Special Feature: Proposals and Tenders: To Charge or Not to Charge

paper-writeI have been running my own business, an online marketing agency in Perth Western Australia for nearly 15 years, and in all that time I have never charged a potential client for the cost of the written proposal. 

paper-writeI have been running my own business, an online marketing agency in Perth Western Australia for nearly 15 years, and in all that time I have never charged a potential client for the cost of the written proposal.  You can imagine, I have written a lot of proposals in that time and, like most agencies, some have been shelved or rejected for no clear reason. So, given that genuinely useful marketing proposals take a lot of research and customisation these days, have I ever been tempted to charge directly for the work?  

The answer is: you bet I have!  I have been tempted.  There have clearly been instances where a prospect has just been:

  • Fishing for information on how they can do things in-house;
  • Justifying, or bargaining with, their current provider;
  • Playing a long-shot in case there is a cheap silver bullet because they don’t really have the budget for anything serious at the moment.

Who Wears The Cost of Proposals?

It is extremely frustrating when someone falls into these categories or fails to give any genuine feedback on why a proposal was lost. I soon move on to the standard feeling that this is just part of the cost of doing business.  I sometimes console myself that, in reality, all costs of doing business are ultimately charged to the end customer, especially if a smart operator like me builds the agency hourly rate based upon a reasonable margin to be had and the costs of running the business which include proposal preparation costs.

Once bitten…

Then, something happened in late 2014 that bolted me out of my complacency, and made me examine a little harder as to what I have been doing – or not doing – so well all these years.

It was a Perth-based business that came to me in 2014 that asked for a proposal to market their training courses to all English speaking countries.  They said that they had a new website to launch within weeks and had tried in vain to find a full time experienced digital marketer in Perth, and now with investor pressure they instead needed to urgently appoint an SEO Agency.  This seemed plausible to me as I knew how difficult it was to find good digital marketers in Perth and the digital strategy was vital to the successful site launch.  To that end, I had three of our team drop everything and pour 2 days intense work into this proposal.  They wanted everything written down, including some elements of market strategy.

 When it came time to present to this prospect, no less than 6 of their staff came to the presentation and picked our brains clean on just about everything they could ask and seemed happy with the answers.  I spent a Sunday afternoon writing minutes of the meeting and answers to specific questions asked by the MD.  The next week, no member of their 6 man team answered or even acknowledged my email(s); or returned my phone calls; let alone thanked us for our time. I found out subsequently, from another source, that they hired an in-house SEO/SEM specialist post website launch.

While, I am a realist and wasn’t shocked at losing the above prospect, I was shocked at the length they went to acquire our intellectual property without the smallest, professional courtesy of thanking us for our time – let alone giving us any feedback on our work.  

After the above mentioned incident, I have read a little bit about other opinions where agencies charge for proposals.  

Opportunity Cost

However, what seems missing from the conversation is my sudden realisation that the greatest cost in preparing a written proposal is the opportunity cost of not having time/opportunity to follow up leads and prepare another proposal that might have a more realistic chance of a positive outcome – for both parties. 

Let’s face it, the most lucrative prospects/proposals are the ones that require your most experienced people – such as the MD or Sales Manager.  Their time is seriously limited.  Therefore, each proposal prepared must have, at the very least, a 50% chance of converting or you are going to have to charge for proposals to keep the agency from either cutting the quality/customisation of the written proposals, or passing too much cost to existing customers.

That said, I am still not of the mind to charge directly for proposals unless there is an absolute clear case of the prospect needing more of a strategic document or what I might call an Audit and Evaluation Report rather than a typical proposal or tender.  The 2014 incident, in hindsight, was more of a strategic document opportunity and something should have been better negotiated. However, to charge for every written proposal might cause too many people to abandon dialogue prematurely – another potential opportunity cost. 

Lessons Learned

What I have actually learned – and still very much in the learning process this year – is something quite different from setting the rather simplistic solution of a charge policy.  

Lesson One: How personal nature can impact on the cost of proposals

For example, I am a somewhat generous person by nature – even if I do say so myself.  Like many entrepreneurs who choose the service industry, we like to please people and we often assume the best of people. So when consulting or preparing proposals we tend to give far too much away.  We occasionally need people to remind us that we have to hold back something until there is some form of give or commitment on the other side. 

Lesson Two: Unless the prospect has to sacrifice something, as small as it might be, the proposer has little hard evidence as to how serious the prospect is about making a decision.

For example, in the past I would typically go out and see the client at their premises and discuss their needs face to face and then follow that up with a written document and visit to their premises again. Now, I might ask them to come to me on the second visit, particularly if the distance in non-trivial. If they say they are too busy, I may either ‘reschedule’ based upon some more qualification or put less time into the written proposal.

Lesson Three: We in the Marketing Industry need a more consistent and structured qualification process for leads.

For example, I now ask better questions about our prospects before launching into preparing a written proposal. And sometimes realise we need to tailor the time and effort we put into the written aspects of the proposal depending on the answers. 

Qualify, Qualify, Qualify

It may seem obvious in theory and less so in practice, but my tip is to discuss verbally, where possible, the needs and expectation of the prospect, before giving an indicative range of services and costs. Perhaps ask them to do a little work and supply a written brief or answers to specific questions.  Only after gauging the reaction of the prospect to this, should you do the bulk of the research and documentation necessary for a formal proposal. 

In summary, I feel we do not need to charge for written proposals provided we:

  1. Qualify the prospect heavily and move them to a better fit supplier if the risk is high;
  2. Ask them to contribute a bit of their own time to the process;
  3. Tailor the proposal and written detail according to the value and risk of the job as learnt through the qualification process, while preserving reputation and minimum standards; 
  4. If there is a component of the request that requires research and/or intellectual property beyond the norm, consider separating out that component in a separately named report and charging a reasonable fee for that alone.

About the Author

Charles Ryder is CEO of White Chalk Road, a leading search engine optimisation (SEO) and online marketing firm in Perth, Western Australia. White Chalk Road provides SEO, SEM, PPC and online reputation management services to clients based in Perth and wider Australia. Connect with Charles on Twitter.

 

 

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