In order to manage anything, you have to identify the key drivers, define them and commit to measuring them. This concept applies equally to tendering. In fact, we think it’s so important that it’s the very first module we teach in our Bid Accelerator program.
So when it comes to submitting tender responses, business proposals and grant applications, how well do you know your numbers?
The business of bidding
It’s easy to overlook tendering as an administrative or tactical task. In contrast, strategic sellers take a long-term view of their bidding processes, using well-established metrics to guide current tendering performance and future tendering objectives.
The good news is that there are only four key bid metrics needed to calculate your bidding numbers. With these metrics you can gain insights on where and how to improve your bidding investment:
- Annual bidding revenue – the total revenue you want to win through your tendering activity, on an annual basis.
- Proposal win rate – the percentage of tendered business you actually win (be honest). This is a measure of your bidding effectiveness.
- Average contract value – of the opportunities you pursue. Do you aim to win your revenue target with just one large bid, or multiple smaller bids?
- Bid investment ratio – the investment you make into winning tenders, expressed as a percentage of the overall contract value. This varies by industry but is generally in the 0.5 – 3.0% range. For example, if you’re bidding on something worth $1 million, then you should be investing between $5,000 to $30,000 to win that bid. This is a measure of your bidding efficiency.
Use your numbers wisely
Once you have these four metrics, you can calculate the value and volume of opportunities you need to pursue on an annual basis and the indicative bidding budget required to support your tendering activity. We’ll cover those calculations in our next blog and also explain how they can help you make more informed decisions about your overall tendering program.
But if you’d like to delve a bit deeper right now, check out our free webinar recording where Mark Riley and Nigel Dennis provide a sneak peek into Module 1 of our Bid Accelerator program, explaining how to apply these key bid metrics to drive your bidding ROI.