Bonus – Can I Charge for A Good Proposal?

A question that I often hear is:
"Doing a thorough proposal could cost me 10 days easily to do it right. Could I request a small fee for that service up-front?"

My response: What about asking for a larger fee? Why? Many successful salespeople and business owners close more of their deals when they charge for their proposals. Let me explain.

Start by thinking of price not as a cost recovery tool, but as a marketing tool. Right or wrong, many people value what they get according to what they pay, not according to what it costs you to produce it. The fact that it takes you 10 days to do the proposal is not important to your customer. Your customer is more likely to remember how much time that he or she has invested. When that happens, people look at "free" as a problem, not an opportunity.

If a salesperson offers you a new Lexus for a dollar, do you look for the catch? Most of us would. But, what if you pay $50,000 for the same Lexus? Will you polish that car and keep it clean for years? Again, most of us would.

Apply that thought to the first product that your prospect sees from you: your proposal. Which of these two is a customer more likely use - the idea that is free or the one that costs several thousand dollars? If you charge for your proposal, history shows that your ideas will get more respect and get used more often.

To get that money, you have to deliver a product of true value as the client sees it. If the client doesn't think it valuable, they will not and should not have to pay for it.

Now look at your proposals in that light. Try this test:

Take any three proposals that you have delivered in the past year.

Open them to the first page - and then count the number of times it refers to the prospect by name or company name.

Now count how often the document's first page refers to you or your company.

If you find that the page talks more about you than them, or talks about you first, ask yourself a basic question: Why should the customer pay you for that?

The two rules of successful proposals are simple:

1 - Only talk about what matters to the prospect. (Only offer value as they see it).
2 - Charge for that value according to what the prospect will realize, not you.

Next time, start with something of value as the client sees it. Your client came to you with a problem. When your proposal offers some information that can help solve the problem it has real value. If the document offers some discovery that the client can really use but would not have gotten elsewhere, then you have a product to sell. You should charge accordingly.

Don't set the price for your proposal according to your hours or according to your sense of competition. Set the price at a level that will make your customer want to do what they have invested in. Remember that people are more likely to use something that they paid to get.

If You Charge for a Proposal, How Do You Collect?

Business people who present proposals for high-value products and services usually use one of these three strategies:

Strategy 1 - Ask for the money up-front. Then you are, effectively, selling a design specification for your work.

Don't just discuss the product. Use your proposal to provide an effective solution. Show how this specific organization will use the product to get the most advantage. Add a time line, offer suggestions that go beyond the product, make it a map to implement the final solution. Write and present a design specification for achieving the result that the customer wants. You are delivering real value. A large consulting firm would charge a fair price for that. You should as well.

Strategy 2 - Say that they are going to be paying for all of that design work, but as part of the total job price. You will still present that proposal that delivers real value. The price for the project will include a fair price for the development and the proposal. This has the advantage of allowing the client to move forward with the proposal without contracting for the full project.

Invest a few hours with the organization to get the right answers, to build the high quality and high value recommendations that will allow the results your customer wants. Again, the proposal is not for product, you are proposing the combination of processes and investments needed to get a solution.

To price it, give your customer a lump sum for the whole project. If your product costs $60,000, and the analysis and specification is $20,000, you will ask for $80,000.

It puts you at a little risk. In real life, the risk is slight. Ninety-five percent of these deals happen when you follow steps 1 to 10 above.

Strategy 3 - Say that you will do the proposal free. Free is the most popular because no decisions have to get made. However, if you choose this, remember that you are assigning a value to your work: nothing. Nothing is a strong message. You are saying that your work is not worth much. The customer will often say thanks and then hire a consultant to tell him or her what you already knew.

Applying the Three Strategies to A Real Situation

Let's examine a real example. Custom Call Centers (CCC) makes advanced systems that handle and route incoming data and telephone calls for places like airline reservation centers. CCC is in a competitive business, with very good salespeople. Jane Jordan, CCC's salesperson, wants to sell a system to BigTel. (These are not their real names.)

Using strategy 1 - Jane will break the project into two parts starting with the proposal. When she talks to BigTel, she'll note that how they use the software is just as important as buying the right package. She'll tell BigTel that she can help make sure they are happy by doing some up-front analysis. She will guarantee that they will be happy with it, and offer to create a call flow plan and implementation plan for $25,000. Her entire proposal focuses on the implementation. BigTel will get a document and a presentation. The result will be a much better installation. BigTel has a small decision to make - to spend only $25,000 to make sure the larger investment will work.

Using strategy 2 - Jane keeps the two halves of the proposal together. She'll tell BigTel that she will do something unique to BigTel but standard for CCC. She'll make sure the system will work to BigTel's specifications when CCC installs it. BigTel gets a tremendous amount of high-quality call flow and systems analysis, costing $25,000. The good news is that BigTel will only pay for it if they use it. She will do the analysis for BigTel immediately, and bill for it when BigTel accepts the system.

Jane will do the analysis and submit a proposal for the whole package. Instead of talking about CCC, she'll talk about BigTel and BigTel's issues. She will make it clear that she'll deliver a plan to support the way BigTel actually works. When BigTel turns the system on, CCC gets paid for everything. BigTel has an easy decision since there is no up-front cost for this. BigTel also realizes that they are not just getting a system that works the way the supplier defines it; the customer gets a system that works the way BigTel defines it.

Using strategy 3 - Jane will tell BigTel that if it buys the system for $200,000, it will get the systems analysis free. If the customer doesn't buy, BigTel still gets the free analysis.

Strategy 3 is harder for BigTel. To go along with it, the managers there would have to decide that the cost of the system is fair, but the free analysis is not worth anything. If it's not worth anything, their implementation may be flawed.

What Really Happened?

In the real case, Jane went up against a competitor who could do the same analysis. CCC asked Jane to use Strategy 3. The competitor used Strategy 1 and won. Worse, when the salesperson saw how easy winning that way was, the competitor adapted. The company started to maneuver deals so that CCC would give the proposal away while the competitor would continue to charge high amounts for theirs. The competitor won 3/4 of the deals.

CCC lost twice each time -- they paid to do a high value proposal and they lost deals until they realized the problem.

You don't have to lose twice. Use your proposal to send the right message -- that you deliver valuable results the customer can use right away, and that they will invest to get the right solutions. After all, isn't that what your customer really wants?

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