When we work with companies on their proposal process, they often start off thinking that they need templates to make proposals easier so they can submit more bids. However, only companies that sell commodities can use templates without having them reduce their competitiveness. Doing more lower quality proposals less expensively will not make you more competitive or more profitable. In fact, just the opposite is true.
There are two ways to respond to RFPs:
- Bid any that you can
- Bid only the ones in which you have insight into the customer’s perspective and what it will take to win
When you bid every RFP you come across, your business will suffer in three key ways:
- Lower margins due to a lower win rate
- Lower margins because you are competing on price instead of customer insight
- Lower margins because you lack economies of scale because your business is a collection of capabilities that resulted from the opportunities you stumbled across and then won, probably on price
Furthermore, 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.
Why do businesses set themselves up like this?
It’s primarily because doing business through proposals is expensive. Not only that, but the costs are up front, well ahead of an uncertain future pay-off. It requires:
- Relationship marketing, followed by a
- Sales process aimed at gaining customer insight and discovering what it will take to win, followed by a
- Major effort to produce a proposal, and then a
- Lengthy award process that often results in a loss
All of these costs come up front, before you see any revenue. The temptation to lower those is extremely strong. But 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
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. Looked at the other way, that 10% difference in win rate almost doubles your revenue and can increase your margins even more. If your business depends on RFPs, your priority should be to achieve a high win rate. Instead of lowering costs, you should invest. And like any investment, you should be selective.
If your business depends on responding to RFPs, you best control your costs by spending strategically and not by spending less per bid on more bids. 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 responding to 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 leave it to a group of specialists to do so you can get back to your real job. It means that responding to RFPs is your real job. And everyone else’s too. It means you can’t afford to make up how you do things as you go along. It means that your future depends on how your staff does things, and can’t just depend on relying on their experience.
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.
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Carl is the Founder and President of CapturePlanning.com and PropLIBRARY.
The materials he has published have helped millions of people develop business and write better proposals. Carl is an expert at winning in writing. He is a prolific author, frequent speaker, trainer, and consultant.
Carl can be reached at firstname.lastname@example.org
To find out more about him, you can also connect with Carl on LinkedIn.
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