EP113: Why Bidding Cold Is (Almost Always) a Bad Idea
Companies that are new to government contracting see it as a magic bullet. You respond to an RFP, and you win a lucrative five-year contract!
And yes, it’s easy to get excited about an opportunity that seems like a great fit for your business. But if you don’t already have a relationship with the buyer, you’re chances of winning are quite low.
So, you’re not doing yourself any favors by bidding cold.
On this episode of The RFP Success Show, I explain what it means to bid cold and why it’s almost always a bad idea.
I discuss the competitive advantage you need to unseat an incumbent and describe how insider information helps you write a better proposal response.
Listen in to understand why a buyer won’t take a chance on a vendor they don’t know and trust—and find out why you can’t speak to a prospect’s specific needs and challenges when you bid cold.
Key Takeaways
What it means to bid cold and why it’s almost always a bad idea
The one time it's okay to bid cold and what you can learn from the experience
Why you have a less than 5% chance of winning when you bid cold
The competitive advantage you need to win an RFP (beyond being qualified and capable)
2 reasons why it’s challenging to unseat an incumbent
How insider information helps you write a better RFP response
Why a buyer will not take a chance on a vendor they don’t know and trust
How ongoing relationship building and information gathering allows you to speak to a prospect’s greatest needs and challenges
The #1 mistake companies make when responding to RFPs
How a low win rate impacts the morale of your proposal team
RFP Success Show EP113 Transcription
Speaker 1 (00:00):
You're listening to the RFP Success Show with eight time author, speaker, and CEO of the RFP Success Company, Lisa Rehurek. Tune in each episode to learn what today's Capture and RFP teams are doing to increase their win percentages by up to 20, 30, and even 50% and meet the industry trailblazers that are getting it right. Let's get started.
Lisa Rehurek (00:24):
Hello everybody. And welcome to the RFP Success Show. I'm Lisa Rehurek, your host, and I'm also founder and CEO of the RFP Success Company. And this is an exciting episode because we're back from our summer hiatus. We take a couple of months off in the summer because I don't know if you all know this about me, but I live in the Phoenix, Arizona area and it is hot here in the summer. So the past couple of summers, I have decided to get the heck out of dodge. I take a little hiatus still working, but I take a hiatus from the podcast while I am in much cooler weather, enjoying some cooler weather. So we're back September of 2022. And today, I want to talk to you about bidding cold and it's interesting. I'll have this conversation with people and everybody else say, yeah, we don't really want a bid cold, but you would not believe the number of people that we talk to that bid cold.
(01:15):
So it's an important conversation. If you're a proposal professional, I know you get this, but I also know we have a lot of listeners that are not necessarily proposal professionals. They respond to RFPs as part of their sales job, or they respond to RFPs as part of a bigger job within an organization, but not necessarily proposal professionals. So this is mostly for you all and mostly for the owners of the companies or the managing directors and the VPs of business development that get very excited about an opportunity that looks like, oh, my gosh, this is right up our alley. We can totally do this. And they're like, we have to respond to this. I totally get it. I understand the emotion of it, but I'm here to say bidding cold is a bad, bad idea. And that's what we're going to talk about today. So again, not an unusual occurrence, especially for companies that are newer to government contracting. They say, okay, we want to get into government contracting because we here, you can get a three to five year contract and it's very lucrative.
(02:16):
And so it feels like that magic diet pill, right? I'm going to take this pill. I'm going to wake up tomorrow morning. I'm going to be 30 pounds lighter. That's what people sometimes think about RFPs. They're so easy. You just respond to these questions and then you could win this business, but that's not really true. So let me back up here and just say, what does bidding cold even mean? Bidding cold means you're bidding on an RFP that comes across your desk. You have the qualifications, but you have zero relationship with the buyer. You've had no pre-conversations and the buyer does not know who you are. That is what bidding cold means. And it's almost always a bad thing. And I say almost always, because there is one time where bidding cold is okay. And that's if it's a strategic move, meaning you want to get into the entity in the future, this is an opportunity to get some exposure, get some competitive intelligence, You know that the likelihood of winning is a very low.
(03:16):
In fact, bidding cold, you have a less than a 5% chance of winning. That's a low percentage. So you know that going in. It's strategic, but you'll likely get some sort of debrief. You'll have an opportunity to see deeper into the competitors. You'll get introduced to the buying agency and the buyers. So sometimes strategically, if you are going into it with your eyes wide open strategically, it can be an okay thing to do, but you've got to know going in, you're likely going to lose. This is an investment. You need to communicate that to your team, so they're not frustrated. And there's a real good reason why you're doing that. Why is bidding cold so bad? Well, like I just said, less than 5% chance of winning. That's a lot of time and effort. What happens is your response to the RFP, you end up just answering the questions. Now that sounds like the right thing to do, but your response to the RFP really should be more than that.
(04:18):
So every bidder is going to answer the questions and likely be qualified, but you can't just be qualified and you can't just have the capabilities. You've got to show more in order to win. In order to win, you need a competitive advantage. Now I'm going to do a quick digression here for just a short minute. If we think about an incumbent, meaning a vendor that's already got the contract, there are two main reasons why incumbents are hard to unseat. First is that they have the relationship and the contract. And it's always easier to stay with a current vendor than switching, unless something's horribly wrong. So if you think about your bank, if you've ever thought about switching banks, oh, what a pain in the butt, right? Because you've got recurring payments, you've got things already set up. You've got debit or credit card numbers that then all have to be changed around.
(05:11):
So unless there's a lot of pain there, you don't want to make the switch. Same for these buyers, with their vendors. So that's one thing. But the second reason is that the incumbent has inside information that helps them write a better response. They know more about what the client's real needs are, what their hot buttons are. They know internal politics. All of that doesn't get built into the RFP questions. So if you are not the incumbent, the only way to get that information is to be working on a relationship long before that RFP comes out. I know you're cringing, because you're like, I don't have time. I don't have resources. What a pain in the butt. And you know I'm talking about the incumbent relationship here, just to paint a picture. But at the end of the day, that's the only way to unseat an incumbent is to really understand and make it feel like it's worth their while. It's a long term play.
(06:02):
And I want to repeat that. It's a long term play. So if you're expecting to easily get into state government contracting, it's not going to work. Sure. You might get lucky, but we really just don't see that happen very often. You have to have some prospect intelligence going into the RFP and the buyer needs to be familiar with you. So I use the incumbents as kind of an illustration to really understand how they have an advantage because of that. So how can you create the advantage? Whether there's an incumbent or not, you still have to figure out how to create that advantage. And that advantage is having that inside scoop. Right? So think about this. Would you buy a house without looking at it or knowing anything about it? No. I doubt it. It's a big investment. You don't want egg in your face. You don't want to get screwed.
(06:52):
You don't want to find out that the foundation has a million cracks and is going to crumble at any time. So it's the same thing, right? There is hundreds of thousands, if not millions of dollars at stake and a buyer is not going to take a chance on somebody they don't know and trust. They are not going to. So your job is to help them get to know you and to trust you. And you just simply cannot do that solely by answering their questions without adding additional value, based on outside knowledge of their environment. You just can't write a good solid RFP if you don't have some of that insider information. And the only way to get that insider information is to be building a relationship a year, two years, three years. I'm not kidding before that RFP comes out.
(07:41):
This is why also it's important to target because you can't possibly do that with 50 states. You can't possibly do that with 26 states. You can't possibly do that even with 15 states. You've got to narrow down your targets and work hard to build those relationships. My soapbox, this is my soapbox. With some ongoing relationship building and information gathering, what happens is you get armed with more information than just what you learn in the RFP itself, which really is generally what I call skin deep. Meaning, it tends to be more surface-y, like RFPs are written by a committee and they generally have more of a politically correct bent or kind of that professional writing bent to it. What sounds good, but it's not really getting to the meat of what the challenges are. So when you've got these RFPs again, they're kind of written by a committee. They're not written emotionally, but they're going to buy based on the emotions that they feel when they're reading your response.
(08:44):
When you have done a great job with relationship building and information gathering long before the RFP comes out, some of the things that you're going to be able to do is you're going to be able to talk to what their biggest challenges are. And again, that always goes deeper than just what they write in the RFP, because nobody wants to put out all their dirty laundry, but the more you talk to them, the more live conversations you can have, the more you get to know them, and you're building this connection, they're going to let things slip over time and you're going to learn things. If there is an incumbent, you might learn something that they don't like about their current vendor, even if it's subtle and you can write to how you're going to help them overcome that.
(09:27):
Again, you're not going to call it out, but you're going to write to it. You can prove that you understand their environment better than your competitors. You know why? Because you did the work to get that information long before the RFP came out. You can write to their needs and their challenges instead of making it all about you. One of the number one mistakes companies make when responding to RFPs is that they make it all about them because that's the way that the questions are written. But at the end of the day, the evaluators and the buyers, they want to understand what's in it for them. How is this going to make my life easier? How is this going to solve our problem? And you can write to that so much better when you really understand what they're going through and what their needs are. You can also better tailor your experience to their specific needs, going deeper than what shows up in the RFP.
(10:19):
So the RFP will say, here's a statement of work. Give us your experience, your past performance on this. So you do that. And it feels like it's connected, but if you know more and you have a better background of really what they need and what they're looking for, you can write to that so much better and tailor those experiences into things that are going to show up for them and their environment and all of these things that I'm indicating here are trust builders. They're going to be like, oh yeah, they totally get it. Or, oh yeah, that's exactly what we're going through right now, too. How cool is it that they've got that experience that maps exactly to the problems that we're having?
(11:01):
So there's just so many different ways that you can write better and position your company better when you're armed with that information. And it just makes a massive difference. Every client we have comes to us thinking that they can do without that. And guess what? They find out differently because they lose. And they're like, we don't understand why we lost. We met all the qualifications. Well, you and six other firms. How did you differentiate yourself? And we will do an RFP audit on prior responses. And we'll say, you're not speaking to them or about their challenges at all. You're just talking about you and what your qualifications and your capabilities. And again, while it feels like that's what you're supposed to do, there's a different positioning that will really help you stand out. And I know it's hard work. I know it's time and resources, but as with any sale, that's part of the process. And that's part of what will make you a winner. And if you look at all those companies that they've got 70, 80% win rates, they do this very well.
(12:06):
They do this very well. When we look at our clients that we've helped increase their win rates. We've gotten a lot of wins for our clients, it's because they do this well. And then we help them write to it and we help ask the right questions or we help position them for that along the way. So if you're bidding cold, you have less than a 5% chance of winning. So third time I've said that because it's so important. And I don't know about you, but I don't like those odds. That is likely not worth your time, your money again, unless it's strategic. The other thing that it does is it brings your staff down. Like you keep losing over and over. And the staff are like, oh my gosh, we're putting in all this time and effort. Everybody gets a little bit more stressed. Everybody gets a little bit more frustrated and there's a lot of demotion that starts to happen.
(12:54):
And whether it's conscious or not, your staff will go into the next one thinking, well, we're going to lose this one too, because we're not winning anything. So you do not want to be in that kind of an environment and you don't want to be building that kind of a culture. It's just a ripple effect and it's not a good ripple effect. So bottom line, don't bid cold unless you have a strategic reason to. And if you've got people in your organization that are hell bent on bidding cold, have them listen to this. I have 25 years of experience in this. I have a team full of experience of this. We know this industry, we know RFP responses in the state, in the SLED environment, state, local education. And we know this to be true. So we're not just talking about this because we think it's true. We know it to be true. We've experienced it for 20 plus years.
(13:44):
We talk to evaluators all the time. It's one of their biggest things are like, if we don't know you, the likelihood of you ever winning is pretty much zero. So stop bidding cold people. Stop bidding cold. Thanks so much for listening and we'll catch you on the next one.
Speaker 1 (14:01):
This has been another episode of the RFP Success Show with Lisa Rehurek, eight time author, speaker, and CEO of the RFP Success Company. Thank you for joining us. If you have feedback on today's episode, email us at podcast@rfpsuccess.com. No matter your business size, industry, if you have an in-house RFP team, or need outside support, the RFP Success Company helps increase RFP win ratios by 10, 20, and even 50%. Learn more at the RFPsuccesscompany.com.