Why your high win rate is hurting your business
If you win every bid, you might be too conservative
- By Bob Lohfeld
- May 24, 2011
Win rates vary widely among companies, and we see them range from as low as 10 percent to as high as 80 percent based on a variety of factors, including companies that bid anything and everything to those that bid too conservatively. To assess how your win rate stacks up against your competition, take a look at our chart. Equally important, examine the details behind your win rate. These can direct you to areas where you can make substantive improvements.
|Win rate||Color score||Assessment and recommendations for improvement|
|80% to 100%||Green||Doing very well, but opportunity qualification and bid decision criteria are set too conservatively. Adjust these criteria slightly to increase the number of procurements you bid, and you will significantly increase new business revenue.|
|50% to 79%||Blue||You are in the zone. Your capture and proposal processes are working, people are trained in effective capture and proposal management — as well as writing — and you are using technology to increase business acquisition efficiency. Focus on optimizing your capture and proposal process and driving greater efficiency into your business development life cycle.|
|25% to 49%||Green||Not bad, but you could certainly do better. Focus on defining and institutionalizing capture and proposal processes. Invest in infrastructure to increase business acquisition efficiency. Work on improving people skills by emphasizing training in capture and proposal management and in proposal writing.|
|0 to 24%||Red||You’re in trouble and need to rethink everything you’re doing. You are bidding jobs you have no business bidding, and your processes — if you have them — are broken. It is back to basics. Define your capture and proposal processes, set pursuit and bid criteria, and train your staff in capture and proposal management and in proposal writing. Create an enterprise repository to manage your business acquisition activities. You have much room for improvement.|
As a rule, you can look at win rates to gauge the overall effectiveness of your business acquisition process. We like to see win rates in the 50 to 75 percent range. Larger companies with mature processes and well-trained capture and proposal managers consistently deliver results in this range.
If your win rates fall to the bottom of the win rate scale, it’s time to rethink everything. Go back to basics and define your capture and proposal processes. Manage to these processes, and train your staff in the roles they have to perform. Make sure you have suitable automation to support your processes, and make sure everyone follows the processes. Every company with good processes and supportive infrastructure should deliver win rates above 25 percent.
Occasionally, we see win rates that are too high. Generally, this occurs when a company is bidding too conservatively, e.g., they are working in a narrowly defined market niche and don’t venture out of their comfort zone. If the company opens up its bid criteria slightly and takes on more bidding risk, it can greatly increase its revenue.
Computing win rates
We define win rate as the number of competitive proposals you win in a given period divided by the number of competitive proposals you submit. Don’t include any proposals where the government canceled the procurement since these events are generally outside your control.
Don’t create win rates based on dollars won versus dollars bid. This simply distorts your win rate. When companies do this, you can bet they have a poor underlying win rate and are hiding that by counting the values of some large indefinite-delivery, indefinite-quantity contract to inflate their numbers. The number you want is wins divided by total proposals submitted.
To compute a statistically valid win rate, you must have competed more than a few times. While it is mathematically correct to say, “If you submit two proposals and win one, you have a win rate of 50 percent,” it is hardly accurate to say that you are likely to continue winning 50 percent of all proposals you submit. Basically, the more competitive proposals you submit, the more statistically valid your win rate.
Looking behind the numbers
To understand how well your company is performing, compute your win rate by type of procurement. For example, if you bid both 8(a) procurements and full-and-open procurements, compute separate win rates for each. You may be surprised to find that while you do well on 8(a) competitions, your win rate on full-and-open procurements is in the cellar. Clearly, you must do more work on your people, processes and infrastructure to bid full-and-open competitions effectively.
Similarly, examine win rates on competitive task-order contracts. These can reveal problems in handling rapid-response procurements.
Finally, look at win rates by procurement dollar value. We often see companies that do well bidding smaller procurements but whose win rates tank when contract values go above $30 million.
A good analysis of win rates should show you where you fall short and where to focus efforts to improve your company’s revenue growth.
Bob Lohfeld is the chief executive officer of the Lohfeld Consulting Group. E-mail is email@example.com.