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Responding to RFPs like your business depends on winning them

And maximizing your ROI like it matters

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.

See also:
ROI

Ways that companies respond to RFPs

Either you have a strategic plan, or you don't when you decide which RFPs to bid. The result is that companies tend to fall into one of these approaches:

  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 the capability to do the work and the hope you can win, while in reality 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. High proposal costs per win
  3. Poor past performance because of all the times you underpriced, failed to meet customer expectations, or simply delivered the minimum needed to get by
  4. Lower margins over time because you are competing on price instead of value driven by customer insight 
  5. 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
  6. Lower staff satisfaction and higher turnover due to the low pay needed to stay under the low rates you bid

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. 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 doing business through proposals is expensive. Not only that, but the costs are up front, well ahead of an uncertain future pay-off. 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, and then a
  4. 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 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

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.

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.

If your business depends on RFPs...

If your business depends on RFPs, your 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.  And like any investment, you should be selective. 

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 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.

Let's discuss your challenges with preparing proposals and winning new business...

Carl Dickson

Carl is the Founder and President of CapturePlanning.com and PropLIBRARY

Carl is an expert at winning in writing. The materials he has published have helped millions of people develop business and write better proposals. Carl is also a prolific author, frequent speaker, trainer, and consultant and can be reached at carl.dickson@captureplanning.com. To find out more about him, you can also connect with Carl on LinkedIn.

Click here to learn how to engage Carl as a consultant.

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