When it comes to selling to corporate America, there's good news and bad news for small and midsize companies. The good news is that today's corporate buyers are less likely to select vendors based on prior relationships or reputation alone -- meaning that more suitors are allowed into the dance. The bad news is that the dance has become a lot more formal.
Where there's formality in corporate purchasing, the request for proposal, or RFP, can't be far behind. RFPs have long been used by government agencies seeking vendors. But in today's era of strict corporate governance standards, RFPs are being issued more frequently for private-sector contracts, as well. The internal control guidelines set by the Sarbanes-Oxley Act, in particular, have put the kibosh on single-source, relationship-based purchasing contracts. "The RFP process has become the standard gatekeeping model for any contract of any significant size," says Steve Banis, principal at Ross McManus, an Albany, N.Y., business consultant.
As anyone who has responded to an RFP knows, the process can be exhausting, and a 33% success rate is considered excellent. There are three main challenges to any RFP response: getting invited to take part in the first place; gathering the data to answer the issuer's questions; and writing, packaging, and presenting the proposal itself.
Unlike government contracts, private-sector RFPs don't have to be publicly listed. The only way to hear about them is to spend a lot of time networking with people who will tell you when they arise, says Rebecca Hefter, vice president of training at Novations, a Boston-based corporate training firm that responds to about a dozen RFPs each quarter. "Our most successful proposals are for clients we know well enough to discuss the contents of the RFP with beforehand," she says.
Once you're in the game, research is key. In January 2004, Yamamoto Moss, a Minneapolis marketing firm, responded to an RFP issued by a major financial services firm for a contract worth about $250,000. In response to a general question about the issues facing the brokerage industry, one of its staffers spent several days at a local firm observing brokers. "It went a long way toward winning us the business," says Shelly Regan, the firm's president. The client has since turned into Yamamoto Moss' largest.
Before cobbling together a proposal -- which usually runs from 20 to 50 pages with a three- or four-page executive summary -- expect to spend long hours debating, writing, and proofreading. It can get expensive. A response can take several weeks to complete (a typical RFP comes with a deadline of between four and eight weeks). That's a lot of potential billable time left on the table.
Forget the handshake deal. Today more contracts require a formal application
Vermont Electric Power Co., a public utility in Rutland, Vt., issued more than a dozen RFPs in 2004. What does the agency look for when evaluating the responses? "A company has to have completed a project similar in scope," says Dean LaForest, a senior planning engineer. "It also doesn't hurt to have a human being who can come in and be able to answer questions and address issues." Indeed, while the paperwork involved in responding to RFPs can be daunting, many competitions hinge on the presentation phase, in which potential vendors must back up their rhetoric by showcasing their teams in a high-pressure boardroom environment.
That adds up to a lot of pressure -- enough to make one long for the simpler days of the handshake deal. But for those firms that don't bump into the right people often enough, an RFP can be a great equalizer. "Almost all of our big clients were gotten through the RFP process," says Novations' Hefter. "If you want to do big projects with companywide application, you have to be able to succeed at RFPs."