For beginning entrepreneurs, there is a lot of industry lingo and jargon that are tossed about that tend to get lumped together when they shouldn’t be. One of the most common instances of “lumping” is formal research and business proposals. Although the structure of these two business documents is similar, the outcomes being discussed are very different.
Here’s the difference: a formal research document is completed to determine if a proposed project as a chance of success. A business proposal, on the other hand, is essentially a sales pitch that shows the intention of beginning a new project. What you’ll often find is that these two documents work together to create one source of information, which is likely why they’re often considered one task.
Formal Research Is Usually the First Task Completed
When a formal research report is completed, it will provide a business with some basic facts about their market. It can be general or specific depending on the scope of the research that is being conducted. It is essential for every business in every industry to take the time to conduct this type of report. That’s because there are some specific bits of information that will be discovered that can help the future decision making process.
- It will help businesses discover what the general sales rate is for their market and industry.
- A list of competitors will be generated so that a business can become competitive without undercutting the existing market.
- Similar products or services in the market will be discovered so that value comparisons can be made.
The most important fact that a formal research report is going to discover is the level of market saturation. If there are too many similar products in the market at that moment, then there isn’t going to be a legitimate business opportunity. If there is not, then the market is ripe for the fresh ideas that can be brought to the table.
That’s when a business proposal becomes the next logical step.
Business Proposals Suggest Methods
Formal research might look at the generalities of a market, but business proposals deal only with the specifics. This document will not only suggest what new products or services should be put forth in the market, but suggest methods to make them viable as well. Proposals don’t always need to be associated with a new product or idea either. A proposal also makes sense if a new marketing approach is needed to breathe new life into existing services.
A business proposal typically has three distinct sections that are included within the body of the final report.
1. It will have a description of the task that is being considered, usually a brief overview of the journey being proposed.
2. There will be a comprehensive look at the general approach that should be taken in order for success to be achieved.
3. A schedule and budget for successful completion will also be included so that profits and loss and be examined before the implementation of the project.
It is not uncommon for several business proposals to be drawn up from the same formal research. This is because different people or different teams will look at research data in different ways. The multiple proposal approach offers a business the chance to find the biggest patch of common ground, plan for the best success, and then do their best to make it happen.
You cannot have a complete business proposal without performing any formal research.
It is possible to create a business proposal without formal research, but it will be an incomplete proposal. This is because without research, any information about market conditions will just be an educated guess. That might be fine enough for a small landscaping company who is thinking about adding a tree trimming service to their suite of services, but it isn’t good enough for a multimillion dollar product launch that is being taken to the mass market.
Business Proposals Can Also Be Business Propositions
One of the most common forms of a business proposal is a bid for services. If a business needs their parking lot paved, for example, they would solicit bids from local contractors for the job. Those contractors would research the job, figure out their budget to complete the work in a specific amount of time, and then establish a cost that is profitable for them, yet still competitive with the rest of the market in general.
Research, however, is still essential to this process. A bid will not be 100% accurate if 100% of the available information has not been considered during its creation.
What Are the Benefits of This Documentation?
The primary benefit of these two documents is that they can provide a business with a complete picture of the market conditions. The past, present, and future are all examined to create a comprehensive strategy that can help a business maximize the gains of a new product, service, or marketing effort. It lowers costs because all strategies can be evaluated and bring new products or services to the market more quickly.
There’s also the clear benefit of knowing whether or not a idea is going to potentially succeed before capital is invested into a new idea. If a new idea takes $1 million to bring to the market with an appropriate level of brand exposure, but the expected market sales per year is only going to be around $100k, then businesses can determine whether or not the value of the revenues coming in will eventually pay for themselves or just result in an overall loss.
The final benefit is that the formal research and business proposal combination can help a business know what their budget will need to be thanks to the schedules that are included in this documentation. By knowing where the funds will need to go, more accuracy over the finances can be achieved and this lowers the overall risks of fraud and embezzlement happening.
Knowing the difference between these two documents will help you create a better niche in your market and industry. Use it today to make sure you have both documents in order for your next project.