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Should You Invest in Pricing?

Explore the Top 5 Reasons Why Investing in Pricing is Critical to Your Company’s Success

So you’ve just received your 8(a) classification and are bidding on your first government proposal with no idea where to start. Or, you’re a seasoned small business deciding how to allocate your funds to best position your company’s win probability for a new proposal opportunity. Let me walk you through why investing in Pricing should be your #1 Priority no matter the circumstance.

First and foremost, investing in Pricing Maximizes Your Profit potential by ensuring your company achieves its financial goals while mitigating risks. A thorough understanding and analysis of what’s needed to ensure your bottom line is met will optimize your overall profitability opportunity, and put you in a position to continue to bid on government proposals in the future.

Next, investing in Pricing will Save You Millions over the life of the contract. Most 8(a) companies new to the proposal industry will simply put an arbitrary fee on top of labor rates to seemingly save on proposal development costs. This is the biggest mistake a company can make whether new or established. When choosing this route, a company increases their risk of being deemed unreasonable and likely leaves unnecessary money on the table, ultimately reducing profit potential. An experienced pricing firm will help you understand the risks associated with various contract types, help you mitigate those risks and ensure price competitiveness, but also price reasonableness while evaluating an appropriate fee strategy. This leads to the third benefit of investing in Pricing. 

Having a well thought out Price proposal shows that you Understand the Scope of Work. When a Contracting Officer evaluates a proposal, one criterion is price reasonableness. The question is, what is an acceptable price, and where does your bid fall within the competitive range? If you are too low or too high, it can be a signal to the Contracting Officer that you didn’t take the time to thoroughly understand the scope of work; or worse, it could mean you won’t be able to fulfill the requirements of the proposal long term; both of which represent incredible risk to the government. Investing in Pricing will provide the insights and expert due diligence to ensure your bid is not only price reasonable, but also competitive, while not leaving money on the table.

Next, investing in Pricing can help Build Your Brand and Establish a Positive Rapport with the Contracting Officer. When you consistently deliver a sound Cost Proposal and Pricing Plan, you solidify your company as one that represents a low risk to the government, that will always be priced reasonable and able to maintain a consistent workforce during the entire period of performance with very little turnover. This will be very helpful as you bid on future opportunities and cement your space within the proposal arena.

Finally, all of the above combine to pave the way for a Higher Win Probability. Your investment in an experienced Pricing Firm will provide an invaluable return that will continue to provide value year after year. The right start with a comprehensive and thorough price strategy will help build and expand your industry and competitive knowledge base, all of which are critical when establishing a winning price strategy. 

About the Author

Channon Perry is the Principal Owner and President of Strategy & Insights at CPS Consulting Firm. With over 15 years of experience, she and her team of strategists provide thought leadership and an innovative approach to pricing strategy and development for government proposals for small to mid-sized firms. Her firm is known for their seamless 10-Step Process that includes complete Cost Proposal Development, Industry and Competitor Analysis, Fee and ROS Sensitivity Analysis and more.  Visit CPS at www.categoryandpricingstrategists.com to learn more.

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