Six tips for building your new business pipeline
- By Bob Lohfeld
- Mar 19, 2014
Most companies really miss the mark when building their new business pipeline.
Typically, the market research team dumps every conceivable deal they can find into the new business pipeline. One company that I reviewed even boasted that they had a new business pipeline with over 150 targets worth $8 billion. With a win probability of 5 percent, they thought they could bring in $400 million in new sales.
Their new business pipeline was nothing more than a pipedream. Let’s get real and follow these 6 simple tips when building a new business pipeline.
Stay close to your core business
A fundamental truth in business development is that the better you understand the customer, the more likely you are to win. Always apply this principle when building your new business pipeline, and start by looking for new business opportunities with your current customers or with organizations that are close to your current customers.
Look at your current customers’ organization charts and see what adjacent organizations do and what they are buying. If they are buying similar services, then these procurements should be high-priority deals in your new business pipeline.
Don’t overlook opportunities to be a subcontractor if the kinds of services you are providing are being bundled into larger competitive procurements. Additionally, look for procurement opportunities to support your customer in other geographic locations. It’s often easy to identify opportunities where your customer is buying the same services that you are providing currently—except the procurements cover other geographic locations.
Don’t hesitate to ask for referrals from your current customers. If you are doing an excellent job, your customers will want to refer you to others.
Look at what else your current customer is buying
It is often easier to sell new services to your current customers than to sell those services to new customers. Always look at what else your current customers are buying.
If your firm is a service provider, you may have broad capabilities to support a current customer who may be unaware that your firm could provide additional services. Perhaps you are only getting a small percentage of what your customer is buying today, and it may be easy to convince your customer to buy from you rather than from another contractor.
Look at what else your customers are buying and ask the question, could your firm provide these services too? If so, add these opportunities to your new business pipeline.
Set a strategy for targeting new agencies
When you select opportunities in new agencies, make sure you have a rationale for why you want to prospect in those agencies, and make sure that the work closely matches the scope of your current or past work. If you are in the health care business, it makes sense for you to prospect for work in other agencies that do health care work.
On the other hand, if the agency is not in the health care business, and that is what your firm does, selling to them will be more difficult.
Have a strategy that reinforces the business that you are in or want to be in and then look for opportunities in agencies that fit your strategy. If you’re a service provider, don’t let your market research team search across the entire government landscape to pick opportunities. If you do, you will discover you are prospecting in 50 different agencies, and you’ll learn it is very difficult to convert your new business opportunities into revenue.
Trying to be a credible bidder in too many agencies generally turns out to be a useless waste of time and energy.
If you are selling hardware or software licenses, then you can select more agencies. With commodity offerings, you can be a mile wide and an inch deep in the government market and have a successful strategy.
Avoid chasing the gold rush
Everyone wants to be where the action is, but before you go chasing new agencies and leaping into new lines of business, make sure you are going to be successful.
It is easy to see that every IT company wants to be in cybersecurity, but if you have no company past performance, experience, tools, or technical staff in this market, then maybe it is better to avoid racing in where others have more compelling credentials.
Selling new services that you haven’t sold before to customers that have not bought from you previously is nearly impossible in a crowded government market. While it is tempting to have the market research team follow the money, it can often land you in places where you are just an outsider watching others take the business away.
Focus is key
There are always going to be targeted opportunities that pop up along your journey, and these will deserve your full attention, but for the most part, focusing your new business pipeline on agencies where you have traction or can reasonably hope to get traction is a good idea.
The scope of your market coverage will depend on the size of your firm. The smaller the firm, the tighter your focus should be. Larger firms are less concerned about focus and more concerned about deal size. After all, these companies didn’t get to be king of the jungle by chasing rabbits.
Stay focused and be reasonable with the scope of your new business pipeline. There is no point in building into your pipeline more agencies or deals than you have the resources to explore.
Developing relationships with government executives
I believe it is equally as important to focus on developing relationships with government executives as it is to chase deals.
The reason is that many of the deals are not visible to an outside market researcher and can only be discovered or created through face-to-face discussions with potential users of your services or products.
I’ve often called this the Lewis and Clark strategy in honor of the two explorers who set out to find a safe route to the Pacific Northwest. It took them over two years to reach the Pacific Ocean but the things they learned along the way were just as valuable as the destination. It’s the same in business development. It’s the people you meet and the opportunities you discover along the way that will pay off for you even if you never bid the big deal that you started out chasing.
When developing your new business pipeline, identify all the people you need to meet along the way, and see if you can discover what they need. These exploratory discussions will identify opportunities that are never publicized. They are the ones your market research team will never see from their 30,000-foot view, but you can discover them when you focus your discussions with the government executives you meet along the way.
How effective is your new business pipeline?
Over time, you can measure the effectiveness of your new business pipeline and your market research efforts. Some companies learn that very few, if any, of their new business wins came from the targets they identified from their market research efforts. In these cases, some corrective actions need to occur.
Hopefully, following these tips will help turn last year’s pipedream into this year’s new business pipeline.
Bob Lohfeld is the chief executive officer of the Lohfeld Consulting Group. E-mail is firstname.lastname@example.org.