We’re all busy people, and unless an article catches our attention, we tend to skim and maybe even not get past the first line. So, here are a few snippets about the cost of tendering that you can read in 30-seconds or less:
In 2014 MarketingWorks and the University of Reading reported that £44k is the average cost of a losing a bid, and £66k is the average cost of winning a bid*
Most companies have a prospect-to-win conversion ratio of 7:1 or higher and with SMEs this rises to more than 10:1
Using the figures in (1) and (2), a winning bid has to make circa £370k to cover the cost of any lost bids.
Honest qualification of a prospect (taking the emotion out of the equation) can increase win ratios more than throwing money at the bid team.
If prospect to win ratio was reduced to 2.5:1 each win would make £200k more margin.
It's no surprise that smaller bids cost proportionately more (of the expected winning contract value). This is because of the fixed costs associated with deciding to bid.
The true cost of bidding is in responding to bids that appear on your desk with no prior knowledge or warning.**
30 seconds over - if you are still interested read more detail here.
*In 2014, MarketingWorks, in association with Professor Will Hughes of the University of Reading undertook a study of bid costs and managed to get data from 118 companies. In 2015 Jack Simpson used this data and added to it in an article he wrote for the Construction News. In it he quotes £44k average cost of a losing bid and £66k average cost for a winning bid.
Whatever the cost of your bids it's a fact that if you lose 7 for every one you win the bid costs of all 8 have to be paid for by company profits /winning bids.
**If you didn't know the ITT was coming you're already behind the 8 ball as one of your competitors will have been talking to the potential client and have inside knowledge and influence gained and created before the official bid process started.
The figures above (£330k) cannot offer a true reflection as I suspect most companies attack bid responses in a repetitive manner. If you happen to spend £44k on one bid you'll most likely spend a similar amount on the next bid because most of the cost is time. But that doesn't preclude you from winning the odd bid just as spending another £22k on your next bid doesn't guarantee a win. It's what you do with the budget that matters.
In terms of bid cost I'm interested in the difference between companies that have a 2 or 3 :1 win ratio and those at 7 or 10:1. A winning bid for me starts at strong and honest qualification of a prospect. Do you have a relationship? Do you understand their need? Have you been having conversations with them pre-ITT?
If you can't answer these questions are you just throwing good money away? If you spend less time on the failures you'll have quality time for the bids you've qualified 'in' and therefore able to produce a higher quality result. More time on a bid also means you'll have time to review it before you submit it - if there's a mistake or worse still a negative emotion generator‡ it's better you (rather than your prospective client) find it.
Qualify well. (Managers - don't push your sales teams into bidding for everything, and account owners/bid managers don't bid for something just to keep you looking busy.)
Plan time for a review (and if you can, get fresh eyes in to do the review whether they come from within your company or from a specialist resource).
‡ A negative emotion generator is text that sends the reader off into "what did they mean by that", or "who do they think they are" type of question while their eyes keep reading. When their brain eventually catches up to their eyes they could have missed a good page or more of your answer. It's not just the lost page either - stop and think for a minute - if someone had insulted you or made you angry or frustrated how much more critical and less understanding you would be to anything they subsequently tried to tell you.