by Gary Dunbar
- What is next year’s Gross Revenue?
- How much of next year’s revenue must come from new contracts won this year?
- How much will Business Development cost this year?
These key questions in Business Development Management aren’t easy to answer with reliable accuracy. Obviously, next year’s revenue from continuing existing contracts is relatively easy to forecast. It’s next year’s revenue from new contracts, this year’s wins, that’s difficult. Here are some tips to help you do that.
Develop a Consistent Method to Calculate Your “Win Rate,” i.e., the number of successful proposals compared to the total number of proposals submitted. If this number or percentage varies wildly every year, next year’s revenue forecast is very likely to be a wild guess. On the other hand, if your firm wins at a consistent percentage of total proposals submitted, revenue projection gets far easier and much more reliable. A win rate of 60% is a good target.
Imagine what it would be like if your annual revenue forecast was always, year after year, within 5% of your actual annual revenue. How would this impact hiring, or acquiring more office space, or upgrading computers, or advertising, or an updated website? Or your Go / No Go proposal decisions for new opportunities? You get the picture. So, the bedrock issue in Business Development Management is your win rate. Calculating your win rate is easy to say and difficult to do. Consider these seven factors:
- The span of time over which your rate is calculated. We like 24 months. Every month the rate is updated to drop data that’s 25 months old and data from last month added. Keep a record and formally update it every month.
- Track every proposal submitted. Minimum data should include positioning-to-win efforts completed before the RFP was released; the total cost of proposal preparation; the maximum gross revenue contract value; your estimated maximum net revenue value; contract Period of Performance; and estimated date of award and start of work.
- Calculate your win rate by comparing the number of contracts won to the total submitted and by the gross revenue value of contracts won to the total gross revenue value of proposals submitted.
- Always get a debriefing for every proposal you submit. Ask for and record the reasons your client provides for why you won or why you lost.
- Submit a written Business Development Status Report to senior management monthly.
- Conduct periodic management review meetings with your firm’s senior management and all Business Development personnel at least quarterly or monthly if the volume of activity merit more frequent reviews.
- Use Business Development data and reports to prepare your Annual Business Plan for the next year during the last quarter of each fiscal year. This plan should include all previous years’ comparisons of Annual Revenue Forecast and Actual Annual Revenue. In addition, include a full description of actions planned to ensure the revenue forecast is fully achieved.
Establish Procedures to Conduct All Steps in the Business Development Process. The basic Business Development Process has six phases, and each phase has information items to be obtained, recorded, and saved and tasks to be performed:
Phase 1 Lead
- BD Number – Assign your firm’s BD Number to every lead tracked
- Quantity of Current Leads – Maintain a tally of the total number of leads currently active and update monthly
- Procurement Name – Determine/save the contract name your prospective client uses
- Purpose – Describe the contract’s objective
- Contract Price Structure – Record information available about the type of contract structure likely to be used in the procurement (e.g., Firm Fixed Price)
- Contract Type – Record information available about contract type likely to be used by the Government (e.g., IDIQ))
- Contract Method – Record information about the procurement method likely to be used by the Government (e.g., Small Business Set Aside)
- Contract Maximum Value – Record information about the maximum estimated amount the Government believes the contract will cost
- Timeline RFP Release – Record information available regarding when the RFP is expected to be released
- Timeline Proposal Due – Record the date you expect the proposal to be submitted
- Additional Comments – Record other information you might obtain
Phase 2 Opportunity
- Lead Information – Update/correct as required
- Contacts – Date, names, and reports for all meetings with individuals in the Government agency responsible for this procurement
- Contacts Directory – Name, position, address, email, and phone number of all Government contacts
- Contract Net Value – Update information on Maximum Value and estimate the Net Revenue Value (Maximum Value minus the estimated pass-thru costs for vendors, subcontractors, consultants, and other ODCs)
- Capture Plan Status – Such as waived my upper management, in process, under review or approved
Phase 3 Target
- Sales Calls – Status of all meetings with prospective client/customer required in Capture Plan
- Competitors – Status of competitor identification and analysis
- Team – Status of SOW analysis; identification of teaming requirements, Team Win Strategy and Objectives, teaming negotiations, and Teaming agreements
- Positioning Deliverables – Status of positioning deliverables (information, reports, and other data for use in the proposal preparation) required by the Capture Plan
- Proposal Plan – Status of management review/approval of proposal budget/preparation cost
Phase 4 Proposal-In Process
- Proposal Steps – RFP-Based Proposal Outline, Annotated Outline, Pink Team Draft Review and Report-Out, Recovery, Red Team Review and Report-Out, Recovery, Green or Gold Team Review (Price) and Report-Out, Recovery, Final/Gold Draft, Final Management Sign-off, Proposal Submittal
Phase 5 Proposal Pending
- Contacts – No more than three phone calls to the Contract Officer only inquiring regarding when the Source Selection will be announced; don’t ask any other questions
- Update – All contract value data
- Expected Award Date – See Contacts above
- Estimated – Length of time between contract award and receipt of payment of first invoice
Phase 6 Won, Lost, or Terminated
- Win Rate calculated by number of wins and by value of wins during current time period (we recommend two years as the current time period)
The biggest mistake that happens far too frequently is learning about a procurement after the RFP has been issued and then deciding to prepare and submit a proposal. Only do this when you have very recently inherited a vast amount of money from a relative you never knew about who won the lottery.