It Feels so Good to be a Loser
Sunday, May 13th, 2007These are good times for professionals, many having more work than they can handle. This glut of client opportunities gives firms a rare chance to upgrade the size and quality of their clientele. To do so they will need to raise rates and turn away small clients and low margin work. Many find that hard to do. Why?
A client and friend who is a PhD, economist and a rainmaker at a litigation support firm argues that if you aren’t losing two out of three competitive pitches, your fees are too low. You may not agree with his ratio, but his logic is impeccable. It’s both good and essential to lose to competitorson price—sometimes.
Operationally, that is a hard message to grasp, because it goes against all of our prior training. What sport did you ever play where you sought to lose two thirds of the time? When were you encouraged to go for D’s or F’s in school? Was being passed over for promotion ever a good thing? Whenever someone says, I’m glad I lost, it sounds like sour grapes. Maybe a PhD economist can feel good about losing, but the rest of us don’t.
So, we go on competing intensely to win work only to find that we have set ourselves up to lose an opportunity to win a bigger, more strategically important client, because we can’t start soon enough or because we sent the B team to the sales presentation, or because taking the work from the small client created an insurmountable conflict.
Firms that overcome this problem usually do so by setting minimums in the size of assignment they take on. One firm I know of doubled its average project size after enforcing a controversial minimum-sized-project policy. Revenues ballooned the following year.
I know of another firm that raised its rates 20 percent in one year and didn’t reduce its conversion rate on proposals by even one percent. But it took guts to hold to such a big price increase.
I think I’ll try a different approach. The next time someone in the firm loses a pitch on price, I’m going to throw a wine and cheese party for the office in celebration.
