Business development pipeline metrics tell you how many resources you need

On a day to day basis people have to make decisions about resources like:

• How many people do I need for BD?
• How many do I need in my proposal department?
• Should I insource or outsource?
• How many project managers and other operations staff will I need?
• Can I afford to hire the staff I need?

The answer isn’t some generic metric. The answer can be found in your business development pipeline. Your pipeline isn’t just how many leads you are tracking. It should also include how many leads you are targeting. With a little analysis you can figure out when those leads will arrive, whether you are on track to meet or exceed your target metrics, and what the impact will be.

You should analyze your business development pipeline metrics based on two key targets: the minimum number of bids and the total revenue. You don’t want all of your target revenue to come from one bid. But you also don’t want it to come from too many low value bids. The right size bid depends on your company and what it offers. Once you know the target for your review and the number of bids, you can do a simple average to find out how much each bid should be worth. Then ask yourself if the number makes sense. If it’s too big or too small to be realistic for your company, adjust the number of bids, the target revenue, or both.

When you settle on the average you can compare it to your previous bids to determine the number of people required per bid. Include everyone who is dedicated to the bid, such as the business development manager, capture manager, proposal manager, other proposal specialists, etc. If somebody works more than one at a time, then include them as a fraction.

Now ask yourself what is the average length of your bids — 14 days? 30 days? Convert the number of bids projected for next year into the number of bids at a time (one approach is to divide it by 365 and multiply by the average number of days per bid). Now multiply by the number of people per bid. Round up.

If you get a number far larger than the number of people you currently have, then either you set your growth targets higher than your resources can stretch, or you need to plan on hiring more staff in order to grow.

This analysis can also help you decide when to use your own staff and when to outsource. Most of the calculations are based on averages. But the real world isn’t so neat and tidy. Instead of coming in at fixed intervals, your bids are going to come in a bunch at a time with dry spots in between. If you staff to the average, you will have surges that you can’t accommodate and dry spells with nothing to do. The dry spells will be where they develop their process and tools. The surges could be where you outsource. If your bids have high peaks and valleys, you may wish to do more outsourcing, so that you don’t have to cover the cost of the valleys. You should run several scenarios and really think this through. Assuming your staff will somehow stretch to cover the surges is really just planning to sacrifice quality to keep up. But in BD it doesn’t make sense to lower your win rate to accommodate more bids.

So can you afford the number of staff your business development pipeline says you need to capture the leads you plan to target? To answer this, you may need your finance department involved, because you need to know about your company's profit margin and overhead to answer the question. Each dollar your company makes gets allocated by your accounting system to cover the costs of your business. Theoretically, each dollar coming in has a certain amount in it to cover BD costs. You need to assess whether if you hit the targets in your pipeline, you’ll be able to afford the staff your analysis says you’ll need to get there. If the numbers don’t add up, you’ll have to start over and reassess all your business development pipeline targets.

If they do add up, then you need to address when to hire the staff. You want them on board and up to speed before they are needed. But you also need to cover their costs. If you measure your actual performance against the targets in the pipeline, you can do this. You can calculate what number of bids times what win rate is required to cover the costs of the next person you want to hire. Your pipeline should tell you how many leads you need to achieve that number of bids.

When you do this kind of analysis, you should notice how important your win rate is. A slight change in win rate has a big impact on revenue. It also greatly reduces the number of leads required to achieve it. Pay careful attention to your actual win rate vs. your target win rate, because all of the other numbers will change when there is a difference.

When you first start using your BD pipeline as a strategic tool like this, you will be making up a lot of the target values, because you don’t have the historical data to draw upon. It’s a chicken and egg problem. You can’t calculate your pipeline because you can’t calculate your targets, and you can’t calculate your targets because you don’t have any pipeline data. You have to short circuit this by making assumptions. However, you need to revisit those assumptions frequently. You may get to the point where you can set your targets once a year, but when you are first getting started you may need to reassess them every month, depending on your bid volume.

In any event, your pipeline has the potential to be a business management tool that is far more significant than just being a lead tracking tool. It can help you make better decisions at all levels. That makes it worth understanding and developing.