Proposal (business)

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This article is about business proposals. For marriage proposals, see betrothal.

A business proposal is an offering from a seller to a prospective buyer. Proposals can range in size from a one page letter, or price list, to several hundred pages of detailed specifications. In the business sales process, the written proposal is the vehicle that carries the terms of an agreement between buyer and seller and forms the basis for a subsequent business contract. When a proposed offer is accepted by the buyer, it creates a legally binding document for both parties, buyer and seller.

In complex sales situations, the process of selling can take several weeks, or even months, to complete, with offer and counter offer going back and forth. The proposal provides a formal way for both sides to communicate in writing during these negotiations. Prospective buyers sometimes issue a Request for Proposals (RFP), or an Invitation for Bids (IFB), to guide the sellers and provide specific information about what products or services they want. These specifications become the customer's requirements, and meeting requirements is a major objective in writing a successful proposal.

A properly accomplished proposal will put the buyer's requirements into a context that favors the sellers products and services, educating the prospective client about the full nature of his or her needs and the capabilities of the seller in satisfying those needs. Often, a prospective client may be aware of only a portion of their needs, or they may be unaware of what the market has to offer to meet their needs. A successful proposal is one that results in a sale, where both parties get what they want. This is called a win-win situation.

The basic components of the business proposal are: 1) an orientation to the sellers capabilities or products, 2)a discussion of key issues, 3) a description of the sellers offering and related benefits, 4) the cost of the offering, and 5) a schedule for delivery of the products or services. Of course when responding to an RFP or IFB, the format of the proposal is determined mainly by the buyer, and the seller must respond in kind. Because the proposal becomes part of a contract between the buyer and seller, it must be also considered a legal document and may contain elements of their legal agreement, such as penalties for non-delivery or tardiness.

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