In last week’s post, I referred to the likelihood that the RFP world is undergoing short-term and medium-term change caused by the COVID-19 pandemic. It’s likely you’ve already discovered this for your business.
In a quick survey among over a dozen of our clients plus consultants who advise on the RFP process, we see that three things are happening now and are expected to continue even when the situation becomes less severe:
Why Fewer RFPs?
This is a question with an obvious and a not-quite-as-obvious answer.
The obvious – some businesses must retrench. They have to conserve cash. So expensive, or even the less expensive but not urgent projects, will be put on hold.
The less obvious – RFPs that are issued will go to fewer potential providers than before. We’re picking up definite indications that this has started. With money tighter, if a project is put out to bid, the originating company wants to be 100% certain that the project will be done well and on budget. Some will feel they can’t take as big a chance on hiring an outlying firm, even if that firm might’ve been given serious consideration in normal times. So, for you the firm in pursuit of the business, the RFP might be out there, but you’re not being invited to pursue.
One more consideration: For those RFPs that are issued, in a world where budget is now tight, companies will be looking to spend less on each project that they put out to bid. For the pursuing firms, it means the likelihood you’ll be pressured into lower fees and maybe lower margins.
The New Maths: Wins and Losses Matter More
So here you are. You’re receiving some RFPs, you have some projects to pursue pre-RFP, but not as many of both as you usually do. That means every win and loss matters more.
Let’s say you’ve been happy with a conversion rate that’s historically around 30%. You typically submit five proposals a month, or 60 a year, converting 18. And let’s say each win has been worth an average of $1,000,000 in fees.
Here comes the new normal. You’re now looking at 30 opportunities a year. A 50% reduction. Are you confident you can win 18 of 30 (60%) when historically your win rate has been half of that? And maybe the value of the 18 wins is now reduced by 20% in revenue and profit. To meet your new business target, even if you’re winning 60% of the time, you have to make up a $3.6M shortfall in revenue. Take it another step: To make up that revenue gap, you have to win four or five more pursuits out of those 30 available. Now you’re talking about winning 22 out of 30, or a conversation rate of 73%. And that’s from a historical rate of 30%.
You Must Do Something Different
Most pursuit teams can’t expect to double their conversion rate just because they have to. Teams must consider major changes to how they pursue new business and respond to RFPs. Change can come anywhere in the business development cycle:
- Bob Wiesner
As businesses assess and adapt to the new normal, we’re hearing a consistent hesitancy to resume their pre-virus business development activities. Reasons are many.
“Our own prospects are postponing RFPs”
“Our people are remote, our teams are scattered”
“We’ve got to cut back on investment”
If a company is concerned that current conditions make it hard to engage in new business activities, well The Artemis Partnership has something for that company to consider:
Now is the BEST time to ramp up new business activities
There’s a fundamental truth which all businesses, especially professional services firms, have to understand and accept, and it transcends the current business situation: The pursuit is won well before the RFP is issued. It’s that time period before the RFP when some competitor has established close relationships with that prospect. And it’s so much easier to do it before the RFP (and before procurement gets involved). By the time the RFP is issued, decision-makers already have a pretty good idea who is most likely to win – or at least who is least likely to win. And the pursuing team has learned how to best position itself and its solution.
Now that many projects and their associated RFPs have been delayed, it’s the perfect time to reach out to those prospects you want to work with. It’s the perfect time to show you understand the challenges they’re facing. And you’d like to talk about how you can help them be successful when some kind of normalcy returns.
Fewer RFPs is one likely outcome of the crisis
Depending on your profession, it’s reasonable to expect fewer projects and RFPs when companies emerge from crisis mode. If your business is oriented toward growth – or even sustaining your P&L in difficult times, you’ll want to get involved is as many appropriate RFPs as possible. And if there are fewer opportunities to pursue, the stakes of winning and losing the ones you do get in are way higher. You simply have to win more often than you were before the crisis.
Minimally, then, you must start building relationships and establishing your value NOW. And, given what we said above, you probably have the time to do it, and your prospects have the time to engage with you.
What is your firm doing now to maintain business development momentum?
Bob Wiesner | Managing Partner, Americas - firstname.lastname@example.org
Ian Forbes | Managing Partner, Europe - email@example.com
Graham Kean | Managing Partner, Asia - firstname.lastname@example.org