Those are just some of the sentiments that I hear from bid managers and sales executive, when I ask them why they’re avoiding government contracts. To a large extent they’re right to. The average win rate for an SME is an appalling 26% according to PwC’s most recent report into European procurement Activity (Report).
To digress into figures for a moment, the same report indicates that the average contract value is €60,000. Most businesses spend around 5% of the contract value on presales activities. It’s plainly unsustainable to build a 20% margin into your proposals just to break even.
Next time you’re weighing up the odds of spending that money on writing a proposal or having a flutter in the casino, take note that in The Signal and the Noise, Nate Silver noted that the odds of winning at Blackjack in Las Vegas were 48% - that sounds more attractive in the short term than slogging over a proposal you’ve little chance of winning!
But here’s the thing, there’s a small cohort of SMEs who are beating these odds and winning as much as 70% of the RPP proposals that they write. At TenderScout we studied over 100 of these businesses to try and understand what they were doing differently and how we could apply their strategies in our clients businesses.
All companies spend pretty much the same amount (between 3% and 6% of the contract value) on their presales activities; the difference is in where they spend it.
In most companies, around 10% of pre-sales cost is incurred on qualifying opportunities and almost 90% on proposal development – writing content, creating graphics and so forth In the cohort that are beating the odds, they spend three times as much, up to 30% qualifying opportunities (and conversely less time writing actual proposals).
The qualification process is fundamentally data-driven decision making around which RFPs, fit the sweet spot and are winnable. We identified 4 key categories of tools used to help make decision:
- Customer Relationship Management Tool (CRM) to record details of your relationships with buyers and build up a record of your engagement with them.
- Buyer Profiling to better understand who the buyer is, who the key decision makers are, what the buying history looks like, how they make buying decisions, how much they typically spend and what their needs are.
- Competitive Landscape Analysis to acknowledge whom your competitors are, their strengths and differentiators, their relationship with the buyer, their track record, experience and expertise and whether they are likely to submit a better proposal than you can.
- Bid/No-Bid process to standardize decision making in the context of your solution, the buyer need, the competitive landscape, the budget and timescales within which the solution is to be delivered and so forth to determine whether all else being equal your proposal will meet their needs and be a more compelling proposition than that of your competitors.
Businesses are using tools like salesforce, Datahug, VisibleThread and TenderScout amongst others to simplify the process, increasing the robustness of their decision making and ultimately giving themselves a platform for sustainable success.