How to respond to RFPs like your company depends on winning them

Companies often put more emphasis on making proposals easier than they do on winning them, while at the same time trying to do as many as possible. If they calculated the ROI, they'd realize that the investment in doing proposals right is tiny compared to the huge returns it delivers.

Instead of trying to find twice as many leads, mathematically they'd be better off trying to win twice as many. But instead, they try to minimize what they spend on proposals so they can afford to pursue as many as possible. This results in them lowering their win rate and lowers their ROI even further. It makes me shake my head.

Companies like this aren't serious about winning RFPs. If they were serious, they'd pay attention to their ROI and choose the path that best maximizes it. They'd discover that it's better to invest in doing proposal well than in doing lots of proposals. They'd discover that to be serious about winning RFPs means being serious about understanding what it will take to win.

Ways that companies respond to RFPs

The approach you take to bidding RFPs demonstrates the maturity of your company. Which approach do you take?

1. Bid any RFP that you can and try to find them all
2. Try to convince yourself that you're being selective by bidding RFPs where you have some experience or can do the work and the hope you can win, while in reality you are just bidding any RFP you can and trying to find them all
3. Bid only the ones in which you have insight into the customer’s perspective and what it will take to win
4. Bid only the ones that meet your strategic planning and lead qualification criteria that are based on having insight into the customer’s perspective and what it will take to win

Hope is not a strategy for winning RFPs. Desperation is not a strategy for winning RFPs.

Ways that companies hurt themselves by bidding every RFP they can

When you bid every RFP you come across, your business will suffer in many ways:

1. Lower margins due to a lower win rate
2. Even though the per-proposal price might be lower, you'll have higher proposal costs per win, since each win has to pay for all the losers
3. Lower margins over time because you are competing on price instead of value driven by customer insight 
4. Even lower margins over time due to lacking economies of scale because your business is a random collection of wins instead of a strategically reinforcing collection of core competencies and relationships
5. Poor past performance because of all the times you underpriced, failed to meet customer expectations, or simply delivered the minimum needed to get by
6. Lower revenue because all those losses represent money you've left on the table and add up to far more money than new leads at a low win rate can ever deliver
7. Lower staff satisfaction and higher turnover due to the low pay needed to stay under the low rates you bid

This is when you'll be tempted to try to control costs by minimizing the cost of bidding so that you can afford to submit more bids. This means doing more proposals of lower quality, resulting in an even lower win rate that will continue to spiral down, and ensure that future margins will be lower still. Or you'll try to bid more opportunities in the hope of being able to win more in spite of your low win rate. Making up for low quality proposals by doing them in volume is a great way to destroy a company.

Why do businesses set themselves up like this?

It’s primarily because they've been taught that doing proposals well is expensive instead of an investment that can be measured. Doing proposals well requires:

1. Relationship marketing, followed by a
2. Sales process aimed at gaining customer insight and discovering what it will take to win, followed by a
3. Major effort to produce a high win probability proposal

All of these costs come up front, before you see any revenue. The temptation to lower those costs is extremely strong. But first you should consider:

• If you have a 30% win rate, you’ll have to go through it all three times just to score a win
• If you have a 20% win rate, you’ll have to go through it all five times for each win
• If you have a 10% win rate, you'll have to go through it all 10 times for each win

Now, look again at the difference between a 20% win rate and a 30% win rate. It’s only a 10% difference in win rate, but the difference in cost and time is almost double. The difference between a 10% win rate and a 30% win rate is just 20%, but it returns triple the revenue. If you're already at 30%, simply getting to 40% is a 33% boost in revenue. How much relationship marketing and proposal development costs could be covered by tripling your revenue? How many times those costs does it return, 100x? 1000x?

If that's too much math for you, try simply dividing your proposal costs by the number of wins. With the same costs but more wins, the cost per win goes down fast. Not only that, but with more wins you can increase your proposal costs per win and still be lower than where you started. By investing and achieving more wins, you end up decreasing your proposal costs more than if you lower your proposal costs in a way that also lowers your win rate. You can't put less effort into what it will take to win and make up for it by wanting to win more.

If your business depends on RFPs...

If your business depends on RFPs, it's time to get serious.

Don't take my word for it. Measure it.

If your business depends on RFPs, your top priority should be to achieve a high win rate. It is worth more investing in a higher win rate than in lower costs or bidding more questionable leads. Setting your priorities this way and managing it like an investment will actually produce a lower proposal cost per win.

And like any investment, you should be selective. Bidding everything should no longer be a priority. Bidding everything where you have more insight into what it will take to win than your competitors should be your priority. Maintaining that high win rate by not gambling on low probability RFPs just because they are out there should become your priority.

If your business depends on RFPs, you best control your costs by spending strategically and not by spending less but losing more. Spending strategically means actually having a strategic plan, having a sales process that produces the information needed to win the proposal, and a proposal process that can articulate what it will take to win from the customer’s perspective. If your business depends on winning RFPs, it means your business depends on doing these things effectively.

If your business depends on responding to RFPs, it means you can’t just throw your least expensive staff at the effort or let people think that contributing to proposals is not their real job. It means that responding to RFPs is everyone's real job. It means you can’t afford to make up how you do things as you go along. 

If your business depends on responding to RFPs, it means your entire business should serve the process that wins your RFP responses. Think about what that means and your business will prosper.

If you need any help making it happen, let me know.