Computerized spreadsheets like Microsoft Excel are great for quickly and accurately manipulating large amounts of numerical data. Embedding such spreadsheets with formulas that reflect a company's costing methodologies can allow an enterprise to rapidly generate pricing figures for the business proposals and RFP responses they need to secure new customers. However, as a business grows, such "homegrown" pricing tools often become problematic. When this happens, a new solution much be found.
How do you know when a custom-built pricing application has outlived its usefulness? Here are seven signs your homegrown pricing tool is holding you back:
- Numbers Don't Reflect Reality. This is the clearest and most serious sign that your homegrown pricing tool no longer works. If your spreadsheet formulas don't produce reliable results, you risk undercharging -- or overcharging -- your customers. Neither outcome is desirable. Long-term risks include insufficient profits, lost business and serious dings against your company's reputation.
- Results are Inconsistent/Untrustworthy. Similar -- but not identical -- to the first problem, this describes a situation where a pricing tool sometimes produces accurate forecasts -- but sometimes does not. Such scenarios often arise when a pricing tool is built to address a specific set of pricing criteria but it then used to crunch numbers for others. When you're not sure when results are accurate and when they are not, it puts all the results in question, which ultimately leads to the same negative consequences you encounter when all the numbers are bad.
- You're Taking Time to Re-Acquire Data. The whole point of an automated pricing tool is to allow companies to generate proposals quickly and accurately with a minimum of effort. If you have to reach out to a dozen or more department managers every time you're putting together a cost proposal, your homegrown pricing tool is no longer doing its job. A professional pricing tool should retain accurate pricing data so you don't have to keep reinventing the proverbial wheel every time you receive a new RFP.
- You Can't Collaborate. Large-scale cost proposals are rarely one-person jobs. Often, numerous people are involved. This requires the sharing of pricing tools and collaboration between individuals who are often in far-flung locations. If you cannot easily share your pricing tool with multiple individuals when costing a project, its utility is severely limited.
- Your Tool is Being Abandoned in Favor of Alternative Costing Methods. Sometimes, pricing managers find their homegrown spreadsheet-based tools so frustrating that they quietly stop using them and simply default to other systems, perhaps systems of their own devising. There is no formal policy change here, just a casual drifting away from approved methodologies toward those with which individuals feel more comfortable. The results of such behavior need not necessarily be wholly destructive, but they do undermine a company's quest for consistency, integrity and accountability.
- You're Not Generating More Proposals. If the number of proposals you generate monthly has plateaued -- or has even declined -- this could be the sign of an obsolete pricing tool. As the old saying noted, a wagon train can only travel as fast as its slowest wagon, and a slow, cumbersome pricing tool will necessarily be a drag on a company's business development potential.
- You're Not Winning More Business Ultimately, the goal of any sales department is to generate more sales -- and profits. A fast, flexible pricing tool is central to this effort. Spreadsheets have their uses -- but also have their limits. If sales wins are down, it may be time to upgrade your technology to reflect the times.
If your business is experiencing any of the symptoms described above, it's time to consider upgrading to a dedicated, professional automated pricing tool. Although such tools require significant investments as well as user training, they can pay for themselves many times over in terms of increased internal efficiencies as well as the number -- and size -- of new contract wins you can enjoy.
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