Proposal or Contract?
February 2005 |
You’re in a new business meeting, a closing situation with a late-stage prospect, and he is enthusiastic. “Great,” he says after listening to your pitch. “I’d like to do this. Get me a proposal.” You write up your proposal, send it over and follow up by telephone. Voicemail. You leave a message and promise to follow-up the next day. Again, voicemail. You send an enthusiastic, can’t wait to get started email. Nothing. Days slip by. Then weeks. What was once a highly responsive, easy to reach prospect has turned into a ghost. What happened?
One of two things likely caused the prospect to disappear. Either he shopped the proposal around and found a better price, or in the time between when he said he was going to act and when he received your proposal, buyers’ remorse kicked in and he slipped from a late-stage prospect (one very close to buying) back to an early-stage prospect (one without intent, and therefore a long way from buying). What happened – what went wrong – was the proposal. The prospect had made up his mind to proceed with you and then in asking you for a proposal he requested time to reconsider and an opportunity to find someone to do it for less. And you granted it.
The Second Rule for Presenting Proposals
I have five rules for presenting proposals. Rule #2 is: The proposal is the words that come out of your mouth. The document is the contract. The paper is the place to sign; it is not the place for convincing.
Buyers of agency services are conditioned to ask for proposals, and ask they do. A late-stage prospect that is engaged in a consultative process to determine whether or not it makes sense to do business with you does not need a written proposal. He needs to know that you understand his problem and know how to help. He needs an understanding of how you would proceed, and knowledge of how much it will cost and how long it will take. Then he needs to commit. The document’s job is not to convince him or get him to agree – that’s your job and it’s a job that needs to be done first, before the document even hits the table. The role of the document – a contract – is to increase his level of commitment.
Three Levels of Commitment
In a final closing situation there are three levels of commitment that you request from the prospect in sequence. The first is a verbal commitment. “Shall we do this?” Only once you get a verbal commitment do you request the next, the written commitment. In other words, the paper comes out only after an agreement has been reached.
“Great. Sign here,” you say after you’ve received a verbal commitment. In truth it’s a little more than sign here. Take a few minutes to review the details of the contract, including the services being offered, the budget, timeline, and your terms and conditions. One of your terms for new clients absolutely must be a deposit of some kind paid before work begins. I suggest one-third to one-half of the fee portion of the assignment. A deposit is necessary – mandatory – because after you receive the written commitment – the prospect’s signature at the bottom of the contract – your next objective is to get the third level of commitment: financial. Get it quickly because the prospect reserves the right to change his mind until he parts with his money. Buyers’ remorse sets in even before the prospect buys, and then it reappears shortly after he has committed. Your prospect is never more vulnerable to his feelings of doubt than between the moment he decides to take action and the moment he parts with his money. Momentum is everything and time is your enemy. You want to ensure there is as little time as possible between each of the three levels of commitment. Come to the meeting prepared!
So the role of the contract is to escalate the level of commitment from someone who has already said yes. Now let’s look at the anatomy of a typical written proposal and determine which information should stay and form the basis of a contract, and which can be discarded.
Now let's look at the anatomy of the written document - the contract.
The Anatomy of the Document
Most agency proposals contain information of the following type:
A repeat of the reasons offered in the pitch why the prospect should hire the agency. Is this information necessary? Remember that by the time the paper comes out, there should already be a verbal commitment in place. This information is just in the way: a distraction on the road to written commitment.
Written confirmation of what was proposed in the meeting. This stays. Every contract should address the scope of services, deliverables, budget, and timeline. These are the details of the what, where, when, how and how much of your business engagement. None of this detail should be new to the prospect – you’ve covered it all in your proposal (the words that came out of your mouth) – but all of it needs to be above the place where the two of you will add your signatures as the specifics of your agreement.
Does strategy belong in a contract? No way. Does it ever belong in a written proposal? Only if you’ve been paid to write the proposal! You do not begin to solve your clients’ problems before you are engaged. Any strategy outlined in a contract is there for the same reason as the sell information: an attempt to justify the prospect’s investment by making the document more convincing. The purpose of the contract is to not to convince, it is to make it easy for the prospect to commit. Even discussion about the problem - a common and often lengthy preamble found in most proposals – is not necessary here. You should already have demonstrated that you understand the problem in your previous discussions throughout the buying cycle.
A Place to Sign
The last section of the document, a place to sign is the entire reason and purpose for this tool. Ask yourself what other objective you were trying to accomplish in your proposals? Convince? Overcome price objections? Solve the prospect’s problem as a demonstration of your ability to do so? The signature is the destination: get there quickly.
Conversations Instead of Proposals
Contract Length and Detail
Remember that your objective in putting the contract on the table is to get a written commitment, which is an important psychological step in helping the prospect progress towards solving his problem. The purpose is not to lock him into an iron-clad agreement on the smallest details. Your contract should be short (one to three pages) and should not be intimidating in its level of detail. If you need the assistance of a lawyer to write your contract, then your client will likely need a lawyer to sign it. Keep the contract as short as possible so that you can get a signature in the closing meeting. If you need to reposition the initial signed agreement as a more simple letter of intent or memorandum of understanding and follow-up afterward with a more comprehensive agreement that will involve lawyers and purchasing departments, that’s fine. Know your audience and know the level of agreement and detail they’ll be able to commit to and then prepare accordingly.
A New Dialogue
Now that you are considering getting out of the proposal writing business you’re probably imagining what those get me a proposal conversations sound like.
“Get me a proposal.”
“Okay, here’s my proposal. I propose to (fill in the blank)”
“Great. Write it up.”
"I’d be happy to write up a contract for your signature if you’re telling me that we have an agreement. Do we?”
“No, we don’t. I need something to show my boss.”
“I want you to understand that we’re not in the proposal writing business. Here’s what I’m willing to do. I’ll agree to invest in the presentation of a proposal [you still have not agreed to write one!] to you and your boss. In exchange all I ask is that at the end of the meeting we agree on whether or not to move forward on my proposal.”
Expert agencies write contracts that get signed, order-taker agencies write proposals that sit on shelves. Let your competition write the proposals.