How to Tell if an RFP is Worth the Time Investment

Lead Management 17th, Jul 2013


Everyone loves to make a sale. Everyone likes to hear about a new customer. Because of this, even the best salespeople can respond emotionally, rather than rationally, to a request for price (RFP) or a request for quote (RFQ).

The best way to ensure a rational decision-making process is to come up with a worksheet for salespeople to fill out every time. Here are the steps to developing a worksheet for your business.

1.      Estimate the value of the potential customer. Come up with a reliable formula for determining the likely value, both initial and over time, that different kinds of customers represent to your company. This formula might include:

  • The overheads of this particular good or service.
  • The odds of a customer returning for an additional good or service.

2.      Estimate the strength of your company in different factors of the request. The most accurate way to estimate this is by looking at past performance. Create a formula with the following measurements:

  • How many RFPs has your company produced that included this factor?
  • How many RFPs with this factor actually resulted in a sale?
  • Divide these metrics to produce a percentage value.
  • Average the percentage values for all factors of the customer request.

3.      Multiply the estimated value calculated in step 1 by the average percentage value calculated in step 2 to produce an objective value score of the RFP as a whole.

4.      Remain reliant on personal judgements to start, but keep track of the value scores of all RFPs that you complete, the cost of performing the RFPs, and the actual payoff from these customers. Create an excel spreadsheet that does the following:

  •  Subtract the cost of performing the RFPs from the actual payoff for each RFP, and enter it as a Y value.
  • Enter the value score as an X value.
  • Insert an X-Y scatter graph.
  • Analyze the graph. You should have a fairly even distribution, beginning with RFPs of lower value scores producing losses for the company, and ending with high value scores producing great profits for the company. There will be outliers on both ends of the spectrum. Calculate a trendline.
  • Find the value score above which RFP responses are most consistently profitable.

5.      Enforce a lower limit for value scores that merit a response. Your salespeople should calculate value scores and follow this limit absolutely. Make sure that your salespeople understand that responding to RFPs is not a personal decision, but a business decision. You can’t afford to take risks on RFP proposals that are not likely to pay off in profits.

6.      Create a worksheet to help salespeople quickly enter and calculate relevant information for each RFP.

Developing a quantitative system takes a lot of time, but will save you time in the long run. It is necessary to remove emotions from the process of deciding which RFPs are worth responding to.

By: Tyler Shannon

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