Many salespeople believe that they should respond to all proposal requests that come across their desk where the scope of work falls within the capabilities of their companies. It’s easy to see the allure. Working on an opportunity that “fell out of the sky” is far more desirable than “beating the bushes” to turn up an opportunity.
Desirable, yes. But, is it smart?
Responding to a request for a proposal (RFP) carries with it associated costs. What are they?
-There’s the time invested identifying and specifying the relationship between the prospect’s request and the solution your company could offer.
-There’s the time invested researching the competition you face and the solutions they could offer.
-There’s the time invested developing an advantageous positioning of your solution relative to your competition.
-There’s the time invested writing the proposal and developing the appropriate supporting materials.
-There are production costs of any required presentation materials.
-And finally, there is the opportunity cost of working on a proposal instead of pursuing other opportunities.
It’s important to recognize that not all RFPs are created equal. That is, there are various reasons buyers send out RFPs…not all of which are for the intention of doing business.
One reason companies might send RFPs is simply to obtain some no-cost consulting. For example, they may be considering establishing a new process of system using in-house resources…and sending RFPs is a way to gather relevant, valuable, and FREE information about processes, costs, implementation timetables, and so forth to guide them in their development efforts.
Another reason companies might send RFPs is to gain leverage with a group of competing potential supplies. The buyers end up with several “bargaining chips” with which to negotiate – playing the bidders against each other. It’s also an effective way to pressure an existing supplier…especially when negotiating contract renewals or requesting additional services at prices favorable to the company.
There are, however, other less manipulative reasons for proposal requests. You may have discussed a business opportunity with a new or existing client, and the client’s request for a proposal is to obtain information in order to be comfortable moving forward. Or, if the buyer has made a decision to move forward, the purpose of the request is to secure confirmation of the arrangements discussed.
What should be clear is that blindly responding to an RFP is an iffy proposition…even if the scope of work is well within the capabilities of your company.
Because a proposal is a presentation…delivered on paper rather than in person.
Whether delivered in person or on paper, it doesn’t make good business sense to invest time, energy, and company resources developing a presentation without first thoroughly defining and qualifying the opportunity it addresses.
While you may not always be able to do as thorough a job of qualifying an opportunity generated by an RFP as an opportunity that’s developed through ongoing person-to-person interaction with the prospect, it’s imperative that you have a dialogue with the buyer or an appropriate representative in order to qualify the opportunity, and at the very least, determine the underlying reasons for the request. Then, and only then, can you determine if the request is worthy of your time and efforts.