It’s all about ROI. And your ROI is directly impacted by your win rate. Low win rates lead to a low ROI. For some companies, a 10% increase in win rate is the same as a 40% increase in leads pursued. Bad bid decisions lead to a lower win rate.
This isn’t about subjective preferences, rules of thumb, or even best practices. This is about the hard reality of math. If you don’t understand the mathematical relationship between your win rate, the number of leads you need to pursue to hit your numbers, and the way resource allocation impacts your win rate, then skip this article and instead learn the math. This article will make a lot more sense after that. If you’re not tracking the numbers to be able to do this, then read the article and immediately start tracking them.
Signs that you are making bad bid decisions that are reducing your ROI
You're bidding an RFP because:
- We can write the proposal. Just because you can do something, doesn’t mean you should. This is true even if “you’re not bidding anything else right now.” What you should be doing is refining your pursuit process to maximize your win rate. This includes identifying the criteria that make a pursuit worthy of bidding. Instead of chasing a pursuit with a low win probability just because you can, invest in increasing the win probability of all the future pursuits you have a realistic chance of winning. When this is given as a reason to pursue a bid, it can be an indicator that bid decisions are not criteria based, there is no formal lead qualification process, and the pipeline is running low.
- We can do the work. Your ability to do the work, and your ability to win the pursuit are two different things. Everybody bidding will be convinced they can do the work. Bidding without a competitive advantage lowers your win rate. Hope is not a strategy. If you have to pass on a bid where you can do the work but don’t have a competitive advantage, ask yourself what you need to do to better position for the future. Citing “we can do the work” to justify a pursuit is not only a sign that there are no bid decision criteria, it’s also a sign that strategic planning is lacking.
- We'll just hire the incumbents. Like everyone else. Bidding without the right resources on the expectation that you can just hire the staff currently doing the work if you win and the incumbent contractor loses is worse than bidding because you “can do the work.” You can’t actually do the work. You’re hoping that you can hire the staff who can. That is bidding at an intentional disadvantage hoping to make it up in other ways, usually by undercutting the price, which hurts the credibility of your being able to hire the incumbent staff. When you hear people say “we’ll just hire the incumbents” it not only indicates a willingness to bid without a competitive advantage, it could also be a sign that pre-RFP intelligence gathering was so weak that the number of incumbent staff weren’t known.
- We've got relevant past performance. A variation of this is “We've done other business for this customer before.” Both fail the “So what?” test. The simple fact of having experience does not matter. It’s the impact of that experience. For a bid decision, what matters is whether the impact of that experience amounts to a competitive advantage. Keep in mind that everyone bidding will claim relevant experience. It’s not the quantity of experience that matters the most. It’s the impact. How does whatever experience you have provide a better result or outcome for the customer? That is what matters to them. It’s not how much experience you have, it’s whether you can produce better results. When having experience is seen as the only or primary qualifier for bidding, it’s a sign that the company is not developing any real differentiators.
- We can win it by bidding low and making it profitable after we get the contract. Bidding below the level you can perform at is a recipe for killing your past performance record. And that means you can win this contract this way, but you’ll be doing it at the expense of your future win rate. It’s short term thinking at the expense of long term ROI. It’s often a sign of desperation.
- It's the same work we do for our current customer. See #4. “So what?” Should the customer care? If they do, then that’s the real reason to bid. Developing a core competency is a good thing, and this involves looking for similar works to build relevant capabilities. However, the fact that you want to build core competency does not matter to the customer. Having a core competency that gives you differentiators and advantages that offer benefits are what matters to the customer. If you can’t match the similarity in the scope of work with an information advantage about the customer and a competitive advantage in your offering, then the probability of winning will be low. The similarity is relevant in qualifying the lead as being worth learning more about. But by itself is not an indicator you should bid. Using it as a reason to bid is an indicator that your lead qualification and bid/no bid decision criteria are the same, and that can be an indicator that you are starting your pursuits at RFP release.
- The customer said we should bid. Customers do not always mean it. Sometimes they tell that to two companies in order to have three bids. Customers don’t care about your win rate, ROI, or proposal budget. They think everyone should bid. So if this is the only reason to bid, it’s not enough. You should respond with a lot of questions and gauge their willingness to discuss their needs. If the RFP is already out then it’s even less of an indicator they want you. Who did they talk to in order to know what to put into the RFP? If you can turn this contact into the start of a relationship, it can be a very good thing. If all they want is a bid, then not so much.
- It's similar to a proposal we've already written and we can just use that. No you can’t. Not if you care about win rate and ROI. And even if you try, you’re going to find out that reusing a previous proposal takes just as much effort, and sometimes more, to create an inferior new proposal. If you need to lowball the effort it takes to win the business, it’s a sign that the business is not worth pursuing. Lots of low probability bids do not translate into a high probability of winning. They translate into a certainty of a low win rate, which results in a low ROI.
- We can't win if we don't try. This is a total strawman. It goes along with “we need to bid more to win more.” You can lose more than just the bid by chasing low probability pursuits. The way to maximize your ROI is to skip them and invest in achieving a high win rate for pursuits that are worth chasing. Hear this is usually a sign that there aren’t enough strong leads in the pipeline.
- There's a better way to do it than what it says in the RFP. Then why didn’t you bring it up before the RFP was written? This is a sign that the pursuit started at RFP release. It’s also a huge risk if it’s a government bid or a commercial bid that requires compliance. A bid strategy based on non-compliance should be a no-bid indicator for these types of bids.
- We can price lower than they can. If your strategic plan is to be the lowest price provider and you are as good at it as Walmart, then this is a positive bid indicator. But for everyone else it’s a bad sign. Pricing competitively is a good tactic, but it’s a sketchy reason to bid. It indicates that you are relying on price instead of a competitive advantage. It also could indicate that you’re taking chances with your ability to perform, so that even if you win, you still lose. Bidding with no other differentiators or competitive advantages other than your price is an indicator that you started the pursuit at RFP release and are not thinking through your bid strategies. This may indicate a company that’s trying to make it up in volume, by submitting lots of low-priced proposals instead of bidding strategically. If this is the case, your ROI will suffer greatly.
- We have the right team. See #4. So what? A team must be more than a collection of impressive names. It must be a rationale. Why does your team matter? Why is it better than any alternatives? Relying on other companies to increase your win rate, which is what teaming is, is a questionable practice. If you question it and come up with answers that indicate it’s right for you, then those answers are what matter. Reliance on teaming as your primary differentiator is often an indicator that you’re also relying on experience as a differentiator. See #4 again.
- There is no incumbent. It’s good that there is no company currently doing the work with an information advantage. But that does not give you a competitive advantage. The lack of an incumbent may indicate a lead is worth exploring, but it’s not worth bidding unless you have a competitive advantage. See #6. This is an indicator that your qualification criteria and bid decision criteria are the same.
- Denial. Are you looking at these and saying “we don’t do that” based on some technicality or justifying that when you say it there’s a good reason? Do you say them so habitually that you don’t even notice you are saying them? Are you in denial about your organization? Do you have a strategic plan, lead qualification process, and bid decision process? If you do and you’re still saying these things, do you need to reengineer them? How important is ROI to you?
It’s not that you should never say these things. Sometimes they are part of lead qualification. Sometimes they are a secondary point in a justification to bid. But if people question putting effort into a low probability bid and the first thing that someone says to justify it is on this list, it’s an indicator you have a problem. It’s an indicator that you are not achieving the best ROI you could be.
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