Using Bid Metrics to make Calculated Tendering Investments

In our previous blog, we introduced the idea that strategic sellers view tendering as a numbers game that needs to align with overall business revenue goals. Strategic sellers also know that the quantification of tendering performance is a guaranteed pathway to more effective and efficient bidding.

A calculator and pen with money (Australian dollars) on a table - representing calculated tendering investments.

Four bid metrics that matter

Here’s a quick recap of the four key bid metrics:

  1. Annual bidding revenue
  2. Proposal win rate
  3. Average contract value
  4. Bid investment ratio

But what can they tell you about the way your organisation is bidding, and where you can make improvements?

From calculations to targets

How efficient and effective is your bidding strategy? Should you compete for everything, or focus your bidding resources on opportunities you have a better chance of winning? Do you need to invest more in your tendering? Or do you need better templates, collateral and content to reduce your overall bidding costs?

You can’t hope to answer all of these questions at once, but knowing your numbers is the only way to start finding out. So once you’ve established your four bid metrics listed above, run your numbers using these formulas:

A. Total annual value of bids to pursue =
Metric #1 divided by Metric #2

B. Number of opportunities to find/submit =
Calculation A divided by Metric #3

C. Annual bidding investment =
Calculation A multiplied by Metric #4

Here’s an example. If your metrics look like this:

1. Annual bidding revenue

$10 million

2. Proposal win rate

25% (one in four)

3. Average contract value

$2 million

4. Bid investment ratio

2%

Then your target calculations look like this:

A. Total annual value of bids to pursue

$40 million

B. Number of opportunities to find/submit

20

C. Annual bidding investment budget

$800,000

If you measure it, you can manage it

This is where the numbers get interesting. If you can improve your proposal win rate from 25% to 50%, this halves the number of opportunities you need to find to reach your target of $10 million.

The doubling of your proposal win rate also halves the annual bidding investment budget required – reducing it to $400k.

If you were then able to bid more efficiently, and bring your bid investment ratio from 2% down to 1%, your annual bidding investment budget would halve again – reducing further to just $200k.

Strategic tendering requires an investment mindset.  Calculate targets, measure often and focus on changing the things that matter so you can take small steps towards long term improvements in your bidding effectiveness and efficiency.

If you need help telling your sixes from sevens, module 1 of our Bid Accelerator program is dedicated to helping you apply key bid metrics and calculations to your own organisation. For a sneak peek at that module, view a recording of our free ‘Know your Numbers’ webinar here.

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Businessman using a calculator and taking notes to define key bid metrics for tendering

Four Bid Metrics That Should Matter to your Tendering Team

When it comes to submitting tender responses, business proposals and grant applications, how well do you know your numbers? This blog defines the four key bid metrics that you need to guide the performance and future objectives of your tendering activity.

Give a man a bid, or teach a man to tender?

How can this age-old proverb be applied to the world of tendering?
In this blog we discuss how we’ve designed BidWrite’s consulting services and Bid Academy’s tender training with both giving and teaching in mind.