Just like almost every other statistic, win rates can be an elusive and manipulated number. There are many factors that can be counted into or left out when calculating the win rate, it is very hard to compare your firm’s number with another firm and often one office’s win rate to another. I attempt to dig into the many factors that go into a win rate calculation and different deviations that may be used to calculate them. This will arm you with information to ask the appropriate questions when you are asked to report this number.
Win Rate Definition
The basic definition of the win rate is the percentage of pursuits you win based on the number of pursuits you go after. It is also commonly referred to as a hit rate.
This basic definition is probably about the only thing we can all agree on.
Your next question may be, “what’s a good win rate for our industry?” That is where everyone disagrees. Some may say 30% (meaning you win one in every three pursuits) and some people may not consider anything more than 75% a success. Others are happy with a win rate of 10-15%. Why is this so varied? It is all in the definition of the term pursuit and what data is used to calculate the win rate.
Defining a Pursuit
I am purposely using the term pursuit so far instead of the term proposal. This is because not every sales effort ends with a formal proposal. Sometimes a project is directly negotiated. Sometimes, there is just a letter fee proposal written by the Project Manager, and sometimes there is a 12-month effort including a preliminary design up to 30%. Then there are some that a just given to you through an on-call or IDIQ. Knowing the differences in your pursuits and level of efforts will help you as you begin to develop your win rate.
I suggest taking a look at your sales from the last 12 months and try to list out (or white board) the different types of pursuits. Then try to categorize them into different groups. This will help you determine the different types of pursuits your firm has.
Some questions to help you define your pursuit categories can be:
- Did we have to compete for this pursuit?
- What was the proposal effort for this pursuit? Was marketing involved?
- Did we have to work with a partner (i.e. design-build)?
- Was this through an on-call contract?
- Was this another phase of an existing project or program?
Once you define your pursuits, then you can determine what gets counted in your win rate.
What Gets Counted in Your Win Rate
Now that you have categorized your different types of pursuits, you can determine what gets calculated into your win rate. Wait, you mean not every pursuit gets calculated?!?! Well, you can certainly take that approach, but many firms do not. The main reason is that most of the time, the win rate is used to indicate the effectiveness of marketing and business development. For that reason, they want to only use the pursuits that are a) competitive and b) have some sort of business development and marketing involvement. Let me explain further with some of the considerations I have used in the past.
Is the pursuit competitive? This means that we are competing against other firms to win the project. This can include a public RFP response or invite-only response. I have also started to see competing for task-orders under an on-call or IDIQ contract. If the pursuit is competitive, I have typically counted that in the win rate calculation.
Level of Effort
What is the level of effort to secure the pursuit? Does it involve marketing support? Does it involve technical staff support? Is there a separate pursuit charge number set up? Is there a pursuit budget? I have always been a strong proponent of setting up specific pursuit project numbers. This helps me track many data points, including win rates. If you do set up a pursuit-specific number, I would suggest calculating in the win rate. Other considerations would be if marketing is handling the response documents (proposal, presentation, etc.) and/or there is a significant technical staff support needed.
At a previous firm, we had a lot of repeat work. Most of the time the client called the project managers directly. They discussed a specific scope and then the project manager submitted a letter fee proposal. Marketing would just get copied on the submittal to the client. There was a low level of effort for everyone, so we would not count these into our win rates.
Sub vs. Prime Role
What is your role in the pursuit? Are you the prime consultant? If so, then use the criteria above to help you determine if you should count toward your win rate.
If you are typically a subconsultant, this will be a gray area. Not including design-build pursuits, I have said that if marketing, our project manager, or technical staff have to spend more than two days preparing for the pursuit for the prime then we should open a pursuit-specific project number and count toward our win rate. If we are investing that much time and resources, we should have a vested interest in the outcome.
Some firms only count pursuits into their win rate once they get shortlisted. If they don’t get shortlisted, then it doesn’t count for anything. Typically, this happens if the firm’s initial submittal is “simple.” I say simply because even if it is a two-page letter of interest, we all know how much effort actually goes into preparing those. I would strongly encourage you to not let your firm count their win rates this way. I always pushed to count every pursuit, especially competitive, into the hit rates. It also helps your case for better go/no-go discussions explained below.
Calculating Your Firm’s Win Rate
By now, you should have your list of different pursuit types and what pursuits will be counted. Since this is a backward-looking statistic, you can take all of the pursuits for the previous period (month, quarter, year, etc.), take the pursuits you will count, then label win or loss. Count the wins and divide by the total number of pursuits. This will give you the win rate.
Numbers vs. Dollars
What I have described above can be used to calculate your win rate based on the number of pursuits and dollar amount of pursuits (sales). Why does it matter? Is there a difference? I believe that you should calculate your win rate based on both and here’s why. Say you are nearing a 75% win rate but still coming up well below your sales goal. If you are only looking at win rates based on the number of pursuits, then you may think that you need to increase the number of pursuits you go after.
If you took that same data and calculated your win rate based on dollars, you may learn that you are losing your largest pursuits. If you put more efforts into those and maybe even no-go the smaller dollar efforts your overall sales performance will be better.
Or, you may realize that your total number of pursuits is not even enough to meet your sales goal when you look at the total dollar amount of your pursuits. This may spur some discussion of just how many and how large of pursuits you need.
Just like most statistics, you cannot look at just one calculation to determine your effectiveness.
Other Types of Win Rates
Other types of win rate calculations used can be:
- Shortlist Success Rate – This is the number of shortlists divided by the total number of proposals submitted. This can indicate how well you are doing in your proposal efforts and I would argue this also can indicate how well your preproposal positioning and go/no-go process is performing. I strongly encourage this rate to be more than 60-75%. I believe that we shouldn’t submit a proposal unless we know we can be shortlisted. That is an article for another day!
- Interview Success Rate – This is the number of wins divided by the total number of pursuits that were shortlisted. This can be slightly different than the overall win rate because not every pursuit will have a shortlist interview or phase II in the procurement process. Firms keep an eye on this number to see how effective they are in the interview phase. I would suggest tracking this firm-wide and by the project manager. This number may only be shared with your top executives as a way to determine who needs presentation training or coaching.
- Competitor Success Rate – This is the number of times a competitor is selected by a particular client, district or department divided by the number of times they have submitted. This is more easily tracked in a public agency where the procurement is public record. This will tell you who is winning and how often. This isn’t easy to track, but good data to have. I have also used this to provide not only what firm is winning but who their project manager is and what subconsultants they use the majority of the time. Providing this type of data to your principals can help you position yourself as an expert in your market.
Do Win Rates Matter?
First, let’s discuss why (if at all) win rates matter. It is a basic snapshot of how well the firm is doing in securing new work. However, I would argue that the win rate needs to be considered as part of several indicators to evaluate the firm’s success. For example, if you do not have a strong go/no-go process, then you are submitting way too many proposals. Then, of course, your win rate will be lower. I have always said that the quickest way to improve your win rates is to reduce the number of submittals. When you reduce the denominator in that equation, the percentage dramatically increases. See example below.
Other Items to Measure
In my next article, I will share other marketing and business development related activities to track and measure. This will help you paint the full picture of your firm’s effectiveness and help guide decision making.