When it comes to answering a request for proposal, there are few important statistics you should take into account.
According to TSIA’s research paper, “Making the Move to Outcome-Based Selling,” an RFP is usually sent to an average of 7-8 companies, while the minimum is around three and the maximum between 10 and 12 companies.
On the other side, the average win rate (the conversion from response to a deal closed) is just in the single digits.
Moreover, more than half of all RFPs don’t receive a final decision, as the customer decides against moving forward with the purchase.
So there’s no surprise that a lot of salespeople believe that RFPs are not necessarily a good idea. Even so, most companies are still required to go through an entire formal procurement process, which involves receiving proposals from various companies.
Isabel Gibson, who worked on more than 85 responses over 25 years, considers proposals responsible for burning people out and even making them feel miserable at times.
In her book, Proposals: Getting Started and Getting Better, she attributes the difficult part of answering to an RFP, to the scramble to meet the deadline, which can even lead to conflicts within the team. Her recommendation is to “head into the battle well-armed”, especially if you aren’t the biggest fan of writing proposals.
As for us, we understand that the weapons you need are answers. Answers to some questions you need to ask before answering a request for proposal. Let’s take a few moments and see which are the most important.
What to ask before answering to an RFP
1. Do we have a project manager or project lead?
This can be considered crucial. You and your team need a primary point of contact, in case vendors have any kind of questions. This person would also be responsible of making sure that the RFP response process is moving forward smoothly.
2. Do we have a clear budget?
It’s also very important to establish financial limitations when answering to a request for proposal. If this doesn’t happen, there’s an increased risk of being ‘seduced’ by something you just can’t afford, at least for the moment.
When it comes to RFPs, receiving input and approval from your C-suite regarding the budget is an essential aspect of the answering process.
3. Do we have a list of key stakeholders and/or evaluators?
An entire team or even multiple teams are involved in the answering of an RFP. We previously discussed this in an article about managing an RFP across large teams. Specifically, we’re talking about key stakeholders and evaluators, as well as departments like IT, procurement, and legal.
Why should you list them before answering an RFP? To make sure that you have all the people you need for the RFP response process. The earlier you include them in the discussion, the better the outcome of the request for proposal.
4. What’s the problem we want to solve?
It should be clear from the beginning why are you and your team are answering to the RFP in question, and what you are hoping to improve.
Among the first things that you should point out is the problem the potential client is facing. This should include specific pain points, identifying any improvement or growth opportunities. And in the end, the steps needed to solve the problem.
5. Are we eligible?
You’ve established that you can solve the problem. But before you start the actual work on the RFP, look once again at the posted requirements and see if you’re truly eligible.
In most cases, a request for a proposal includes a questionnaire or has a specific portion, detailing requirements. Only after confirming that you can meet all conditions, should you move forward to developing your response strategy.
6. Do we have any chances of winning?
Considered by many the most important question, it’s actually tied to several variables.
For example, a lot of legal companies try to respond to all RFPs, as a way to promote the company, even if they are not selected. This isn’t necessarily a winning strategy.
We’ve previously discussed how to know what are your chances of winning an RFP, in an article about the RFP response formula that can help you get a higher close rate:
- According to an industry study, the average win rate for RFPs is slightly under 5%. This means that only one proposal in 20 is successful.
- Presuming that the average size of your proposals is around $20,000 dollars and you end up closing one of these proposals, you gain 20,000 dollars in net new business. Still, you will also lose an average of 30 hours for each of the other proposals you’ve sent.
- Considering an average hourly rate of 25 dollars, you can end up losing more than $14,000. That is without taking into account the costs of opportunity, overhead and many other variables.
We know, answering to an RFP is not always the easiest work. It can be challenging for the entire team, but the good part is that there are tools like Kaito that can help you do it more efficiently.
We’ve also put together a guide to help you figure out if a request for proposal is worth answering. It’s a hard decision you have to make when it comes to allocating resources to the RFP response process.
Account value, knowing the final decision-makers, the opportunity for discovery and dialogue, solution presentation manners and, of course, deadlines, weigh a lot when a manager is trying to figure out if answering to an RFP is the right thing to do.
What are the questions you usually ask within your team before answering a request for proposal? Leave a couple of lines in the comments section below – we’d love to hear from you.