In the simplest sense of costing out your proposal, you can start with the hourly cost of the responder. Multiply that figure by the number of hours the responder will spend and find the cost basis of your response.
For example, Jane will be responding to the RFP. Her hourly cost (including salary and benefits) is $50 per hour. Jane will spend 15 hours drafting the proposal response. The base cost of responding to the RFP is $750. Add in the cost to manufacture and mail the response ($100) and your cost has expanded to $850.
If Jane needs help with putting the proposal response together, you’ll need to add in the cost of the help. Jane’s colleague John will spend four hours helping Jane with the response. John’s hourly cost is $65. With John’s added expenses, the proposal cost now exceeds $1,100. If a team of people will be helping Jane, you can see that the cost goes up quite quickly.
But there’s another, less obvious cost to consider. While Jane, John and the team are putting together the proposal, they’re not engaged in income-producing activities for your company. Perhaps Jane could normally generate $1,000 and John could generate $350 in the time they’re spending on the proposal. That’s another $1,350 in hidden costs associated with the proposal response. The response cost now exceeds $2,450 when you combine the actual cost of responding with the foregone income.
Outsourcing proposal writing can reduce the RFP response cost
Can you reduce the cost of responding to a proposal? Say that Jane, John and the gang could reduce their time spent by 25%, which would also reduce lost income. The cost of responding to the proposal is now $1,870. You can realize those savings only if your employees can make their response strategy more efficient. (You’re still giving up 19 hours of income-producing work for Jane and 7 income-producing hours for John.) If they can’t be more efficient, the higher cost of responding will apply.
If you can subtract Jane, John and Co., from the proposal process (in whole or in part), you can really reduce the cost of your response. Instead of asking your income-producing employees to spend a combined 19 hours on the proposal, limit them to 5 hours. Then, hire a proposal writer to create the proposal. If Jane spends four hours leading the proposal effort and John spends an hour contributing his expertise, their total involvement is now five hours. That reduces their actual costs and better, their lost income. Even if you pay the writer $50 per hour (Jane’s salary and benefits), you’ve reduced your proposal cost by 20%-40%. You’ve eliminated 75% of the lost income, and most of John’s cost. (Jane and the writer are a wash in this example, because they cost the same.)
Hiring a freelance proposal writer allows your employees to focus on their work, while still allowing you to bid. Establishing a relationship with a proposal writer also reduces the long-term costs of RFP responses.
If RFP responses are a part of your business and you’d like to know more about freelance proposal writing, please contact me at email@example.com or call me at (734) 961-0408. I’ll be happy to discuss consulting on your proposal efforts.
Photo Credit: Pictures of Money, via Flickr