If you run a business or some division of a larger one, some of your revenue probably comes from responding to a request for proposals, or RFP. Many large organizations and almost all government entities use RFPs for most or all of their procurements. It, in theory, brings structure to the procurement process, defines the decision methodology, and gives a perception of fairness to the murky business of buying product or services. In theory, the buyer advertises the RFP, allows for a period of questions, has a specified date and often format of the response, and a documented decision process and timeline.
Preparing an RFP response is like a term paper in high school or college. You spend a lot of time creating it, and there isn’t much good that can come from it. Every hour you spend working on the response is an hour you aren’t earning any money. So how do you decide whether to bid or not?
There are some obvious questions, like does the organization have budget to actually award the bid and do you really want to do the job and be associated with the procuring organization. But to me the most important question is how did you get the RFP? Did you find the RFP yourself on some website or through some service, 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 well-known 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 RFP responses we submitted. After one year, we were winning about 1 in 3. 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 get answers to many of the basic questions before you decide to bid: 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. And those people have rarely had much experience writing an RFP. 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, 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. Two things I carefully watch:
- 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 your marketing efforts 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. After all, that’s why “cooy” and “paste” were invented. If you are writing significant new material for every proposal, maybe you haven’t found your niche market or the right potential clients.
The last word:
This is just one of many issues you need to confront as you enter the realm of consulting. Peter Osborne and others have set up a Consultants Launch Pad. The goal is to help people decide whether consulting is right for them, and then show them how to quickly set up their businesses and become successful. It includes experienced consultants who offer advice. Check it out.
Keep your sense of humor.