Should we always submit a proposal if we are asked to do so?
For many service businesses time spent considering, drafting and submitting proposals is fairly hefty.
Mostly it’s a cost bravely born because it’s seen as a direct step towards winning new business, but sometimes that display of bravery gets in the way of common sense.
Here’s an example of what I mean. I’ve changed the details but the conversation is exactly as it panned out.
The company was having a team meeting to discuss how to price a particular proposal. After considering the issue from a number of angles someone asked how similar proposals had been priced, so the admin assistant collated all the recent proposals that had elements similar to the one under discussion.
Many of those proposals were for existing clients and for one reason or another they weren’t great reference points.
So the team looked instead at the bundle labelled “new clients” and after poring over the terms of those proposals someone asked: “Which of these proposals did we win?”
“Er, none,” was the answer.
Then there was robust discussion about how awful these types of proposal were to draft, how the potential client was always vague about what they wanted and how they rarely seemed to value the service, etc, etc.
Eventually someone asked: “Why are we submitting a proposal then?”
“Because we might win it,” was the response.
Possibly, but highly unlikely methinks.
After a bit of nudging the team leader calculated how much time this type of proposal took to prepare. It turned out to be about two man weeks – a cost of more than $15,000, which was a considerable figure for the business.
Armed with this info the CEO asked the team leader a series of questions:
1. What is the probability of us winning this work?
2. What is the value of the piece of work?
3. Is it worth investing $15,000 in this opportunity?
It turns out that the team valued the piece of work at $100,000 but reckoned they had a less than 10% chance of winning it (nil based on their track record).
High school maths said the outlay was greater than expected winnings and so did common sense.
We are only human and we get carried away with the possibility of winning work we are asked to propose for, but like the lottery, sometimes we win by not entering.
How do you decide which proposals to pursue?
Julia Bickerstaff's expertise is in helping businesses grow profitably. She runs two businesses: Butterfly Coaching, a small advisory firm with a unique approach to assisting SMEs with profitable growth; and The Business Bakery, which helps kitchen table tycoons build their best businesses. Julia is the author of "How to Bake a Business" and was previously a partner at Deloitte. She is a chartered accountant and has a degree in economics from The London School of Economics (London University).