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

Written by Christi Hayes and Fact Checked by The Law Dictionary Staff  

If you run a small business then at some point you will likely come across two types of documents: business plans and business proposals. While these two documents sound very similar in name, they do have different purposes and structures. Confusing these two types of documents is understandable, not only because they sound similar to one another, but because the information they include can often overlap. However subtle the differences between business plans and business proposals may be, it is important for ambitious entrepreneurs to understand those differences so that they can better plan for their own companies' success.

What is a business plan?

Let's start with a business plan. A business plan can be thought of as being the grand vision for your company. It includes a description of the business and executive summary along with more detailed information about financial projections, potential competition, marketing plans, and other items that detail what a company does and how it plans to achieve success. A business plan is meant to give people a brief idea of what your business is and what it hopes to achieve. Business plans are especially useful for attracting investors to a company (especially a new one that may have little name recognition), but it can also be used to give other people, such as accountants, attorneys, and even future employees, a better idea of what your business does.

What is a business proposal?

If a business plan describes the overarching vision of a company, then it is useful to think of the business proposal as describing a very specific action or plan for how that vision will be implemented. Essentially, a business proposal presents a specific idea, such as a new business project. The proposal is meant to attract investors to get behind the specific project being proposed. For example, a well-established restaurant chain may decide it wants to expand into a neighboring state. In order to attract investors to help provide capital for the project, the business would create a business proposal. While the business proposal may provide a brief overview of what the company actually does (like a business plan would), its main purpose is to outline the details of the proposed project, including anticipating any questions or concerns potential investors may have.

If you plan on growing your company then you will need to learn how business plans and business proposals work. These two important types of documents are often easily confused with one another, but knowing the differences are key if you want to attract investors and help your business thrive.

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