Is the (RFP) juice worth the squeeze?

by Peter Osborne on July 13, 2010 · 1 comment

Is the juice worth the squeeze=Is this worth the effort?

Sometimes the best deal is no deal.

Inevitably, new consultants are going to find there’s an RFP in the way of winning new business and see it as a great opportunity to add desperately needed revenues.  That’s not always true.  Ask yourself a few key questions before committing the resources (i.e., the time and distraction) to respond to an RFP.  Among those questions:
  • Is this opportunity a good fit for you from a strategic point of view (e.g.., does it support your personal brand, does it open a new market, would winning it provide credibility with other prospects, is it a good fit for your portfolio career)?
  • Is the client really looking for a new partner or is this a way for them to get some free consulting/fresh ideas that they will turn over to the “winner?”
  • Is this a proposal that can be won with a strong value proposition or is the decision going to be made on the basis of money?  And do you care?
  • Is the incumbent participating?  If not, why not?
  • What’s the client’s financial situation?  And the corollary to that one, is this a client you would be proud to be associated with?
  • Did you influence the RFP specifications in some way?  If you didn’t, who did?  And did that person or organization insert specifications that make it a bad deal for you?
  • What is their budget?  Why are they issuing an RFP?
  • Do you understand the decision process? If so, are you in a good position?

In many cases, the consultant driving the RFP or the company itself (if it is working without a consultant) may put something in the document that says you can’t ask questions or get additional information (or that you have to go through the consultant).  Your goal in those situations should be to change the ground rules and find out all you can about this opportunity.  In a future blog, I’ll talk about ways you can do that and still get the business.

If you want it.

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{ 1 comment… read it below or add one }

Walt Lapinsky July 14, 2010 at 9:14 am

Peter has the right questions, although I would add one more and put them in a different order.

The new question, and to me the most important: did you find the RFP yourself or did the client send it to you or at least ask you to bid on it?

Years ago I was asked to set up a technical pre-sales organization for a major division of a major computer company, as we called them in those days. My real task was to figure out why we were only winning about 1 in 10 proposals we submitted. After one year, we were winning about 1 in 3 proposals. In this specific environment, it cost about $1M to put together a proposal, but the awards were eight-to-ten digit numbers, so this improvement had a noticeable benefit to the bottom line. We made a number of changes, like only bidding on deals that we could actually deliver. But the most important change was that if we weren’t in there influencing the deal before the RFP came out, we did not bid on it.

Being there allows you to answer many of Peter’s questions: do they have budget, what is the decision process, who makes the decision and who influences that decision, is there an incumbent they like or pre-selected winner that will be hard to overcome, and, most importantly, what is the real problem they are trying to solve.
Too many RFPs are written by desperate people who don’t understand their own problem. They have somehow determined the solution, and put out an RFP to get that solution. If you really understand the underlying issues, you can put in a very strong proposal that indicates you do understand and have the ability and desire to fix it.

Most RFPs are written by people who have never written an RFP before. This is true even in large companies with a separate procurement organization. The procurement folk may manage the process and have templates, but they don’t control the technical content. When you see something strange, question it. You probably have a better idea of what the client really needs then they do, especially if you have been working with them for some time. And it can be a key part of gaining the attention of the influencers and decision makers.

I suggest that you treat a proposal effort, and the pre-sales effort leading up to it, as a project with a budget. As you start working on it, estimate the potential total value of the award and determine how much you are willing to spend on getting it. This might be a percentage of the expected client payments over two years. I wouldn’t go above 10%. Keep track of your time and other expenses just like you would for a “real” project. Check on the status periodically, and be prepared to walk away. I’m working on a deal right now that was originally supposed to close in June, now maybe in December. I’m still pursuing it, but with a lot less time and effort. If the award date is moving away faster than the calendar is moving forward, it will never close. If the expected value of the award is dropping, so should your proposal effort budget. Don’t make the common mistake of saying “gee, I’ve already spent 100 hours working on it, maybe another 50 will close it.” If it isn’t profitable at 100 hours, it isn’t going to be profitable at 150. Take that 50 hours and find another deal to work on.

If you get good enough to win one in three proposals, then spending 10% of the expected value on each proposal means you are spending about 30% of your revenue on sales, plus whatever else you are spending on marketing including demand generation. If you are only winning one in ten but still spending 10% on the pre-sales for each, then it is easy to figure out why you aren’t making any money.

One more point: treat your proposals as a marketing document that can be reused many times. The format of each submission may be significantly different, and some will require deeper detail in some areas. After you have submitted six or so proposals, 85% of the actual content should be the same. If not, maybe you haven’t found your niche market or the right potential clients.

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