What Is a Business Requirements Document?

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.

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.

 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)