How to predict the future of your business

Will your business grow, shrink, or stay the same next year? Are you chasing enough leads? Should you focus on finding more leads or on winning the ones you have? How many people will you need to chase your leads and prepare proposals? Will your win rate go up or down? How many leads can you “no bid” and still hit your numbers? There is a tool you can use to answer these questions and it’s not a crystal ball…

We call this tool your pipeline. Others call it a funnel. The basic concept is easy to grasp. But it is a subtle tool, with hidden complexities.

One simple way to create a pipeline is to start with how much revenue your company wants to make next year. Then figure out your average bid size. If you don’t know, make it up based on what it should be. From those two numbers you can estimate how many proposals you need to win.

Next, take your win rate. Use it to calculate how many submissions you must make in order to win the number you are targeting.

Then estimate how many pursuits you will “no bid.” Will it be 1 in 5? 1 in 10? More? Less? What should it be?

Finally, estimate how many pursuits you will look at and discard without even pursuing. Will it be half of what you identify? More? Less?

From these numbers, you can draw a bar chart. It will have a large bar showing how many opportunities you need to identify. It will have a much smaller bar with the number of opportunities you will actually pursue. It will have a somewhat smaller bar showing the number that you actually end up bidding. The smallest bar will be the number needed to hit the revenue target you started with.

Depending on how many qualification steps you plan to have, you can change the number of bars. But the concept remains the same.

You can also change whether to focus on the number of bids, the number of dollars, or even something else (for example, the number of staff). We recommend rendering your chart every way you can think of, because you will gain insight from doing so. And because problems can hide if you don’t.

For example, if you only chase one really large bid, you will either hit your numbers or have zero revenue. That’s not a healthy plan. And while you probably won’t do that, you might end up with a couple of pursuits dominating the numbers. A pipeline chart that tracks both the number of bids and the revenue would help you catch it if that’s the case. Likewise, it’s possible to have a high number of bids but very low revenue. If all you have is a pipeline chart that shows the number of bids, you might not realize it until it’s too late. You need both perspectives to make sure that you are pursuing enough of the right-sized leads. You can use a stacked bar graph to show both at the same time.

Pipeline analysis is usually done with spreadsheets. You can have different tabs for different views. And you can use conditional formulas to select what to show in each view. I like to set up the main tab as a “dashboard” by putting the key charts there and putting the supporting data on individual tabs. This requires a little skill with using spreadsheets, but it’s well worth learning.

When a company doesn’t have the right historical data, they have to make a lot of assumptions in order to draw a pipeline chart. This is better than doing nothing. You can revise the numbers once you’ve collected some real data.

Once you can draw your pipeline, that’s when the analytical fun really starts. For starters, you can overlay the real numbers as they come in with their targets. You can also run the numbers forward to answer, “if we continue with this gap or surplus, where will we end up?”

Are the totals flat across the top? This could indicate you’re bidding everything you find. This is not healthy. Flat bars mean that either people aren’t being selective, or that they are gaming the system by identifying and pre-qualifying leads without recording it, and what you are seeing is not accurate.

If your company uses the Readiness Reviews from the MustWin Process in the PropLIBRARY Knowledgebase, you can also create a pipeline view to show the readiness status. Instead of the more traditional calendar view, this will show how many leads are at each Readiness Review stage. This will enable you to see whether your pipeline leans towards new leads or leads that will soon be ready to bid. You can also use a stacked bar to show the review score of the leads to see whether the leads you are tracking are strong or weak.

You can test the targets in your pipeline for sanity by calculating how many people you need to pursue them. Take last year’s numbers and work out how many people you need to chase your pursuits and write your proposals. Will hitting the numbers you are targeting require more staff than you have to pursue the leads? Are you going to work them into the ground or hire more people?

You can also use a pipeline to facilitate diversification. For example, if all your business is with one or two major customers, business lines, locations, etc., you might want to spread out in order to mitigate your risks. You can set up separate views of your pipeline to give insight into issues like this and help monitor your progress.

Don’t forget to track the impact of teaming. If you team with other companies, you might show huge revenue numbers but end up giving it all away. You can add a different view of your pipeline to track which bids you pursue as a prime, which you pursue as a team, and which you pursue as a sub.

Pipeline analysis can help you determine whether a company is healthy and well balanced. Financial statements and projections don’t give you the full picture of your business development efforts. Show me a company’s pipeline charts and I can tell you whether they have a problem with identifying leads, getting those leads ready before the proposal starts, or winning their proposals. If you are having a problem the pipeline charts can show you whether the problem is staffing or process. Your pipeline chart can also tell you whether to look forward to next year or whether you need to get serious and make some resolutions for this year.

Click here if you'd like us to put you in touch with a consultant who can help you to implement a pipeline, build your strategic plans around it, and use it to grow your business.