How Much Does It Cost To Give A Proposal

Most salespeople think that the key to sales success is to relentlessly and persistently get in front of as many prospects as possible and to present proposals to anyone who is willing to listen. Ignorant and misguided sales managers reinforce this mindset by pressuring salespeople to give more proposals and present more solutions. This throw a lot of mud on the wall and see how much sticks approach results in salespeople wasting tons of their time, having a low closing percentages, experiencing massive amounts of rejection and frustration, hours of wasted staff time preparing proposals that never close, lousy sales forecasting, poor staff morale, high sales staff turnover and a myriad of other problems.

The key to eliminating these problems requires a fundamental mindset change on the part of the owners and managers about selling. This mindset change is more than positive thinking. It requires the managers and owners to ruthlessly analyze their beliefs and attitudes about what works and what doesn’t, what can and cannot be done and how much they are willing to change the way they do business. The reality is that the problems that are being experienced within the company relative to the sales process are merely a reflection of the owners and managers skills attitudes and beliefs about selling. Only when the owners and managers change their mindset and attitude will there be a change in the sales force.

Managers, owners and salespeople need to analyze how much it cost them to prepare a proposal. When I asked business owners, managers and salespeople how much it cost to prepare a proposal, most of them looked at me as if I’m speaking a foreign language. Not only do they not know the answer to the question, they have never even considered the question. They are blindly following their approach because they’ve never taken the time to stop and think about this issue.

Recently in a coaching session, I dug deep into this rabbit hole with a client by asking how much time and money was invested to get to the proposal step? Their answer was, “I don’t know”. I continued to probe further by asking, “Including driving time to and from the appointments how much time has been invested meeting with this prospect”? “Based on how much your time is worth per hour how much do you personally have invested at this point”? Who else besides you has been involved in presenting or preparing this proposal”? “How many hours of their time have been involved putting the proposal together”? Based on their hourly pay scale how many dollars does that represent”? How much has it cost your company in payroll for these people to prepare the proposal for you”? “When you add up everyone’s time how much did it cost your company to prepare and present this proposal”? “How many times each week or each month is your company doing this”? “On a monthly basis what is the cost of preparing proposals”? “What percentage of these proposals end up closing”?

When I forced them to give me answers to these questions they were shocked with their answers. They had never considered the cost of going to market. They simply considered giving proposals and hoping for the best the excepted way of doing business in their industry. Doing what everyone else in the industry does is a sure prescription for mediocrity at best and failure at worst. In order to excel and thrive, businesses must do something different than everyone else in their industry. Failure to do that reduces your company offering to a commodity and gives the perception that you’re no different than anyone else.

5 replies
  1. Diane Hohlfeld
    Diane Hohlfeld says:

    Steve…still waiting for that Aha! moment with our people, when they see not only that the wages of others working on their projects really do have a cost, but that their own time has value, too! It amazes me how long some people will keep working and working to get someone to come their way, leaving $ from other potential customers along the road because they have no time to spend with them. They’re too busy doing the wrong things to take a gift (lead) that comes their way and make some money! As you said this morning, we’ll keep preaching and hope a light comes on…thanks, Steve!

    Reply
  2. Craig Breitsprecher
    Craig Breitsprecher says:

    I can’t believe, even among my counterparts, how many people don’t have a clue how devestating it can be to an organization to “chase” business by throwing out proposals both monetarily and from a personnel perspective. Good points.

    Reply
  3. Todd
    Todd says:

    So qualify, qualify, qualify in the interview step, right? Qualify how / when the decision will be made & what they want to see in the proposal. So, you “make the sale” before the presentation is ever made, right?

    Todd Talbot, CFP, ChFC, CLU

    Reply

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