Blogs

 

Understanding your real marketing costs for the pursuit of a project is very important. Firms have limited resources so it is important to make the most of what you have. In 2012 the Association of General Contractors (AGC), in conjunction with FMI Corporation, published a report based on their comprehensive survey focused on gaining a better understanding of how firms view and execute business development differently in today’s environment when compared to their experiences during the boom years that preceded the great recession.*

 

The result of this comprehensive survey showed, not surprisingly, that profitability has trended downward over the past two years with 83% of respondents stating that they are now less profitable or are only breaking even. The study also found that companies are investing a higher percentage of their revenue in business development than they did in the past. Midsize companies, however, spent a lower percentage of their revenue targeting and winning work which relates to their having the lowest average hit rates. Additionally, firms with no business development staff report a limited ability to hold onto customers and convert relationships into repeat business.

 

Developing a strategic business development plan that is in line with your business plan is very important. Within this plan a budget should be established and a method for tracking costs should be implemented. One of the costs firms should always track is the cost of pursuing projects. Tracking only the cost of proposal preparation limits your ability to fully understand the real cost of winning projects.

 

My golden rule states that firms should never submit a proposal if they do not have a high probability of winning the project. This isn't smart business and consumes your marketing budget. There are many firms that have stuck with what they know and have reacted to shrinking hit rates by increasing the number of proposals they submit. Their marketing resources are being devoured in the preparation of shotgun boilerplate proposals that fail to get them to the shortlist. This also leaves them with inadequate resources to retain and develop clients, the most successful way to win new projects. I ran into so many marketers at the SMPS Pacific Region Conference who were burnt out and frustrated because they were just cranking out proposals with a very low hit rate. It is no surprise that turnover in marketing departments is high, costing firms even more in the long run.

 

SMPS Orange County Chapter's June program focused on healthcare. One of the questions we asked the panelists was what they looked for in winning proposals and presentations. One of the panelists, Bill Eveloff, Vice President at Petra-ICS (a spin-off of St. Joseph Health) described a selection process that he had recently conducted. He said that he invited ten firms to submit proposals. His first cut he described as being easy because he just threw out the proposals that read like boilerplate. He then reviewed the remaining proposals and selected three firms to interview based on relationships and client-specific content. Going into the interview he said that all three firms were equally qualified and would do a good job if selected. The firm that was ultimately selected came in with a high level of project knowledge, had already developed conceptual material, and ultimately delivered an interview that felt more like a charette than a formal presentation. This is the approach I sell to my AEC clients, but now that the words have come from a real client, the message has much more power.

 

In my experience, and I've developed well over a thousand proposals throughout my career, the only way to win a project in our hyper competitive market is to demonstrate knowledge of the client and project issues, then write text that is fresh and specific. Bottom line, in order to increase your hit rate, you need to put technical hours into the proposal for site visits and preparation of a project specific approach with graphics. This drives up the cost of proposal development so firms must make smarter go/no go decisions. My favorite lesson learned in studying for the CPSM exam is that in order to win more projects you have to submit fewer proposals.

 

If you are trying to persuade your executive team to implement a rigorous go/no go process, I suggest that you prepare a report for them that contains the actual cost of pursuing past projects with columns indicating whether you shortlisted and/or won. I would be very surprised if this report doesn’t show that you won significantly fewer projects when a reactive approach forced a boilerplate response. This will allow your firm leaders to better understand the benefit of only submitting on those projects where you have a high probability of winning and then spend the money it takes to do it right.

 

The past few firms I worked with full-time used Vision for their accounting and time sheets. We created BD numbers for project pursuits and everyone involved charged their time to this number. This way we knew the real cost of pursuing projects, which varied significantly depending on the client and project type. For instance, private sector clients we had worked with before often accepted a contract style letter which costs relatively little. Qualifications-based selections run in the $5,000-$10,000 range. For high profile projects the cost ranges from $10,000 to as much as $50,000. With design-build or design competitions, costs typically exceed $100,000 which is why serious clients offer a stipend to firms not selected.

 

Below is a partial list of the costs you should track:

• Client meetings that directly relate to the proposal, not the entire BD effort for the client.
• Project, client and competitor research.
• Subconsultant selection and gathering their material.
• Reformatting all subconsultant information to ensure a cohesive package.
• Site visits and analysis.
• Technical content such as a project approach and graphics (for instance site plans and/or bubble diagrams) to demonstrate your ideas relating to the project.
• Statement of qualifications preparation and material costs if it is a two-phased process.
• Proposal hours and material costs including printing, binding, high quality paper, lamination, etc.
• Good faith effort if applicable.
• Presentation graphics preparation, presentation materials (boards, leave-behinds, etc.), story development and slide preparation, rehearsals, time for travel and delivering the presentation, and possibly even a second short short list presentation.

 

 

If you are a subconsultant and want to be selected for more project teams, focus on how you can add value. Your ability to identify project issues that relate to your specialty will make the proposal that much stronger. Having worked almost exclusively for prime firms, the subconsultants I selected were those we had worked with before, had experience with the client and/or other strong relevant experience. If you are contacted to join a team, always deliver the information requested thoroughly and timely. It is a big plus if you have a solid marketing professional in house who knows InDesign. This person can offer to format their materials in the prime's template. If a sub is non-responsive and the prime has to chase down information at the last minute, there is a strong likelihood they will find someone else for the next project.

 

Many subconsultants need to step up their marketing departments if they want to be selected for significant projects. Create a project database to track the technical details on your projects, often required on proposals. Tailor resumes to include relevant projects, specifically those completed by the prime firm. Submit information for only the team members requested by the prime and who are skilled with presentation delivery. Clients want to meet the people who will work on their project so subconsultant participation in the interview is often necessary. For instance, if you are an MEP firm and the project requires a sustainable design, your knowledge is essential in the interview.

 

Take pictures of your projects! The prime will need images relating to your specialty for both the proposal and presentation. However, exterior architectural photos don't work if the firm who designed or built a relevant project isn't the firm you are now teaming with. If you are a mechanical, electrical, plumbing or structural engineer take photos of your systems and structural details. Develop graphics that demonstrate innovative solutions and system performance. If you are a geotechnical or civil firm, have images of your work; yes, dirt and big trucks are cool. Also, make sure you have decent portraits of your key team members available as well. Most firms include team member photos and last minute mug shots are appropriate only when being sent to prison.

A PERSONAL NOTE

 

I know this is a long winded post but this is a subject I’m passionate about. Anyone who has orchestrated the pursuit of a complex project as the prime consultant will understand that the true cost also includes our emotional investment. As marketers, in addition to the hard work and long hours, we put our heart and soul into the chase. It is tremendously frustrating when we are forced to pursue projects we know we have very little chance of winning. Being a loser totally sucks. We are in this business to win!!

* A full copy of this study can be downloaded online at