firm, because we know the value of the reciprocation can be potentially enormous.

Lawyers

Getting attorneys involved in the proposal management and/or development process is a necessary step for most firms, but one that must be managed. A few individual practitioners we know are comfortable doing business based on a handshake and short corresponding document and have never been burned, but we dont recommend it. Though attorneys are paid to have a particularly apocalyptic view of the world, doing business with a sound agreement in place that clearly establishes expectations for each party involved and addresses contingencies is simply good business. For firms that specialize in big government, health care, architectural, and IT projects, attorney involvement can be increasingly significant and necessary.

Legal expertise is most efficiently used during the development of boilerplate-or reusable-sections of the proposal. Attorneys should review a typical proposal to ensure that its terms and wording are appropriate and that it meets generally acceptable industry standards. Chapter 19 covers the retention of legal counsel extensively.

Developing Boilerplate Documents* Developing customized proposals for attractive prospective new clients is a no-brainer; it gives your firm the best chance to win. But developing each new proposal from scratch is wasteful and unnecessary. Many components of the document can be preprepared and sitting on a shelf, waiting to be customized, especially since most firms are competing for similar types of business (e.g., corporate law, Internet marketing, disability insurance). These components include:

Firm background

Service offerings/project description

Terms and conditions

Staffing

For each new proposal, the Introduction, Situation Analysis, and Costs sections will differ significantly from opportunity to opportunity, as will the Project Summary, but even those areas will lend themselves to replication frequently.

Most professional services business developers are capable of doing a significant amount of proposal development and will benefit by leaning on marketers and attorneys when crafting boilerplate documents, but shouldnt need to rely on others much once the process is established, except in unusual circumstances.

Pricing and Negotiating

Once a proposal has been submitted, 90 percent or more of business development activities should be completed with the prospect, including cost discussions. However, negotiating, and more specifically, negotiating about price, often ensues.

Dont dread these discussions; embrace them. If it makes you uncomfortable, get over it or hire someone who is good at it. But remember that this is the most opportune time to address these issues and get them taken care of so you can move forward and build your relationship with the client, according to terms that are agreeable to both parties.

I Didnt Expect It to Cost This Much. If you get this response, you did a poor job communicating with the prospect during the needs assessment and proposal development process. Chalk it up as a lesson learned and vow to get better in the future.

When dealing with the issue at hand, walk the prospect through the process of how you arrived at the fee. Sticker shock is not unusual (though the proposal is not an ideal medium for delivering that shock), but further understanding will help the situation. Discuss the competitive conditions of your industry and provide third-party, objective confirmation of those discussions, such as cost ranges for similar services. Do not simply introduce cost-savings measures; discuss the proposal in the prospects hands.

This Seems Expensive. This response is similar to I didnt expect it to cost this much, but with unique nuances. Expensive means relative to the competition, as opposed to a statement about the absolute cost of the project. The prospect is asking you to justify your premium, so now its time to talk about your organizations pedigree and why the prospect will be getting the most for his or her money by deciding on your firm.

Alternatively, you can discuss the fee in relation to the value of the project. For example, Our fee is $200,000 for the project, but the outcome will save your company $2 million in excess inventory over three years, so it seems fair to me. This is a desired approach, but not always possible, such as with large IT projects that are billed on a time-and-materials basis. In these instances, companies may be looking for a target blended hourly rate. Youd better be affordable today, says Sarah Casalan, vice president of IT at Ecko Limited.

We Need to Address a Few Items. This is good news. This response implies general agreement on the proposal s terms, with the caveat of having to address a few items and iron them out before moving forward. These could be delivery dates, terms and conditions, staff assignments, and

so on. Rarely will you lose a prospect at this stage if you act in good faith and negotiate reasonably.

When to Bend and How to Do It

Some organizations are smart users of professional services firms, others rarely use external vendors, and still others squeeze services companies at every opportunity. The type of organization you are dealing with will dictate your strategy to some extent.

Regardless, maintaining a focus on the long view is imperative. No matter what sector your firm competes in, its a small world and people have long memories, says Jim Jonassen of Riviera Partners. If you give away the farm today, people will remember and expect the same treatment the next time around, which could be a month, a year, or five years later. Its a tough position to retreat from.

Thats not to say you cant reposition or make smart concessions, though, and the firm should consider a variety of factors in pricing engagements or work including:

Establishing a relationship: If youre looking to establish a relationship with a new client who is in your firms sweet spot and has considerable potential, get creative. You can deliver on the project at a fixed rate that you know will fall short of desired profit margins, but youve inserted your firm at the hourly rate you are seeking. Or adjust the fee to weigh it more heavily on success criteria, such as project milestones, which will make the client feel better about the deal. Other options are virtually limitless: taking equity in lieu of cash, providing guarantees, reconfiguring payment terms, bartering, and so on.

Reducing scope: Most proposals include at least a couple of nice to have deliverables. And most client organizations can offer some level of assistance with a project. These two approaches can be used to reduce the scope of the services delivered and, oftentimes, reduce the cost of the project. Never reduce fees without some kind of commensurate concession by the prospect; its bad business and will negatively affect your reputation.

When youve pursued all of your options and still cant arrive at agreeable terms, the writing is on the wall and you need to demonstrate the courage to walk away. Its not easy, but if done professionally, you can maintain the relationship and continue to mine it for future opportunities. After all, different tools are appropriate for different jobs. Firms are often hired by companies that passed them by during a previous vendor selection process because of rate sensitivity or another reason.