

Withdrawal Rules

You'll be eligible to withdraw from both a 401(k) plan and an IRA without penalty at age 59 1/2. By the age of 72, you'll be required to withdraw from your account(s). 

Early withdrawals from either retirement account option result in a retirement account penalty of 10%. However, certain exceptions allow investors to withdraw early without penalties, such as disability, qualifying medical expenses, and health insurance premiums. 

You can also try a 401(k) loan if you're in a pinch. The IRS limits these loans to $50,000 or 50% of your 401(k)'s vested account balance. The interest rates for 401(k) loans are usually lower than most personal loan interest rates. Plus, you don't have to submit a credit check. 

Pros and Cons of a 401(k)

401(k) vs ira — frequently asked questions (faqs).

Yes. You can contribute to both a 401(k) and an IRA in the same year. Be aware that to contribute toward both retirement savings plans, you'll need to recognize each account's contribution limits and how your income may affect your ability to deduct IRA contributions from your taxes. 

Taxes for 401(k)s and IRAs depend on the kind of accounts you open. Contributions to traditional 401(k)s and IRAs are made with pre-tax dollars, so you'll only be taxed on withdrawals. Roth 401(k) and IRAs are made with after-tax dollars, meaning you won't pay taxes when you withdraw during retirement. 

The main difference between a Roth IRA and a traditional IRA is the ways that these retirement savings accounts are taxed. Traditional IRA contributions may be tax-deductible depending on your income and whether an employer retirement plan covers you. Traditional IRAs are also only taxed when you withdraw funds. Roth IRAs are funded by after-tax dollars and grow tax-free. 

Yes. Both 401(k) plans and IRAs will receive a 10% early withdrawal penalty on distributions taken before age 59 1/2 unless you qualify for a rule exception such as disability. You'll also bay regular income tax on the amount withdrawn.

Deciding whether to contribute to a 401(k) or an IRA depends on several factors, including whether your employer offers a 401(k) match, your current tax rate vs. your expected retirement tax rate, and how you'd prefer to invest your money. Consult with a financial advisor who can help you make the best decision based on your personal financial situation. 

A 401(k) and IRA are both great tax-advantaged retirement savings options, and many people use both. 

A 401(k) is a better option than an IRA if you're looking for the convenience of automatic payroll deductions. You should definitely be utilizing your 401(k) plan if your employer is offering a matching contribution. But remember that you'll want to be "fully vested," which may require you to stay at your job for up to five years.

That said, an IRA could be better if you're looking for more flexibility in your retirement planning. Moreover, not everyone has the option to save for retirement through an employer.

"Most people use a 401(k) through their employer, and while I don't have a problem with this, I typically recommend that people only participate in the plan up to the amount that the employer matches, typically 3%," says Kovar. "If you are able to save more than what the employer matches, put that extra money into an IRA."

While the contribution limits are lower, you can still open an IRA to manage retirement savings regardless of where you work.

Another option is to get the best of both worlds. Use an IRA to diversify your retirement savings accounts while also contributing to a 401(k) for additional tax benefits and wealth-building perks. Consider talking to a financial advisor about your options and weigh the tax advantages, benefits, and drawbacks to make the wisest choice for your situation.

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COMMENTS

  1. Business Plan vs. Business Proposal + Examples [Updated 2024]

    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.).

  2. Business Plan vs. Business Proposal: What's the Difference

    Winding-up: Key takeaways Here we go! 🚀 What is a business plan? A business plan is a formal guide that acts as a blueprint, deciphering every root and branch to make a business successful. It is a written document that provides insights to internal and external stakeholders on business vision, goals, and strategies to achieve those goals.

  3. Business Plan vs Proposal: An In-Depth Comparison

    The main difference between a Business Plan and a Business Proposal is that a business plan is a formal document that outlines the company's goals, strategies, market analysis, financial needs, and projections for the future, aimed at providing a roadmap for the business's success and often used to secure funding or guide the management team.

  4. Business Plan and Proposal: Everything You Need to Know

    The major difference between both is that a business plan is a document that presents facts, while a business proposal is a request for a deal and a quotation of prices. A Business Plan You can think of a business plan as the documentation of a company's grand vision. Business plans are naturally tactical.

  5. How do business plans differ from business proposals?

    Ready? Let's get started! What is a business plan? What is a business proposal? Business plan vs. business proposal: what do they have in common? Business plan vs. business proposal: what are the differences? What tools can you use to write a business plan? What tools can you use to write a business proposal? What is a business plan?

  6. Comparison Between Business Proposal and Business Plan

    A business plan is a document that describes in detail how your business is set up, the vision of the company, and the methods and process for realizing business goals. A comprehensive business plan should provide detail on your: Products and services. Business structure. Marketing strategy and market research. Budgetary expenses.

  7. Business Plan vs. Business Proposal: What is the Difference?

    In Closing. Clearly, a business plan and a business proposal are similar - and can even be one and the same. At the same time, they can also serve very different purposes. Unlike a business plan, a business proposal can have a variety of aims and thus does not have a "one size fits all" structure.

  8. Business Proposal and Business Plan: What's the Difference?

    The main distinguishing factor to note is that a business proposal documents the growth strategy and presentation of facts, while a business proposal is a specific ask for an individual to take action (buy your service/product, partner with you in business, and invest in a particular business) .

  9. What's the Difference Between a Business Plan and Business Proposal

    Get started What's a Business Proposal? Now, let's move onto what a business proposal is. Here's where we'll see key differences between the two. A business proposal is a document that aims to persuade a potential client, such as an organisation or sole trader to buy your product or service.

  10. How to Write a Business Proposal

    Differences between a business proposal and a business plan. A business proposal is not the same as a business plan.This is the most common misconception, but while there are areas of overlap (like your executive summary) the two are different.. That being said, you can certainly pull information from your business plan while writing your business proposal—in fact, that's a great way to start.

  11. Difference Between Business Plan and Business Proposal

    The main difference between a business proposal and a business plan is that, while a business plan is informative, a business proposal is intended to showcase operations, goals, and potential. Executive Summary The executive summary of a business plan will include information about the company leadership structure or the introduction of management.

  12. Difference Between a Business Plan and a Business Proposal

    Business Proposal Solicited and Unsolicited Business Proposals Components of a Business Proposal Business Plan vs. Business Proposal Streamline the proposal creation process It's natural to get confused between a business proposal and a business plan if you are planning to turn your idea into reality.

  13. Difference Between a Business Plan & a Business Proposal

    Writer Bio The business plan and proposal often have overlapping segments but they serve two very different purposes. Having a big picture business plan and specific proposals for...

  14. Business Plan: What It Is, What's Included, and How to Write One

    Business Plan: A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan from a ...

  15. What Is a Business Proposal?

    A proposal is how you'll win clients and partners. While they can be written or spoken, a business proposal is always written, allowing potential customers to review and sign it before receiving a contract. A proposal can also be part of a contract if you propose your services and allow clients to agree to the terms immediately.

  16. The difference between a business plan and a business proposal

    The most important difference to note is that a business plan is a written presentation of fact while a business proposal is a price quote and a call to action. Definition According to an article on Entrepreneur.com, a business plan is a document that outlines a detailed description of how a business is set up.

  17. The Difference Between a Business Plan and a Business Proposal

    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, state the value of the project to the client, and solicit the client's business. A business plan is a written presentation of facts.

  18. What is a Business Proposal: Definition, types, examples

    A business proposal is aimed at attracting potential clients with what a company sells. It's a document in either digital or printed form that explains product or service features, taking into consideration the lead's needs and wants. In other words, business proposals show how a company can help solve a customer's specific problem.

  19. What is the Difference Between a Business Plan and a Business Proposal?

    2 min In order to send an official business proposal, you have to have a business plan. These are two different document types that people often confuse and mix. Let's take a look at the difference between the two, starting with the document you should have in place before submitting an official business proposal. What is a Business Plan?

  20. Major Differences between Business Plan and Business Proposal

    The business plan usually consists of the description of a company and the process inside it. However, a business proposal states how a company is going to deal with a business project. While a business plan is written as a presentation style whereas business proposal was written to take an action. In a business plan, the vision of the company ...

  21. Difference Between A Business Plan And A Business Proposal

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