The most immediate effect of a lost RFP is the absence of new revenue.
Companies depend heavily on their proposal teams to secure opportunity wins on a consistent basis. New contracts equal new revenue, that’s obvious.
However, when a company loses an RFP opportunity, the ripple effect is felt throughout the company.
The annual average win rate for government RFP wins is less than 20%. In considering the time and resources that go into bidding, the costs add up. The cost of direct employee salaries in and of itself is significant.
However, the hidden costs can be just as significant, and include:
- Lifetime customer value — New contracts don’t just equal new revenue in the now; they also create future revenue potential.
- Hard expenses — Expenses spent completing a failed RFP can be a hard-hitting dose of reality. Hard expenses include direct employee salary spend, technology, printing, supplies, travel and outsourced support.
- Market credibility — Whether we like it or not, reputation matters. When a company repeatedly loses business, they begin to lose precious market credibility.
- Competitors begin to own you — As confidence wanes within high-loss-ratio organizations, competitors gain an edge.
- Team motivation and engagement — When a team loses an RFP, organizations often lessen emphasis on rewarding and motivating team members. Continued losses create a domino effect of frustration, burnout and demotivation.
When considering these direct and indirect costs, the importance of bidding smart becomes imperative. The best course of action is to define the high-value client and develop assessment criteria to avoid bidding on low-potential opportunities.
 Lisa Rehurek is CEO and founder of The RFP Success® Company. |
