Application – Preparing informative documents
A business proposal or sales proposal is a written offer to provide a service or product. Proposals are crucial to complex or high-priced sales.
The length and complexity of a proposal varies with the cost and intricacy of the offering. Proposals for simple services can be as short as one or two pages, while proposals for large construction projects can have hundreds of pages, often including many large volumes of supplemental information. Similar to other writing tasks, it is important to understand the reader and the purpose of the proposal.
Sophisticated buyers typically provide requests for proposals (RFPs) when bidding for work that is difficult to estimate or for work that will be on going, and they typically provide requests for quotations (RFQs) when seeking to buy a piece of equipment or contract a job that is well defined.
Buyers generally award bids for well-defined scope primarily on price. In contrast, awards for difficult-to-define scope stress professional qualifications and the organizational fit to the buyer’s needs.
Unsolicited proposals differ remarkably from solicited proposals. Unsolicited proposals attempt to awaken potential buyers to unrecognized risks and unspotted opportunities.
Information gathering always precedes the preparation of a proposal. Sales organizations gather information from the documents and instructions buyers supply—requests for proposals, specifications, and bid meetings—and from talking with decision makers and with those who influence the buying decision.
An effective proposal requires a thorough understanding of the buyer’s:
1. Pain (the acknowledged problems)
2. Need for a solution
3. Estimate of the value of a solution
4. Assessment of an acceptable budget to obtain a solution
To be ethical, when receiving a solicitation for a proposal, providers of goods and services can only gather information through formal channels. These include the request for proposal, documents appended to it, pre-bid meetings hosted by the soliciting organization, and authorized question-asking mechanisms.
On the other hand, informal or unsolicited proposals enable the supplier to ask for information through many informal channels. When anticipating an important solicitation, a supplier should talk to the customer before the request for proposal is prepared. Through informal conversations, the supplier should learn the answers to the four previously listed items and quantified the value the buyer places on a solution.
Examples of questions the supplier can ask to obtain this information include:
· What are the major issues challenging your organization?
· Help me understand what you mean when you say your organization “is failing to …”
· What have you previously attempted to do to address this problem?
· What do you think you can do to eliminate this problem?
· What are your criteria for a successful solution?
· What other concerns do you have?
· What concerns do others in your organization have?
· What are the primary concerns of your management?
· What does this problem cost you?
· How much is this problem costing your organization?
· What would it be worth to your organization if you could …?
· If you could save a million dollars per year, what type of budget would your organization be willing to commit to a solution?
· If you could achieve …, what would it be worth to your organization?
· What type of funding is available to address these problems/opportunities/situations?
· What would be the compelling reasons for senior management to agree to a project that would …?
· Who in your organization can approve this type of project?
· What issues could sidetrack this type of project?
When asking questions, it is important for the seller to listen carefully to the buyer. The insight obtained from truly listening to the buyer and understanding his or her problems can provide the extra perception to write a proposal that is more compelling.
The seller should gather this intelligence from both decision makers and from technical experts who will evaluate the proposal in detail and make recommendations to the decision makers.
Draft and refine the proposal
With this essential knowledge in hand, the proposal writer crafts an offer that:
· States the buyer’s objectives
· Restates the value of achieving the objectives
· Proposes a range of options to achieve the objectives—the best practice is to offer three options, with the range including low, mid, and high cost offers
· Includes language and a signature acceptance field for the buyer, so the proposal can serve as a purchase order or contract
Follow the outline provided by the request for proposal, use a template provided by your firm, or adopt one from the many available on the internet. Format the document in a common font. Define sections with headers for each. Include a table of contents. Describe key terms and include a glossary if the document is long and the material is complex—this will be useful to purchasing personnel and the ultimate decision maker, who may be less familiar with industry jargon. Also, clarify terms that you use in a unique way.
Use a cover letter and the proposal summary to pitch your solution to the organization’s pain. Do not waste this highly visible part of a report droning on and on about the extensive experience and sterling qualities of your organization. Rather, focus on the buyer’s problems and on your proposal's ability to economically solve them.
Use bullet lists, tables, and charts to make your proposal clear, concise, and readable. Use direct, but familiar language.
In the body of the proposal, describe in detail the buyer’s problems and provide defensible evidence of the value of the proposed solutions. Provide a detailed description of the service and/or products that you will provide and how they address the buyer’s problems and issues. Quantify the resources and time needed to develop the solution. For complex proposals this will include milestone dates, a project schedule (Gant chart), and cost estimate or bill of materials that build to a quotation/budget.
Some proposals will provide budgetary estimates with payments linked to actual costs, while other proposals will include lump-sum bids to do all of the work described by the scope.
Describe the payment terms, such as “25% payment due on signing” and “fee of 1% per month charged on payments made 30 days after billing.” For large and complex projects, this language can be extensive.
Prepare a work plan
Many buyers will prepare a written scope of work (SOW) to describe the goods and services to fulfill a request for quotation (RFQ) or request for proposal (RFP). The scope of work is a detailed list of goods and services to meet the buyer’s objective. On the other hand, less sophisticated buyers may communicate only verbally their objectives.
The supplier translates the buyer’s objectives and the scope of work into a project plan. Such a plan defines in detail who does what when where how and why:
· What services and/or products will be prepared and/or delivered? This is the scope of work.
· What resources (persons, departments, and subcontractors) will do the work to build and deliver the services and/or products?
· When will the work begin and end? What are other milestone dates? This is the schedule.
· Where will the work occur and where will the services and/or products be delivered?
· How will the resources work to prepare the product and/or service? Who will manage the effort? How will the supplier ensure quality, timely delivery, and budget compliance?
· Why are you recommending this range of solutions to the customer? This is the justification.
Preparing this information for large projects typically requires project management and professional cost estimating. A typical approach is to create a work breakdown structure (WBS), which is an organization of the project deliverables into smaller components. For instance, with the construction of a building, there is the foundation, walls, roof, piping, electrical, and painting. Within each group, there will be further divisions, such as the foundation being divided into excavation, forms, concrete, and reinforcing steel. This breakdown continues to smaller and smaller elements until each element is manageable as an individual work package.
Follow a template
Sophisticated buyers typically specify in their request for proposals the arrangement of proposal elements. Bidders should meticulously follow such guidelines. When the buyers do not specify the content and format, a good pattern is:
· Cover letter
· Summarize the buyer’s problems or the opportunities available to the buyer.
· State the value the solution or opportunity provides the buyer.
· Show how the supplier is uniquely qualified to provide the most economical or most valuable solution. Briefly mention similar problems you have solved for other buyers.
· Describe guarantees or other risk mitigation that will minimize the buyer’s risks.
· Make a call to action. Ask for prompt approval to proceed.
· Do not waste this space by talking excessively about your company in an aggrandizing manner—rather focus on the buyer’s pain (problems) and how you will provide relief (solutions).
· Provide personal contact information so readers can reach you immediately if they have questions.
· Front material
· Add a title page, table of contents, list of figures, list of tables, and list of abbreviations.
· Summary or executive summary
· Write the summary similar to the cover letter.
· Discuss the buyer’s problems or missed opportunities.
· Summarize several options for addressing the problem.
· Link the seller’s strengths to the buyer’s problems. In addition, show that the seller can provide the best solutions.
· Summarize the project’s economics.
· Create a compelling case for the buyer to move ahead immediately with one of your proposed solutions.
· Describe the buyer’s needs and/or opportunities and the value of a solution. Quantify the value of a solution.
· Explain the context of the problems.
· Discuss prior attempts (if any) to solve the problems and explain why those efforts failed.
· Propose a range of solutions to the problems or concisely describe the project.
· Describe the work to be done. List deliverables and delivery dates.
· Offer alternatives.
· Anticipate questions and objections from members of the buyer’s team and include material that answers potential questions and negates possible objections.
· Provide project milestones and a detailed schedule (if appropriate).
· Describe the delivery organization or team. Summarize the supplier’s experience and capacity relevant to the plan. Stress unique capabilities and strengths of your organization or team. Link these strengths to the project.
· Include profiles of key team members.
· Summarize elements of the scope and provide the cost for each element.
· Explain assumptions.
· Economics/Cost-Benefit Analysis
· List the project benefits, quantifying each item.
· Compare the total financial value of the benefits to the cost. If possible, provide discounted cash flow calculations with common economic indicators—internal rate of return (IRR), net present value (NPV), benefit-cost ratio (BCR), and earnings before interest, tax, depreciation, and amortization (EBITDA).
· Restate the buyer’s problems or opportunities.
· Restate the range of solutions.
· Restate the advantages the seller possesses to provide the solutions.
· Restate the project economic benefits.
· Provide a call to action. Ask for prompt approval. Include a deadline stating when your proposal expires.
· Terms & Conditions
· Describe terms, conditions, and assumptions. Specify the duration of the agreement, reiterate the overall timetable for completion, specify payment dates and payment methods, state how the proposal can be amended, etc. It is likely that your supply or legal department will provide this section.
· Provide a field at the end of the document where the buyer can sign and date the document and select solution options. This will enable the supplier to begin work immediately on the project, when the buyer signs and returns the document.
· Add a detailed schedule.
· Include a financial model used to estimate project economics.
· Provide background on the supplier’s organization, such as similar past projects.
· Attach resumes of key team members.
Carefully proofread the proposal. Pay especial attention to the bid pricing, budget, and financial analysis. Ensure that repetitions of key numbers are consistent throughout the document and the cover letter.