How much should I spend on writing a tender?

How much should I spend on writing a tender is a common question. We suggest it should be rephrased to say how much should I invest to improve my business?

Winning is never a sure-fire thing but like all achievements it doesn’t happen without the maximum effort and the best team. Be careful in approaching a tender as a price battle. The tenderer is not looking for the best price but may be looking for value for money, new ideas or a low risk solution. Instead of asking about how much should I  spend on writing a tender ask yourself these simple questions:

1. How valuable is this contract to me and my company?

If the contract is a good fit for your company it is worth pursuing the tender. There is a lot to be learnt from putting together a proposal that details how you can deliver the product or service. It will force you to do a gap-analysis of your business processes to identify your weaknesses and address them.

2. What is the strategic value of getting this customer?

Every business decision has got to be based on a risk analysis. However, some government contracts may open the door into new markets so the benefit is beyond the value of the contract. The cost of winning the contract should be considered part of your overall marketing spend rather than an operational cost.

3. Will winning the contract improve my business reputation?

Government contracts are prestigious. Getting govenment work increases your credibility as a business. It shows that you have rigorous processes in place and are well managed. The improvement to your business reputation will be a benefit to your marketing and advertising messages.

4. Will I be able to leverage the contract to get more work?

So far we have talked about reputational and business development benefits but there are also operational advantages. Having guaranteed work for a set contract period gives you a level of certainty and reduces your risk of failure. The guaranteed income and cash flow allows you to borrow more money for investment in plant and other business assets.

5. Does this contract widen my market opportunities?

If you expand your markets, for instance, you have improved your delivery network and supply infrastructure. This creates an opportunity for economy of scale growth.

Consider strategic costs versus financial costs

The cost of submitting a proposal should not be seen as a sunken ‘cost’ but at least as part of your sales and marketing budget. We like to say the tendering is marketing to one client. That client may not buy this time but they may next time.

We have had several clients who have not won the contract but were given other projects based on the quality of their service offerings. This is an important way of marketing to large clients. This is the reason to be putting in highly competitive bids.

Investment in future revenue

So how much should I spend on writing a tender? In a nutshell your submission is an investment in future revenue. What is that future revenue worth and how much should you spend on getting it? Those are the questions you should be asking.