RFPs - When and how to compete

As the market for legal services becomes more competitive, clients are increasingly choosing law firms based on formal RFPs (Requests for Proposals). But when a law firm replies to an RFP, what are their chances of winning?

Of course the exact answer depends both on the RFP, and on the firm that replies. But, according to Ann Lee Gibson, typical win rates across the legal industry are “very small, probably no larger than 5%.” In other words, the typical RFP elicits about 20 proposals, producing one winner and 19 losers.

“I've often seen this 5% figure when I have worked with law firms over the last eight years to help them improve their competition performances,” she explained. “Usually with a good year or two of consistent effort, firms are able to get their win rates up to 30% - 40%.” To date, consultant Gibson’s advice has helped law firms win more than $435 million in new business.

The win rate of 30%-40% is remarkably close to the ideal win rate I’ve heard for other industries. Sales guru Don Schrello was the first to tell me that I should try to win 1 out of 3 proposals. “Wait a minute,” I said. “Shouldn’t I try to win them all?” “Of course you should always try to win,” he replied. “But if you ultimately win fewer than 1 out of 3, it probably means you are not being selective enough in what you bid, and are bidding RFPs you should have passed on. On the other hand, winning more than 1 out of 3 of your proposals either means you're being too selective in what you do bid (so you could likely grow more quickly by bidding on more RFPs), or are pricing the bids you do make too low, thus leaving money on the table.”

To start getting your win rate up, see Ann Lee Gibson’s article “50 Tips to Help You Win Client Competitions” in Law Practice Management, which can also be downloaded from her Web site.

The best practices Gibson describes start before the competition begins, when you choose which RFPs to bid on. One key is to avoid competitions that are “wired,” that is competitions where the client already knows who will win, but needs to go through the appearances of a competitive process. The trick is to look for signs that they are not serious about the evaluation. For example, before submitting a response you should request an interview to gather background information, and to build relationships. According to Gibson, “Firms that won’t meet with you probably are signaling that the competition is a sham.”

It’s also important to stress the human element in other ways. “Clients will appreciate it when you offer lawyers’ home and mobile phone numbers. Many clients also respond well to invitations to kickoff retreats and face-to-face client satisfaction interviews conducted by the firm’s management or marketing department.”

And remember that “the executive summary is the most important chapter in the proposal” because it’s the section most likely to be read. Think “less is more” throughout, because “when asked which proposals they read first, corporate counsel almost always say, ‘The shortest ones.’”

Finally, Gibson says, “Always debrief the prospective client after the competition is over to learn why the winners won and why the losers lost. More than anything else you can do, debriefs and the information they yield will rapidly guide your firm to improve its competition strategies and tactics.”

As Ann Lee sums up her approach: “It sounds simple, and it is. But, like most ‘overnight successes,’ it requires year after year after year of discipline and hard work.”

To learn more, sign up for Ann Lee Gibson’s Law Journal Newsletter Web Audio Conference “Winning the RFP” tomorrow, Thursday April 27, 2006, at noon Eastern Time.

Comments

[Larry Bodine]

The facts don't support your basic premise, "clients are increasingly choosing law firms based on formal RFPs." With all due respect to you Jim, few corporations bid out legal work -- only about one in five does so. See "ACC/Serengeti Survey: Law Firms Successfully Resist Cost-Cutting" at http://www.lawmarketing.com/pages/articles.asp?Action=Article&ArticleID=191

Law firms should avoid bidding on RFPs, because it just makes them subject to the corporate procurement process. See "Why Go to RFP Hell?" at http://pm.typepad.com/professional_marketing_bl/2005/12/why_would_you_w.html

RFPs are onerous chores leading to hideous events where clients get the chance to dictate terms, chisel down your fees and turn you into a fungible commodity. The "RFP Hell" article describes what Pfizer did to some of the finest law firms in the country.

-- Larry Bodine

[Jim Hassett]

Larry – Thanks for the comment and the links. I had not seen the Serengetti survey, and it is both relevant and quite interesting.

If only 1 out of 5 general counsel are using RFPs, I guess you could say the glass is 80% empty or 20% full. But if I were managing a law firm, I’d still want to compete for that 20%.

As a small business owner, I agree completely that responding to an RFP can be a nightmare. Some are an enormous amount of work, and buyers can use them to play sellers off against each other. Even worse, sometimes they are not even genuine competitions, but are wired for a pre-determined winner.

But I also believe that RFPs are a necessary evil. To cite an extreme case: when I was in the custom training business, a company I owned won over $15 million of US government business through RFPs. Anyone who wants large contracts with the government will be required to respond to RFPs. That’s simply how the government does business. In time, I would not be surprised if some large corporations take this same stand for legal work. No matter how much law firms dislike this fact, it will still be a fact.

You’ve definitely got me thinking about the future of RFPs. I must admit that my statement about “a growing trend” was based on anecdotes rather than solid survey data. Does anyone know if there is any other solid data out there on law firm RFPs? -- Jim

[Legal Marketing Grunt]

Having been through no less than 15 RFPs in the last 10 months - some requesting information on as many as 15-20 different practice areas- unfortunately I am able to validate Ann's 5% win rate. The cost to the Firm is astronomical in both attorney time and Business Development department resources. Were this expense a line item in our marketing budgets, it would represent hundreds of thousands of dollars. We recently won one of the 19 practice areas that we bid on and by my calculations (or rather forecasts), we will not recover our costs for over three years, that is, if we are able to keep the work that long. Yes. We spent over $100,000 in time responding in 19 practice areas to win work in one practice area that will likely be less than $30,000 a year. Embarrassing and frightening.

The real problem seems to be in the lack of recognition- whether on the part of procurement departments, in-house counsel or outside counsel- that strategically important legal services which are easily substituted will give the client incentive to shop for the best price. Conversely, where those strategically important services are not easily substituted, a 'partner relationship' exists and significant barriers to competitive offers are constructed. As legal marketers, we often fail to identify, develop or understand the value added services that our atttorneys can or do offer and clearly communicate that value to clients. It leaves us exposed and, as such, we're very much to blame for our current RFP predicament.