Building Your Business Business Taxes What Is a Business Requirements Document? By Jean Murray Jean Murray Facebook Twitter Jean Murray, MBA, Ph.D., is an experienced business writer and teacher who has been writing for The Balance on U.S. business law and taxes since 2008. She has taught accounting, business law, and business finance at business and professional schools for over 35 years, has authored several books on saving money and simplifying your business, and was the owner of startup-focused company Emence Enterprises, LLC. learn about our editorial policies Updated on September 19, 2022 Fact checked by Mrinalini Krishna Fact checked by Mrinalini Krishna Twitter Mrinalini is the senior investing editor at The Balance and is an expert in investing, financial journalism, digital media, and more. She's been a journalist for more than 10 years at organizations such as the Financial Times and Investopedia, and she has a master's in business and economic reporting from New York University. learn about our editorial policies In This Article View All In This Article How a BRD Works BRD Vs. Business Plan BRD Vs. Request for Proposal (RFP) What Should Be Included In a BRD What Makes a BRD a Contract Frequently Asked Questions (FAQs) Photo: valentinrussanov / Getty Images Definition A business requirements document (BRD) is a formal business document describing the objectives and of a specific project or solution to a business problem. The requirements in this document define the scope of a project and the overall business objective, the specific and measurable results the business wants to achieve from the project. Key Takeaways A business requirements document sets out the requirements for a project so everyone involved will know what must be done and when. It may also include elements that make it into a contract, like terms of payment for work. A business requirement document is different from a business plan or a request for proposal. How a Business Requirements Document Works Your small business is getting ready to expand, or sell new products, or a variety of changes, and you may be looking for a consultant or a contractor to help you with this project. One of the first things you will need to do is to prepare a business requirements document to describe the project and what needs to be done to make it happen. The main objective of a business requirements document is to clarify everything that needs to be addressed to make the project successful, with detailed requirements for each part of the project. Note A business requirements document can be used by a business, government agency, educational institution, non-profit, or other type of organization. A business requirements document (BRD) can be considered in two phases. In the first phase of a project, it's a document that sets out all the requirements for the project, including costs, details on implementation, projected benefits, milestones, and timeline for implementation. In the second phase, the document can become a contract between the two parties, formally setting out the requirements of a hiring company (ZXY, Inc. in this case) and the contractor doing the work. Alternative names for a BRD include Project Requirements Document and Requirements Specification Document. Example of a Business Requirements Document A company (we'll call them ZXY Inc.) has decided to outsource its accounting functions to a shared service center in the U.S. They are beginning a process of finding a location, setting up the services, hiring and managing the employees. It's a complicated undertaking and it will take many months to accomplish. They begin with a team that prepares a business requirements document. How a Business Requirements Document Is Different from a Business Plan While both a BRD and a business plan may contain similar sections (an executive summary, for example), the intent is different. A business plan is created to guide a new or existing business, but more often its purpose is to present to a lender for financing startup or expansion. The business plan contains general information about the company and its plans and strategies for being able to generate revenue to pay back the loan. Financial statements are a key part of the business plan, while the financial documents in the BRD may be quite different, centered on a specific project. How a Business Requirements Document Is Different From a Request for Proposal (RFP) The difference between the two documents is slight but important. Typically, a request for proposal (RFP) is created for the purpose of inviting proposals from various vendors. In the example of ZXY, Inc, , an RFP is sent to potential companies who furnish outsourcing services, to solicit bids. A BRD, on the other hand, is prepared for a specific vendor or joint venture partner who has already been selected by the hiring company. The BRD contains more details and more specifications and deadlines to be met along the way and at the end of the project. When an RFP is created, it comes with a deadline and requirements for submitting bids. The bids are evaluated after the deadline. What Should Be Included in a Business Requirements Document In some ways, a business requirements document is similar to other types of business proposals, but the difference is in the main part of the document, the basic requirements listing. Note Be as detailed as possible in writing this document. It’s a good idea to get an attorney to help you to make sure you don’t miss anything important. The BRD should include these sections: Introduction: Start with a statement giving a broad description of the project and a background statement describing why the project is necessary. Include information about the parties to the project. Definition: Define and describe all important terms, so everyone is talking about the same thing. A purpose statement: Clearly state the goal of the project and begin with the words, “The purpose of this document is…” Basic requirements: This is the main part of the document. List all the requirements for the project, being as detailed as possible. In the ZXY, Inc. example, one section might be requirements for hiring accounting employees. How many are needed? What skills do they have? What credentials? What employment laws must the hiring company follow? Deadlines and interim checkpoints: Schedules, Flow Charts, and Diagrams. Include any visuals you think will improve understanding and clarify the process. Be sure to include a detailed timeline. Signatures: Finally, include a place for signatures of both parties attesting to the fact that the individuals have read and understand the terms of the document and that they agree to comply with the terms. What Makes a Business Requirements Document a Contract In the initial phase the business requirements document is a proposal. You may have noticed that something was missing from the list of sections above—payment for services rendered. Without an agreement about the services to be rendered and terms of payments there is no contract. Before the two parties sign off on the document, standard contract language should be added, with the help of an attorney, including: Promises to pay and promises to provide services Restrictive Covenants, preventing the contractor from taking the company's trade secrets or sharing them with others. What happens if one party doesn't fulfill its required obligations (that is, breaches the contract) Insurance and indemnification (hold harmless) clauses Litigation and arbitration provisions Frequently Asked Questions (FAQs) How do I write a business requirements document? Begin with the purpose statement to make sure everything in the document is focused on the purpose. Then write definitions to make sure everyone is talking about the same things. The major part of this document is the list of all the requirements for the project. Include charts, a timeline, and other supporting visuals. What is an example of a business requirement? If a company is ordering software to operate its warehouse, one requirement might be that the software must be able to include how many products and what types need to be in inventory. Another requirement might be tracking location and status (ready-to-ship, date shipped, etc.) Still another requirement might be that the warehousing software must connect to the company’s accounting software. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Stanford University IT. “Business Requirements Document (BRD).” Small Business Administration. “Write Your Business Plan.” National Association of Counties. “Developing a Request for Proposal.” Cornell Law School Legal Information Institute. "Contract."