Why you shouldn’t respond to every tender
Monday, January 22, 2018/
Do you have clear criteria to assess the relevance and risk of every tender or request for proposal (RFP) that comes into your business?
Do you know how much it will cost you in terms of your time, effort, human resources and money to respond to a tender or RFP?
Do you know what the probability of you winning a tender or RFP is?
If you cannot answer these questions with hard facts and information, you are likely to be putting your business at risk when it comes to responding to tenders and RFPs — and that’s even before you have won the deal.
Here are some things to consider before your leap into the RFP and tender world.
Selling is all about assessing, managing and winning the right sales opportunities while managing cost of sale activity (COSA). COSA is the direct cost-to-company of a salesperson plus the proportional cost of support functions for salespeople, divided equally across the sales team.
To calculate COSA one has to include salary packages for salespeople including cars, phones, insurance, proportional share of support, infrastructural cost contribution and so on.
Every sales opportunity, won or lost, can cost
How much is selling via tenders and RFPs costing you?
Responding to tenders and RFPs can be a black hole when it comes to sucking out resources from your business. If done well, it can be very rewarding, but done badly can cripple a business.
Not all tenders and RFPs are created equal
Someone asked the question on LinkedIn the other day whether people respond to blind tenders. At my company, Barrett, we do not respond to blind tenders or RFPs at all. You have no idea what you are dealing with. It’s up to you what you decide, but we deem these too risky and a poor use of time. Like shooting in the dark or taking a shotgun approach to selling, blind or closed tenders are not recommended.
Even with companies that you are familiar with, if you do not have key contacts in that business already, and cannot do a proper needs analysis of the opportunity, it is not worth it. The probability of you winning the deal is likely to be less than 40%. Why bother?
Unless you have a deeper knowledge of the business, access to key stakeholders, some form of reputation or branding visibility, or your offer is a direct match to what is being asked for, you may need to rethink the tender opportunity.
For instance, late in 2017 we were approached by a major business here in Australia to look at a very large sales training opportunity. The good news is the sourcing team found us on the internet and did a background check on us beforehand. Tick, our marketing and branding is working.
Of course, initially we were pretty excited.
However, once we got into the detail a picture emerged that told us a different story.
We are very big on risk assessment at Barrett. Not all deals are good deals. We did our due diligence on this opportunity. Here is what we discovered using our three-tiered risk management approach:
1. The overall procurement process — is it fair to both parties?
No, this contract was not fair to suppliers. Many RFP, tender and procurement processes are one-sided to the client and often put the suppliers at great risk. This was the case here. We decided we couldn’t fight the beast or change their minds.
2. Is the actual brief logical, well thought out and workable?
This brief was flawed and poorly designed. It was not going to work without a major redesign.
3. Is the brief legitimate? Are they fishing for expertise/ideas and want to do it themselves?
My instincts told me that they were fishing — looking to take suppliers’ ideas and do it themselves. This happens quite a lot, which is why we have significantly reduced the amount of information we put in proposals, especially in the early stages. Do not give away too much.
We also have an ideal client profile checklist that we like to use especially in cases such as these. If the client’s behaviours are unethical, untoward or don’t align with our values we are unlikely to work with them.
In the case of this prospect, we did go back to them seeking answers to our legitimate questions and there was no movement from their side. So we withdrew, which shocked the client. They even asked us to stay but we said no.
Some time-saving tender tips
- Have commonly asked for company information in one location, up-to-date and ready to go. This can include structure, subsidiaries, values, ABN, insurances, policies such as OH&S, quality standards, environment, sustainability, anti-slavery, etc.; achievements, memberships, etc.
- Set up your product or service information in a systematic way, making it clear and easy to understand. Aim for short, succinct messaging that is customer-facing. With technical information, makes sure diagrams, models and so on are well-designed, in picture format.
Remember everybody lives by selling something.