Flattered to be asked to respond to an RFP?
You shouldn't be. Here's why they're bad for your business;
if you respond incorrectly!!!
When a potential client issues a Request for Proposal (RFP), it can be tempting to throw your hat in the ring. But responding can dilute your brand, undermine your credibility, shave your margin and ultimately devalue your company when it is time to sell. Here are seven reasons to take a pass the next time you’re invited to respond to an RFP:
1. Tendered business doesn’t stick
Even if you win the work, the same rules that forced the company to tender the RFP in the first place will kick in again and force them to host another beauty contest next time, no matter how good a job your company does.
The value of your business is linked to how repeatable your model is. Acquirers consider RFP-won business as risky and they’ll likely discount the revenue as “one off.” By doing RFP work, you’re running on a hamster wheel instead of building value.
2. RFPs dilute your differentiation
Responding means you are agreeing to be shoved into a box with a bunch of half-rate competitors who compete on price. You’re better than that.
3. RFPs cut your margins
The RFP is structured so that the customer designs the specifications of the job and then you explain how cheaply you can deliver their specs. The buyer is trying to get the very best price using an apples-to-apples comparison. Do you want to compete on price? If so, don’t expect to sell your business.
4. They decide the rules, not you
The role of an entrepreneur is to conceive of what the market does not know it needs. Nobody thought we would need a thousand songs in our pocket, but Steve Jobs wasn’t reacting to customers’ requests. He was leading them to something better. By responding to an RFP, you let the customer decide how you do your job. Great companies lead their customers--they don’t follow them.
5. They’re rigged
Most RFPs are sent out so the decision maker can say they tendered it. Buyers feed secret information, hints and suggestions to the company they want to win, and more often than not, the decision is made in someone else’s favor before you even submit your proposal.
6. RFPs send the wrong message to your people
When you decide to respond to an RFP, your staff will scramble around pricing the job, writing prose and giving away your intellectual property. They’ll wonder why you don’t have the stones to stick to your business model and why you are willing to let a customer manipulate you like a marionette.
7. RFPs undermine your company's saleability
But what if your industry relies on RFPs for work? Then change the definition of what you do from being in the XYZ industry to being the world’s best maker of whatever product or service you sell. Next time you get an RFP, reply with something like this...
