If your sales force is spending a lot of time on RFPs, but not bringing in a lot of new business, then you might need to consider new investments in your business model.
Building and investing in a winning business model will create much more value than even the best sales teams. We've argued recently that getting your business model right is the best gift you can give your sales force, and we dare to imagine a world where, if your business model has enough competitive advantage, you could fire your salespeople.
This brought a question from Kevin Cray of Wayne O'Neill Associates about responding to Requests-for-Proposals (RFPs):
Bill and Karl,
I couldn't agree any more with your insights on its not about having more salespeople, but it is about the relationships piece. I work for a small firm (15 people) where all we focus on is "coaching" our clients on how to build the relationships that you are referring to, but the toughest challenge is getting them out of chasing around after RFPs all the time to get work. I think the biggest challenge is that people don't truly understand how much work it is to maintain these relationships.
We agree with Kevin that building a business is about relationships. In many markets, RFPs are the way work gets done, and in some cases, such as government contracts, the RFP process is necessary to ensure that the client's needs are met. Here are our suggestions on how to win more RFPs without sacrificing time spent on relationship building.
1. Deliver more customer value than competitors.
Clients pay for value, even in RFP situations. If you build a business model that creates customer value--significantly more than competitors or substitutes--you will often win the work, even if you are at a higher price. By definition, customer value is something that a customer is more than willing to pay for, and in our experience, customers choose value over price.
2. Your relationship with the customer creates customer value.
The relationship you've built is usually worth paying for. Relationships are based on trust, and customers recognize that the bidder with the best price may be more costly if they can't trust that the work will get done right or on time. Even in a competitive bidding process, relationships usually make the difference. We've seen many cases where the work is awarded to a higher-priced firm over a lower-priced firm due to the trust that the firm has built with the client.
3. Invest in your business model.
Advantaged business models reduce the number of competitive bidding situations, because customers realize that the advantaged firm will deliver more value, which minimizes their need to shop around. A better product or service will also increase the ability to win in a competitive situation. Think about what you would have to do to make your product or service an obvious choice for the customer, then consider the investments required to get you there. Whether it's a key acquisition or additional R&D investment, the point is not to rest on your current business model if it doesn't create a clear customer advantage.
These aren't easy steps to take, but when focusing on the long-term growth of your business, putting yourself in the position to win every time is the right thing to do.
KARL STARK AND BILL STEWART are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark