Are You Being Stingy with Your Bid and Proposal Dollars?
Are you reluctant to bid because it costs too much to hire proposal people or to use outside consultants?
Let’s do some math.
Let’s say your small business responds to 10 Requests for Proposal (RFPs) per year at contract value of $3M each. That’s a potential total revenue increase of $30M over the life of the contracts. Of course, you’re not going to win all 10, but a conservative win rate of 20% would be realistic. Even at that rate, you’re looking at a revenue increase of $6M (2 new contracts). Not bad!
Now, what does it cost to win that $6M in new revenue?
Bidding costs labor hours and material resources. At an average (unburdened) employee hourly rate of $50 (roughly $100,000 per year salary), here is what a typical bid effort takes with a three-week turn-around:
• Proposal Manager – 100 hours ($5,000)
• Subject Matter Experts/Writers – 24 hours each x 2 people ($2,400)
• Reviewers – 8 hours each x 4 people ($1,600)
• Editor/Technical Writer – 32 hours x 1 person ($1,600)
• Pricing Team – 40 hours x 2 people ($4,000)
So a typical proposal effort might take about $15,000, not counting supplies or fringe.
10 proposals x $15,000 = $150,000 in bid and proposal spend.
If you win $6M in new contracts (2 bids), your bid and proposal costs are only 2.5% of what you won. That is a pretty good rate of return!
So, if you want to grow your Federal business, the bottom line is: don’t skimp on putting together a full proposal team and BID, BID, BID. Even if you bring in proposal consultants at twice the hourly rate of our calculations used here, you’re still only spending a fraction of what you win in new business.