In today's post, Vice President of Marketing and Business Development Shawn McCoy offers tips on how to keep companies lean and competitive in a 'lowest bidder wins the job' marketplace.
We've all been there. You put in 100 hours on a proposal only to lose the job because a competitor has undercut you on price. So how do you get ahead without gouging your profit margins?
Internal Structure: In order to be competitive and profitable in today’s economic environment, service firms have to be as lean and efficient as possible. While this will require some “soul searching” and force you to make some tough decisions, to achieve long term success you must figure out what you do best and staff a core group to provide those services. Once you have your internal team set, then look to partner, freelance, or sub-contract out those services that you are least efficient/profitable in providing.
Approach to Market/Focus: One of the hardest things to do, especially in a down economy, is to walk away from potential work. However, you can’t be afraid to say no. Instead, you have to choose your target market and stick to it. This is as much about capacity as it is about strategy, for you simply cannot commit the time and resources to go after every project at your highest level. Go after projects in which you think you are the best qualified for and go after them with passion.
Technology: While the themed entertainment industry always requires a great degree of domestic and international travel, try to save time, money (and personal wear and tear), by using communication technology to stay in touch with your clients. Online presentations, dedicated websites, teleconferences, Skype, videoconferences, etc. are all easy to use and inexpensive options which will allow you to spend less time on a plane and more time in the office doing the actual work. Plus, fewer trips will mean less travel expenses and less hours, which may allow you to reduce your proposed fees without hurting your net profit.
Pricing: As potential clients often compare proposals by looking at fees only, make sure to position your proposal more on the value of the deliverables received for the services, taking focus away from the cost of the services. Show how your proposal provides more value than your competitors – i.e. quantity or types of deliverables, warranties, models and mockups, etc.
Phasing: Often, especially in international markets, our industry’s overall fees scare off potential clients. To help get past this, suggest a phased approach, with a small upfront scope and related fee. Once you get in the door, provide good work and establish a good relationship with the client, this approach will likely lead to bigger scope and fees in the future.
Share the Risk: Especially in risky markets such as China, look to pursue and work on projects with local partners. If you are designer, find a reputable Asian fabricator and team up to share the risk. Let them take care of the local communication and coordination. You can also team up with domestic partners to go after projects. For example, to go after a large fabrication project, team up with a domestic partner who may not only share the risk, but also may provide you with a competitive advantage. Teaming up will also help share the burden for issues such as negotiations ongoing communication and timely payments.
These five steps will help you make those 100 hours well (and hopefully profitably) spent. Good luck!