What do Small Business Owners need to know about RFPs?

A request for proposal, or RFP, is a tool that can help ensure your company procures the most competitively priced goods and services you need to operate your business. The RFP process can be as simple or as complex as necessary to ensure potential suppliers and vendors understand exactly what you are in the market for.

Describe Business Needs

When you write an RFP, it allows you to outline the specific product or service you are in the market to buy. The RFP is simultaneously distributed to qualified vendors for bid. Using this approach, you can detail everything from the type of services, the frequency of needs, your budget and the length of the contract terms. This allows you to forgo the process of individually contacting different service providers, describing what you need and asking for quotes.

Invite Competitive Bids

Vendors that respond to RFPs understand they are competing with numerous other parties to win your business. As such, they are likely to be very specific in their responses, giving you their best estimates and describing the ways in which they can outshine the competition. The way a company responds to your RFP gives you an idea of their responsiveness and attention to detail and allows you to evaluate how well they would do providing requested products and services.

Compare and Contrast Service Providers

RFPs generally include requests for client testimonials or examples of ways in which services have successfully been provided in the past. Sending out an RFP essentially requires service providers to sell you on their merits, describing their workforce, their history, their financial projections and describing materials and processes they’ll use to meet your needs. The process also allows you to compare similar products and services side by side and narrow down your selection.

Maintain Your Budget

Using RFPs can help you stay on track from a purchasing, budgeting and project management perspective. Writing the RFP guidelines forces you to evaluate your needs, your timeline and the money you have to allocate. It also helps you define the expectations you have with service providers in advance.

Downside to RFPs

RFPs can be time-consuming to complete, and small businesses may not have the staff to effectively respond as you’ve requested. While complex or costly projects should be given time and attention by prospective service suppliers, keep the RFP elements simple and straightforward as possible to make encourage competition and completion.

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