I got the following plea for help from one of our members: No one in my company seems to grasp either the importance or utility of developing, much less following, a formal proposal development process. My average lead time is about 1 1/2 weeks, and often less. Naturally, our win rate is embarrassingly low. How do I tactfully help my superiors come to the realization that there is a better way?
I've written a lot on related subjects, but am not sure I've answered this directly enough for those of you in a similar circumstance. Here's what I recommended:
A good place to start is with a lesson in pipeline mathematics.
Start with $100 million in leads.Now let's try again:
Bid 75% of what you find.
Then submit $75 million in bids.
Win 20% and you've got $15 million in business.
Start again with $100 million in leads.By bidding a little less and winning a little more you end up with a 20% boost in revenue and an even larger bump in profit. What most folks want to do is to keep the number of bids the same and increase the win rate. Think of all the money you'd make then — $40 million in the example above (a 250% increase!). This would be great, only it doesn't work because you raise your win rate by:
This time, bid only 60% of what you find. Submit $60 million in bids.
Win 30% and you've got $18 million in business, for the same cost of sales.
If your win rate is low, you can't afford to increase your resources/cost so that you can add process and keep bidding everything you discover. What you have to do instead is get picky about what you bid. This alone will lift your win rates, even without implementing a process and metrics.
- Doing things correctly instead of doing them quickly
- Investing time in order to achieve a higher win rate as your return
- Implementing a formal process that adds goals, actions items, and quality assurance steps that are currently being skipped.
- Using metrics that over time show you which bids you have a low probability of winning
Now, reinvest some of your new-found profit into lower rates and your win rate can go up again.
Run the numbers anyway you want and you will find:
The scary part is that the numbers work the same way in reverse — lowering revenue and destroying profitability. When the response is to seek more leads instead of improving the win rate, it creates a downward spiral. Forget about leads — companies that focus on win rates soar. Companies that focus on leads plateau, and once they max out their market or their need to inefficiently consume leads reaches an unsustainable level, they crash.
- Raising win rates lowers the number of leads you need to hit a revenue target.
- Each time you double your win rate, you ultimately double the size of your company, without increasing the number of leads required.
- When you increase ywin rate, profitability increases even faster than revenue since the cost of sales is the same.
This isn't just someone's theory and no amount of wishful thinking can change it. It's math.
A good way to correct poor win rates and low probability bidding is to introduce metrics to the business development status meetings. People will have to implement the process in order to complete their metrics reports. As you accumulate data, you'll be better able to assess exactly what is raising or lowering you win rates. But you'll see an almost immediate boost in win rates, as people start doing things they're not doing at all now just to complete the reports.