Responding to Requests for Proposals (RFPs) is a crucial activity for businesses across industries. Most RFPs are issued via email, using Word, Excel, and PDF attachments and then are similarly managed by response teams the same way. However, manually managing RFP responses can be extremely time-consuming, error-prone, and detrimental to win rates. It's no wonder that employees share a collective groan every time an RFP arrives in their inboxes.
Investing in specialized RFP Response Software can maximize efficiency, accuracy, and ultimately revenues. (It can also completely eliminate the aforementioned collective groan!) When factoring in both cost savings and revenue gains, the story around RFP Response Software ROI can be quite compelling. If you're reading this article, you may well be considering investing in a solution and have come across Loopio. We urge you to take their published RFP Response Software ROI with a grain of salt (see Lies, Damn Lies, and RFP Statistics for insights into their numbers), they report a 415% ROI over three years. As for the side of sodium chloride that accompanies this report, it's important to note that the study only involved six companies.
The Costs of Manual Responses
Without RFP software, staff may spend upwards of hundreds or thousands of hours per year crafting customized responses from scratch. This excessive manual workload racks up costs in multiple ways:
- Time Expenditure - On average, employees may devote 20+ hours per RFP response. For a team submitting 25 proposals annually, that equates to over 500 hours diverted from core revenue initiatives. Does 20 hours sound like a lot to you? Eric McKinnon, SVP of Sales at CerpassRx, reported spending over 70 hours per RFP...and that was with a proposal manager on staff.
- Opportunity Costs - A 2023 Loopio report revealed that salespeople spend 23% of their time working on proposals, time that could be dedicated to generating leads, nurturing relationships, and closing deals.
- Errors and Inconsistencies - Manual processes often result in mistakes in submitted responses, lowering compliance rates and reducing competitiveness. While automated processes can also introduce data problems, humans have more time to identify and address them as compared to a manual process.
- Missed Deadlines - Trying to cobble together responses under tight turnarounds frequently leads to missed deadlines. According to software provider, QuorusDocs, companies fail to submit ~20% of RFPs on time when managing the process manually, resulting in median lost revenue of roughly $725,000 per company.
In our own interactions with prospects, the first two items on the list, time and opportunity cost, are the main drivers of interest. And while the numbers will certainly vary across companies, industries, and opportunities, there is no denying that manually responding to RFPs is generally consider a painful, time-consuming process. The psychological discomfort aside, there is a real cost to RFP responses which means that there is a real way to think about RFP Response Software ROI.
The Benefits of RFP Response Software
By leveraging purpose-built RFP software, vendors realize major efficiency gains:
- Labor Savings - Automated response templates, centralized data, collaborative features, and more streamline the RFP process. We've seen numbers ranging from 30%-65% improvements in cycle times. (Considering that Vendorful targets a 90%+ improvement, we feel that those claims may be reasonable.)
- Increased Accuracy - Software tools dramatically reduce human error while simplifying and streamlining the review process.
- Generate More Opportunities - In reducing the time, effort, and cost to complete an RFP response, software solutions allow companies to get "more swings of the bat." The impact is compounded by the reduction in missed opportunities that historically resulted from missed deadlines.
- Improved Win Rates - By submitting more responses on time with higher quality, some vendors see dramatic improvements in win rates.
A few thoughts here.... First of all, let's be clear about what the real benefits are: companies that use RFP Response Software get more opportunities to win business and win those opportunities more often. This stems directly from the impact of the software in reducing the labor costs and improving output quality. Each of those is important in their own right, but they primarily function as drivers.
Now you may be wondering about saving hard dollars on labor. While we don't have hard data, we can share what we've experienced empirically. Most companies are not looking to reduce the size of their proposal teams. In fact, most companies don't even have proposal teams. So while it's certainly possible that there are businesses out there that want to cut headcount, most seem to want to make sure that their employees get the "highest and best use" of their time.
Calculating RFP Response Software ROI
Arriving at a definitive number for RFP Response Software ROI is somewhere between challenging and impossible. But getting to a ballpark number is a surprisingly straightforward exercise. The approach we're going to take is looking at different scenarios. Bear in mind that the numbers are estimates — realistic ones — but are not to be taken literally. For example, providers of the RFP Response Software will price their offerings differently. Having said that, this is a useful exercise and we recommend that you plug in your own numbers when evaluating a purchase.
We've tried to make modest assumptions so our expectations are that productivity would increase more than it does in the examples, the human capital costs would decrease more, and pricing could be more competitive. Having said that, there is a compelling ROI story even when the assumptions aren't particularly rosy.
Small Company
(average deal size: $50,000)
Metric | Manual Process | With RFP Software |
|---|---|---|
RFPs completed per year | 12 | 15 |
Win Rate | 25% | 33% |
Employee Cost per RFP | $2500 | $1250 |
Annual Software Cost | $0 | $20,000 |
Total Cost | $30,000 | $37,550 |
Revenue | $150,000 | $231,000 |
Profit | $120,000 | $193,450 |
RFP Response Software ROI | - | 188.22% |
Notes:
- Cost savings: The software reduces the cost per RFP by 50%, resulting in a total cost savings of $12,500 annually.
- Increased productivity: The company can now respond to 15 RFPs per year, up from 12, due to streamlined processes.
- Improved win rate: The win rate rises to 33% from 25%, likely due to better quality proposals and faster response times.
- Increased revenue: The combination of more RFPs, a higher win rate, and the average deal value of $50,000 results in a revenue increase of $81,000 annually.
Mid-Market Company
(average deal size: $100,000)
Metric | Manual Process | With RFP Software |
|---|---|---|
RFPs completed per year | 48 | 60 |
Win Rate | 25% | 33% |
Employee Cost per RFP | $5000 | $1500 |
Annual Software Cost | $0 | $60,000 |
Total Cost | $240,000 | $150,000 |
Revenue | $1,200,000 | $1,998,000 |
Profit | $960,000 | $1,848,000 |
RFP Response Software ROI | - | 406.23% |
Enterprise Company
(average deal size: $250,000)
Metric | Manual Process | With RFP Software |
|---|---|---|
RFPs completed per year | 200 | 250 |
Win Rate | 25% | 33% |
Employee Cost per RFP | $10,000 | $2000 |
Annual Software Cost | $0 | $200,000 |
Total Cost | $2,000,000 | $700,000 |
Revenue | $12,500,000 | $19,531,250 |
Profit | $10,500,000 | $17,831,250 |
RFP Response Software ROI | - | 415.69% |
Intangible Benefits Beyond ROI
While efficiency and revenues provide tangible metrics around software ROI, RFP automation also drives additional business value:
- Improved Team Morale - Tedious and stressful manual workloads take a toll on employee satisfaction. Automation alleviates burnout so staff can focus on higher-level work.
- Brand Reputation - Well-crafted, compliant proposals strengthen a vendor's reputation for quality and reliability among buyers. This builds trust to support long-term customer relationships.
- Competitiveness - Streamlined software processes allow vendors to rapidly submit numerous customized responses at scale, giving a competitive edge over those still working manually.
What It All Means
In summary, specialized RFP Response Software ROI is significant and can deliver exponential returns through increased productivity and revenue gains over manual approaches. The automation and built-in collaboration enabled by these tools create a winning formula for bidding success and ROI. Consider implementing such a solution to realize benefits for your own team and organization. Reach out for demos of specific products matching your use case and budget to further investigate optimal ROI. By taking action, you’ll be well on your way to accelerated growth through technology-driven RFP processes.
