Archives For rfq

Vegas Shot from the RIO

In a recent executive coaching meeting, the subject of RFPs came up…this is a common issue for both resellers and technology manufactures – one worth addressing here…

The confusion comes when we try to relate this to the sales strategies I’ve described over the past several months.  The four things buyers buy – is this operational efficiency, risk mitigation, return on investment or competitive advantage?  Creating an effective value proposition means selling to the 95% who don’t know they have a need, but this person seems to know all about their needs.  Am I coming up with one of the four things or is the client?  How about the four meetings I’ve written about?  Which meeting are we in – where are we entering the sales cycle?  All of the rules suddenly don’t fit.  How about the fee setting rules; is there a way to value price this request?

The request is almost always initiated by an influencer – someone without liability, so where is the urgency?  In my 4 meeting sales model, it isn’t until meeting three that you would be discussing budget, and that would happen only after value has been demonstrated and quantified with asset owners.  Fees discussions usually take place by phone after I review the client’s exact needs and pin point exactly what we are going to deliver- at this point I am looking for a verbal agreement.  Without a verbal, there is no written proposal in my world.  So now, in this new situation, you can see we have violated almost every rule.  We are taking a request from an influencer, bypassing the value proposition phase  with asset owners, eliminating any type of discovery or assessment, and now we are sort of working with an influencer to discuss price –  the wrong person; and way before any value has been established.  It doesn’t make sense because it isn’t a good way to buy or sell.  In most cases you will lose this sale to the person who was chosen before the RPF was ever written!   And the client will end up with something that doesn’t really meet their need.

Here are a few rules I follow to keep this from happening.

1. I understand RFPs are written, usually because the influencer is required to get competitive quotes.  Remember, influencers have needs, and staying within budget isn’t one of them.  Given the chance, I  thank them for the opportunity, and then work to get a meeting – my hope is to get a meeting higher up, either now or in the near future, but before I write anything.  At this stage, I am looking for the true needs of my buyer, working to meet them if possible some some creative alternative.

2. The winner has already been chosen in most cases – knowing this, I also know it will be an upset if I win, therefore we need a strategy that upsets the entire process.  This usually requires convincing someone internal to the process, that they won’t acheive their desired results if they continue with their current approach.  Luckily, RFPs have a poor track record of delivering the desired results, so this isn’t .  Showing up with some case studies helps reinforce this point in the mind of the buyer.

3. REFs strip out the value differentiation of mine and any competitor offer, other than price.  There’s no reason to continue unless I can convince someone to take a look at my value – which is always my intellectual capital, not my price.  Rather than spending 40 hours on a response, I spend my time trying to connect with the buyer on this topic.

4. If all fails, I am ready to walk.  But always on good terms.  There’s no reason to upset those who truely believe they are doing the best thing for their company, or simply following what they have been directed to do.  Instead, leave on good terms, with the buyer wishing you had responded, but wondering why you did not.  There may be a future opportunity in the form of a rescue mission if things don’t turn out as expected.

© 2011, David Stelzl

 

Advertisements

Photo taken by David Stelzl

For some reason, discussing money is the major hurdle.  Yesterday I had several sales calls with potential buyers.  One example stands out… We had discussed the need, talked about options, come to a conclusion on next steps, and even picked dates to begin.  My prospect then said, “Send me a proposal with some options and pricing.”

I was tempted to agree, but then that little voice reminded me of Mahan Kalsa’s book, Let’s Get Real or Let’s Not Play (which I highly recommend). Why would we wait for the proposal to agree on options and pricing.  Paper doesn’t sell, I do.  We have verbal agreement on the vision, but no specifics.  Why waste time and possibly ruin the opportunity by putting the wrong thing down on paper?

Instead I simply said, “Let’s review some options right now and make sure we are in agreement on how to proceed.”  I verbally gave him my interpretation of what we were planning to do, offered a couple of options, restated the value, and then offered a fixed fee.  I then said, “How does that sound to you?”  He said, “That sounds great.”  Now I can write the proposal, which is now really an agreement, with confidence.  I converted it to a PDF, attached it to an email, and wrote, “Here is exactly what we agreed to.”  The likelihood of closing this kind of agreement is much higher than the elusive agreements made in most sales meetings.  Meetings end without any real commitment, and the request for proposal is often just a polite way of ending the meeting.  There is no agreement, and there are no specifics from which to craft the proposal.  In the end, this type of proposal goes nowhere, leaving the sales person to forecast at 50%.  In other words, I have no idea…

© 2011, David Stelzl

Justifying your Fee

October 29, 2010 — 2 Comments

My son has never had pizza!  Can you believe it…you should know by now that I eat pizza at least once a week, and that’s a bad week for me.  Why have I deprived me son?  Be cause he is allergic to everything.  Gluten (which knocks out just about every restaurant bread), wheat, corn, dairy…that is, until yesterday.

After seeing numerous doctors, some local, some far away, we finally have the problem solved.  The local doctors offered him cortisone to treat skin rashes which covered his body head to toe when he was an infant.  My wife, believing the surface treatment was the wrong answer, began researching this.  She soon discovered the food allergy problem, which is actually the result of your body not properly digesting a food, which leads to a toxic substance in the body rather than properly digested food, which in turn must come out of the body, generally in the form of a rash.  Well, with a long list of allergy foods in hand, we were able to keep Tiny Tim (as I call him) somewhat free of rashes.  The problem is, that means Tiny Tim can only eat a hand full of boring foods while watching the rest of us enjoy pizza and ice cream.

Then a couple of months ago someone refers us to a doctor just three hours from my house.  Two visits, three weeks of treatment using natural products (no drugs), and he’s free to eat whatever.  Of course Insurance doesn’t pay for this type of treatment…it’s all out of pocket.  But do you think I questioned the fee?  Did I send out RFQs, collect three bids, push the doc for a 30% discount, count his hours?  No!  He solved a serious problem using his intellectual capital.  He earned the right to advise me, charge me, and convince me to call him the next time I have a medical need.  This is the essence of becoming the trusted adviser.  This is not a commodity.

PS.  Tiny Tim and I are having pizza tonight!

© 2010, David Stelzl

After several posts on proposals and some words on pricing, people have responded with all sorts of reasons on why they can’t give a fixed price.  Believe me, I understand the dilemma.  If you just don’t know what it will take, you don’t want the risk…here are the common objections:

1. Client doesn’t want to pay more than the hours they see you onsite.

2. You always lose when you fix price

3. No one knows what it will take to complete the job

4. What about scope creep

and the list goes on – feel free to add some below and I will respond with my take…so what do we do?  First let’s understand the real issues:

  • When you do T&M the client sees it as T&M with a cap.  Even if you say, “there is no cap”, they expect one.  If someone quotes me $500 to fix something in my house and sends me a bill for $2000, we are going to have a problem.  Even if I pay it, it’s probably the last time I hire them.
  • When there’s a cap, I take all the risk.  If we come in early, I make less just because I was efficient.  In other words, I sold the $10,000 deal, got the approval, and perhaps a PO was issued for $10,000.  And I’ve even forecasted it!  But I only bill $7000, leaving 3K on the table.  I just lost commission on 3K and my company lost the balance right off the bottom line.
  • On the other side, if I go over, the PO is issued, the people I am dealing with have put the funding together, it’s all signed off and ready to go,  but three weeks later I am back in their office trying to get the PO increased.  What do we do?  Put everything on hold while we wait?  That will go over well with my clients!
  • Or I decide to keep going with no further approval.  Every dollar over is a loss in profit, and if my firm charges me a burden cost on services, which they should if they are smart, I really take a loss.  Before I know it, there is no GP left in the deal and my commission in zero.

So why do people continue to justify the T&M approach?  If you find you are losing on every deal, see if there is a trend.  I had one client who was losing about 25% on every deal.  Well, that was simple, start adding that amount to every new quote and you will be right on.  If the price is too high, the T&M quote is too high – another issue solved.  If the client only wants to pay for hours you can prove you spent, the deal was sold on price, not value, if you just don’t know, break it into phases and quote what can be quoted, estimate the rest for phase 2…stop quoting T&M prices!