Self inflicted madness
This should, in theory, be one of the shortest blogs. In my opinion pitching without pricing is a form of madness. Pitching for work without knowing what one should charge for is like designing a building without knowing anything about its location, or what it will be used for.
A professionally produced pitch can absorb vast amounts of time, effort and money. This can be wasted pursuing poorly priced pitches. They either never get off the ground because the basics aren’t right or, worse still, the assignment is won but so badly scoped and priced that the firm won’t get paid enough to reach breakeven, never mind make a decent profit.
In reality things are a little more complicated. Here are some of the most common reasons why pitching without pricing happens:
Being busy trumps being profitable
In many PSF’s individuals feel a greater pressure to be “busy” rather than profitable. There are many causes for this, which are covered in more details in High Impact Fee Negotiation and Management for Professionals. Often a combination of poor incentive structures/ reporting and weak leadership combine to incentivise professionals to prioritise busyness over profitability. When that is the case quoting a profitable price becomes a hinderance to winning more work. In that case pricing is best not done so as to avoid having to face uncomfortable facts.
Pitching often trumps pitching to win
Many professionals feel better recognised by their firms when they are out “pitching” to clients and looking for “new opportunities”. Although this is an important activity for the long-term success of any firm it must be done smartly. Ultimately the costs of all pitching has to be recovered in addition to other costs such as salaries, etc. Indiscriminate pitching will only serve to raise overheads.
Pitching often trumps pitching to build a focused practice/ Any pitch is better than no pitch
This is another example where activity for the sake of activity is more highly priced than focused activity. This also involves having to say “No” to certain opportunities. Again, where professionals feel that they are more highly awarded for busyness rather than profitability they have an incentive to go for being busy.
Not enough time to price
Good pricing involves defining a detailed scope of work as well as determining the costs of delivery. This can take significant amounts of time, especially when the work is unique. The time needed can increase dramatically when there are fee structure options such as hourly or daily rates, fixed price arrangements or milestone based pricing. Nevertheless, the time invested in these activities are almost always time well spent. Clearly it does not make sense to invest 20 hours in a €25,000 job (unless you are likely to be doing a number of these – in which case it makes a lot of sense). As the size of a project grows it becomes even more critical to price correctly or else you run the risk of getting locked into a major loss maker
Hoping for the best the client will pay/ will see the value
Many professionals hope that once the work is being carried out that clients will see the value of the work delivered and the quality of those delivering and will pay what it costs to deliver. This may be the case in some instances but it is increasingly not so. Clients increasingly expect or require transparency and budget certainty at the outset of a project. Few clients are willing to operated with an open-ended cheque book. Professionals need to recognise this and to prepare accordingly
Not expecting to win
There may be times when a pitch is required for a number of political reasons, even though there is no interest in winning the work. This is often known as “pitch to lose”. Under such circumstances it makes sense to limit the amount of time and effort invested in the pitch. Nevertheless the price quoted should be reasonably on mark. If the price is too low it may raise questions regarding the capabilities or qualities of the pitching team. If the price is too high it may deter the client from seeking quotes in the future
Taking on “strategic or investment” clients/ projects
This is one of the most frequent and most dangerous arguments made in connection with pitching. The argument is that “we need this work to build our reputation/ practice/ market position, etc. so we should pitch at price X, knowing that this is likely to be below breakeven”. In my view, even when there are arguments to be had for taking on work as a loss leader the firm should know how much of an investment it is committing itself to. There is a difference between costing a project – to know what it will cost to deliver and quoting a price to the client. The two need not be identical – in fact they should never be.