Who doesn’t want to hit the bull’s eye?
Experienced marksmen know before they pull the trigger whether or not they have a good chance of hitting their target. It shouldn’t be any different when you’re on the hunt for new business.
Recently, I spent some time catching up on my reading. The PSMJ Quarterly Market Forecast was one of the first items I picked up. It struck me that, six years after the end of the Great Recession, many industry sectors have still not recovered to their pre-recession levels. Some sectors ─ such as transportation ─ are quite strong, but if your firm’s focus is on other sectors you are most likely expending a lot of effort pursuing new opportunities. With finite resources (time and money) available, are you using them in the most efficient way? Are you chasing only the best opportunities or wasting much of your efforts chasing every opportunity that comes along?
Think about the pursuit, time, energy, and opportunity costs – including the emotional drain of losing – and the profit you would have made on the project. With an industry average win rate of only 47% (37% for firms >250 employees), over 50% of your investment pursuing work generates no fruit!
That metric would be discouraging to a professional marksman who knows his or her sport and values the effort he or she puts into it.
Have a GO/No-go Process
According to the 36th (2015) Deltek Clarity A & E Industry Study, only 29% of firms use a formal go/no-go process for all opportunities, and about 40% never use one. An effective go/no-go process can improve your return on marketing dollars by identifying those opportunities that you have the best chance of winning allowing you to focus your efforts, increase your win rate, and energize your business development team. A higher win rate will increase the morale of everyone involved in business development, which will, in turn, drive your team forward!
Sounds great, but how do we get started?
Identifying the Best Opportunities
The go/no-go process is all about identifying the best opportunities to pursue. However, you need to understand first what makes an opportunity the best. In her book “Find the Lost Dollars: 6 Steps to Increase Profits in Architecture, Engineering, and Environmental Firms,” June R. Jewell, CPA outlines a number of very good questions to ask yourself in this process. Let’s focus on these questions:
- Can we make money on the project?
- Is it in our sweet spot?
- Can we be successful?
Too many firms rely on anecdotal information or gut feel for answering these questions when they have the information to make a much more informed decision in their CRM and project accounting systems.
If you combine information on project profitability and win rates, you can identify those opportunities on which you have the best chance of winning and making money. First, sort your project profitability data by project type, geography, customer, and customer type to identify your profit sweet spot. By analyzing your win percentage on your most profitable projects, you can establish a set of the most profitable projects with the highest win rates. These types of projects become your focus when deciding which opportunities to pursue.
For example, you may find that energy-related projects for a certain sector or customer type are very profitable, but you only win one out of 10 opportunities. If your win rate is 70% and the projects equally profitable with another customer type, then all things being equal, that is where you should focus your resources.
With this data, you can decide what projects, customers, and industry sectors to pursue. It just makes sense to focus and keep the sectors and customers where you win frequently and consistently in your sights.