Winning RFPs are critical to a successful Business Development Strategy
Anyone with a mature business development strategy has expertise responding to and winning RFP’s. In some industries it’s practically the only way to win new business. In others over time, more and more contracts are being awarded via successful RFP.
Some organizations have their own RFP teams.
Some supplement their internal teams with outsource RFP writers. This provides expertise and helps offset peaks and valleys.
Some only use outsource RFP writers, determining that the use of outsource RFP writers is more economical while delivering high/higher quality.
Some simply avoid the RFP process all together. They feel it is a waste of time and that their chances of winning aren’t worth the costs involved.
Whether it’s to offset peaks and valleys or as a first step at developing RFP response expertise, it’s worth understanding some simple numbers around outsource RFP writing resources and process.
Basic Costs to Outsource an RFP Writer
A typical RFP writing project costs between $3,500 and $5,000. That is the cost of interpreting, templating, writing and proof-reading a 35 – 50 page RFP. So, an easy rule of thumb: the cost of an outsource RFP writer is around $100/page of response. Except in unusual circumstances, the hourly rate for a writer is around or less than $150/hour. So the average length of time for a good outsource writer to complete professional RFP is around 20 – 30 hours.
Other RFP Costs, Other RFP Contributors
The role of the writer is to interpret what the issuer is looking for and capture and format their organization’s solution so that it stands out from other bids. In the majority of cases, it is not the RFP writer’s role to define the solution. Those who will help define the solution in an organization could include engineering, sales, customer service, consulting, other professional services, and finance.
Note, this document only considers the role and the cost to write an RFP response. The costs to define the solution also require consideration but they have not been included here. These costs generally exist regardless of who is writing the RFP.
Comparison of internal vs external RFP writing resources
How do the basic cost numbers above for an external writer relate to the economics of an organization who writes the RFP using their own resources? Here are some examples:
- Organization with one internal RFP writer. We’ve assumed an average salary of $65,000 – $80,000 for a full-time, internal writer. Including benefits, one third of their salary has been added, totalling $86,000 – $106,000. At that cost, the number of annual RFP’s (at $3,500/RFP) for an internal writer to break even on cost/RFP with an external writer is 25 – 30. Unless there is a steady flow of RFP’s, the cost of an internal writer is difficult to justify.
- Legal or professional services firm, no internal writer (hourly rate). A lawyer or consultant who takes 25 billable hours at $300/hour to write an RFP is investing $7,500 of billable time. A huge assumption here is that the lawyer or consultant writing the RFP can do it in 20 to 30 hours. Based on our experience, actual time invested is often much more than that – particularly if writing the RFP becomes a corporate priority with multiple participants/writers. Recently, we saw an IT professional service firm engage eight(!) consultants to read, interpret and prepare different sections of the RFP (we’ve seen ten people in one room try to write an executive summary – it took three days!). Total hours invested were well over 200. Assuming an hourly rate of just $250/hour, the total cost of 200 hours of billable time spent writing an RFP is $50,000.
- Sales/other organization, no internal writer (salary plus benefits) – assuming the annual cost of a senior sales person including benefits is $235,000, the cost to write an RFP over 25 hours might actually be less than the cost of an outsource writer ($2,800 vs $3,750). However, in expected sales revenue terms (the sales organization’s equivalent of hourly rate) the cost is much higher. If we assume a senior sales person is responsible for $1.5 million in annual revenue (low in many firms), then the revenue expectation per hour (assume 210 days, 10 hours/day) is $714/hour. Multiplied by 25 hours, the cost is greater than $17,500. Multiplied by 50 hours (multiple people involved) the cost is $35,700.
- Cost, contract value and win rate. Obviously, the $ invested to write an RFP start becoming a good investment at the point the organization wins a profitable contract. These scenarios are based on the progression of real-life clients:
- No/modest internal expertise, no external writer
- First RFP – time investment 100 hours (first time writing can be very time consuming); $ investment (@$100/hour) $10,000; result: no contract win; return $0
- Second RFP – cumulative time investment 150 hours (efficiency increase based on learning from first RFP); cumulative $ investment $15,000; result: no contract win; return $0
- Third RFP – cumulative time investment 200 hours; cumulative $ investment $20,000; result: no contract win; return $0
- Fourth RFP – common outcomes: 1) decide to pass – “process is rigged/not fair”; “we don’t stand a chance”; “we don’t know how to do this” 2) take another shot based on growing competency from first three RFPs 3) CEO or other executive searches Google for an outsource writing expert
- No/modest internal expertise, with external writer
- First RFP – time investment 25 hours; $ investment $3,750; result: no contract win; return $0
- Second RFP – cumulative time investment 50 hours; cumulative $ investment $5,250; result: contract win $350,000; cumulative return 456%
- Third RFP – cumulative time investment 75 hours; cumulative $ investment $11,250; result: win $750,000; cumulative return 656%
- Fourth RFP – common outcome: having worked with an external writer on three previous RFP’s, the organization has the expertise to write the RFP themselves and win – however, they choose to maintain the professionalism and efficiency of working with an external writer
- No/modest internal expertise, no external writer
Additional Economic and Other Benefits of An Outsource RFP Writer
- Professional positioning of your firm and your firm’s solution
- Re-usable, professional content that can be included in other RFP’s, website, marketing, annual reports, sales scripts and other materials
- Education of management, business development, marketing and other functions on interpreting and responding to client needs as well as RFP response best practices for winning RFP’s
- Efficiency in human resource costs – flexible as required compared to full-time employee
- Enhanced ability to handle peaks and valleys in writing demand
The economics of an outsource RFP writer are pretty straightforward. A good rule of thumb is that an outsource writer costs about $100 per page of output and a typical project is less than $5,000. It is difficult for internal resources to compete with this efficiency, especially without expertise. From an expertise perspective there is no comparison between an expert outsource writer and someone writing an RFP for the first time. Over time, working with an outsource writer will improve internal RFP writing competency and give firms the option of writing their own RFPs and winning if they so choose.