This year we have seen an increase in the number of Requests for Proposals (RFP) coming across our desk. They are a curious process that in most situations we are largely not fans of and always advise our clients to only go into an RFP process if they’re guaranteed adequate access to the decision makers.

The cynical view is that all too often the decision has already been made and an RFP only serves as a compare and contrast document internally.

Why companies go to market with an RFP are due to a number of reasons. Obviously, government, not for profits and some businesses are required to be seen to run a fair and honest process. Alternatively, they may want to allow for procurement to feel comfort in the decision making or provide an opportunity to gather as much detail as they can in a formal structure. Although it can be deemed as a way to reduce risk, we would argue the opposite.

We have been asked to be involved in twice as many RFP’s this year compared to the whole of the 18 months prior to that. Some we have said no to as we were not allowed any contact with the decision makers and that does not fit well with us. The others we have a mixed bag of results, we have won some and lost some. What I would like to share however, is that time and time again it is highlighted to me is that in our industry (and I am sure in most others) that these are not a smart way for either a company to choose a supplier or for a business to win clients – both sides are not giving themselves the right opportunities for success.

A friend of mine is in advertising and in that industry especially the standard process is a brutal process of pitching for business. Large companies go out to a selection of advertising companies and ask them to ‘pitch’ which involves a huge amount of time, energy and money to be spent for the opportunity to work with this company. These businesses are effectively receiving free creative work at the cost to the advertising business, often into the hundreds of thousands. It can take these agencies a year of working with their new client to recoup their investment and then guess what happens? The company will go out to pitch again!

What a way to start a business relationship, you are on tenterhooks that the client will leave you and you can’t help but be a little bit aggrieved that the power of the relationship sits with the client. To me a good client relationship has to start with an open relationship so that both sides can learn about each other’s values, the way each other works, a consultative approach that allows the company to share with the client a different way of doing things. If you don’t allow a business to guide and push a business into potentially a better way then why call on an expert?

Here are a few reasons why the RFP process is (in my view) flawed in many situations:

  1. RFP’s don’t allow for companies to truly understand each other
  2. Decisions are often made on the wrong basis such as reducing cost or reducing risk as opposed to adding value,
  3. Decisions are made by committee which is most of the time ineffectual
  4. No opportunity to build an even relationship, the company answering an RFP usually feels like they have less power
  5. When you win an RFP you are often wedded to the proposal, meaning that it is often difficult to make changes as you make discoveries
  6. Whenever you properly engage with a supplier there is an opportunity to learn and improve your understanding of their needs which are limited in a formal process
  7. Sellers can waste a huge amount of time going into an uneven process
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Mike Stokes
Mike is the CEO and founder of Indicator. Mike loves working with companies to achieve improvement of sales capability and revenue. Previous roles have also included Sales and Marketing Director at The Icehouse, working with hundreds of entrepreneurs and business owners focused on growing their business. It was during this time that Mike saw considerable need to support the sales management capability of businesses of all sizes. Prior to joining The Icehouse Mike was the Managing Director of Artmount NZ Limited achieving considerable growth due to implementing a strong sales focus and successfully exiting the company in 2007.