Whenever I talk about price, I know the question is coming. And so it did on Wednesday, as I was speaking at the ASI Show in Dallas. “Troy, I do a lot of bid business, particularly with government and schools. How can I maximize my price in the bid process?” Internally, I groaned a bit. You see, I never enjoyed doing bids, and I never enjoyed selling to the government. The reasons are the same – the things that are fun about selling (discovering needs, using expertise, building relationships) tend to go out the window in this environment. Over the course of my career, I’ve probably no-bid at least twice as many opportunities as I’ve bid.
However, the person asking the question needed an answer, so I gave her a couple of quick tips. The trouble is that I felt like I left something on the table; bidding is too big a subject to cover in a 10-minute Q&A period. So with that in mind, I do have quite a few pointers in dealing with what happens after your customer says, “We have to get bids.”
Is it really bid business? The first thing to ask yourself is, “Is this a real bid or a created bid?” If it’s government or a private company tied to a government project, they very well might be required, by law or regulation, to obtain multiple bids. On the other hand, if it’s private enterprise, the problem is that you’re talking to the wrong person; you’re dealing with the information-gatherer rather than the decision maker. At this point, it’s usually too late to get in front of the decision maker.
Who helped write the bid? Here’s the cruel reality of bid business, private or public. Someone – usually a salesperson – was able to get next to the decision maker and form a relationship. This relationship allowed them to write, help write, or influence the bid spec. If that’s not you, your chance of winning this bid is probably 15% or less. That’s because the competing salesperson – if he’s smart – put ‘poison pills’ into the bid that greatly skew it in his or her favor. This can be by having brands specified, or product specs that only his product can meet, etc. Don’t get mad – if you’re smart and you have the opportunity, you’ll do it too. I did.
What is the awarding criteria? This question is important to ask, and unfortunately, you have to put the answer through a filter. If the criteria is ‘price only,’ then you’d better be prepared to be the low price and low profit provider. Keep in mind that your customer will not adjust their expectations of service based on the lowest price. If the criteria includes other variables than price, you should know what the prioritization will be for the various criteria. Again, put it through your filter. Are they giving you the real answer, or are they simply trying to draw in your bid?
Will the decision maker see you? If you can’t get an appointment with the person who will make a buying decision, what in the world makes you think he/she will purchase from you? If I can’t get an audience with the person who will actually make the decision (either face to face or, in the case of non-local business, a phone appointment), it’s an automatic no-bid for me. That just means that the deck is so far stacked against you that your bid is only to ‘keep someone honest.’
What is the bid opening process? Government projects typically are a sealed-bid process with a specified opening time. If it’s a truly fair process, you should ask to be there when they are opened. On the other hand, in private industry, they simply accept and view them as they come in. That leads to….
Always be the first responder. Some people think there are huge advantages to being last, or being in the middle. Nonsense. The only person with an advantage is the first responder, particularly in private industry. First in means first opportunity to close. Even when they say that they have to get bids, you should always ask for the business after your offering is reviewed. In private industry, I’ve won many a piece of business by being first in, making a good presentation, and asking for the business. A couple of times, I’ve actually met a competitive salesperson in the lobby as I was walking out with the purchase order. Being the first responder also sends the subliminal message that you care enough to respond quickly – and if you care this much now, you’ll care this much after the sale.
Is the juice worth the squeeze? This is the most important question you can ask yourself. Is it worth participating in the bid process? Understand that bidding is designed to put you, the salesperson, at a disadvantage and negate all the skills you have in needs discovery, product expertise, relationship building, and customer service that you’ve spent your career building. Instead, the idea is to reduce you to a number on a piece of paper. For me, that’s no fun, and most of the time, it’s not rewarding financially either due to the low profit margins.
Many years ago, a salesperson whom I managed brought a large and complicated bid spec to me. We estimated that it would take about six hours of his time to complete it, by the time he did all the research. He admitted that he had no particularly great relationship, and of course, his commission was based on profit. Although the scope was wide, the profit itself would be small.
Further, we knew that in this same six hours, my salesperson could set between 8 and 10 new appointments. Given his closing ratios, that would equal two new customers, both of whom would likely be higher profit. I let him make his own decision. He chose prospecting. As it turned out, we knew the competitive salesperson who got the business. Let’s just say that my guy’s time investment ended up better than the other guy’s. Sometimes a no-bid is the best bid you can offer.
Finally, never build your business around government purchasing. This is probably the best tip I can give any business owner. I’ve already said that I don’t like selling to government, of course, and one big reason is that the purchasing process can be politically driven. Some of you are probably thinking, “Great! I’m a WBE or MBE right now!” Yep, you are. But….what I’ve learned through contacts is that this is a ground that is constantly shifting. There are preferences within preferences, and today’s ‘most favored’ MBE can be tomorrow’s ‘outside looking in’ MBE. I know of a few businesses locally that have failed because of this. The worst part is that who is favored tends to be driven by politicians that are so far removed from the purchase that they don’t even know the companies that they are affecting.
One final note: I always tell salespeople to never use the word ‘bid’ to a customer because of all that it implies (multiple vendors, price-based decisions, etc.). And yes, I’ve used it quite a bit here. That’s because we’re talking between ourselves. When you’re talking to a customer, always refer to your proposal as a ‘proposal’ or an offering.
If you choose to pursue bid business, that’s certainly your decision. But do it wisely with your eyes wide open. Too many salespeople fail because they spend their time chasing every big bid that comes along, when their time could be better spent prospecting for non-bid business.
