Many proposal professionals talk about proposal win rates as if there’s only one ratio to consider. When asked, they’ll say something like, “Our proposal win rate is ___%.” In fact, most sellers should be calculating at least eight proposal win ratios, and maybe more.
Gross proposal win rate
When sellers talk about proposal win rates, they’re usually referring to the gross proposal win rate. The gross proposal win rate is the simplest and most straight forward of all the proposal win rates you may calculate. It basically says if you respond to 10 RFPs and you win 5, your win rate is 50%.
The advantage of the gross proposal win rate is it provides a single number that you can use to gauge your overall performance between reporting periods or related company divisions. It’s also a good way to measure your progress going forward.
Despite these advantages, its shortcoming is it doesn’t provide much detail or insight about where you are doing well and where you aren’t. Therefore, it’s important to also calculate some additional proposal win rates that provide insight at a more granular level. Let’s explore.
Organizing proposal win rates by opportunity type
Most organizations don’t switch vendors very often. It can be costly, time consuming, it’s a lot of work for internal staff, and there’s always a risk the new vendor will not perform as well as the current vendor. As a result, most organizations tend to stick with the same vendor over multiple contract terms, and they only consider changing if there’s a compelling reason.
We can deduce two things from this.
- First, if you are responding to an RFP in which you are the incumbent, your win rate is going to be generally higher—60% or more—because the buyer is going to be reluctant to replace you with another vendor.
- Second, if you are responding to an RFP where someone else is the incumbent, your win rate is going to be generally lower—40% or less—because the buyer is going to be reluctant to replace their incumbent with you.
In other words, your win rate is going to vary—dramatically—based on whether you are the incumbent or the competition.
Therefore, when calculating win rates, sellers should delineate between re-bids to existing clients and new bids to new clients. This necessarily means you need to calculate two new win ratios; the proposal win ratio for incumbents and the proposal win ratio for new business opportunities.
By treating new business opportunities separately from rebids for incumbent opportunities, you will be generating win rate numbers that more accurately reflect the effectiveness of your efforts for each type of opportunity you pursue.
Organizing proposal win rates by process step
Depending on the industry you’re in, the typical RFP process may involve one or more selection steps. For example, it may be common in some markets or industries for buyers to award a contract based solely on the proposal you submit. Alternatively, other markets or industries may involve multiple steps. For example, buyers may evaluate submitted proposals so can select a few finalists who will then advance to the next step in the buyer’s selection process. In many cases, the next step is an onsite presentation. Among people who respond to RFPs, this is often called “making it to the short list.”
The problem with using the gross proposal win rate to gauge your performance is it doesn’t provide insight into how well you’re doing at each step within the process. By measuring performance at each stage of the process, however, you gain a more precise understanding of where you’re doing well and where you might need to improve. This is precisely what the Short List Win Ratio and the Presentation Win Ratio are designed to capture.
By calculating unique win ratios for each step of your sales effort, you gain more precise understanding about which steps of the process are working well and which steps need attention. For example, if you make it to the short list 80% of the time, then your proposal development process is working pretty well. In contrast, if your presentations only muster a 20% win rate, then you need to focus more attention on improving this last, critical phase in your selling effort.
Shot in the dark proposal win rates
Imagine you are standing in a field in the middle of the night. You have an official Daisy Red Ryder BB gun, and 15 yards away, hidden in the inky darkness of night, there is a metal can that you have to shoot off a log. That’s called a shot in the dark…and that is exactly what you do when you respond to an RFP that you get “out of the blue,” where you didn’t know about it or pursue it in the six months prior to the RFP being released. You might get lucky every once in a while, but often as not, you’re just wasting resources responding to something you’re likely never going to win.
There are two “shot in the dark” ratios we’re going to calculate.
The purpose of these ratios is to raise awareness among managers about how effectively managers are utilizing their resources, and in particular, if they’re being wasted pursuing opportunities they have no realistic chance at winning.
RFP response ratio
I often work with managers who believe that every RFP represents an opportunity, and therefore, it’s their responsibility to respond to each and every one they receive. I wholeheartedly, passionately, and without reservation, completely disagree with this approach. While it’s true that every RFP represents an opportunity, it’s also true that not every opportunity is a good opportunity. Companies that respond to every RFP they receive are wasting resources.
The RFP response ratio is not a win rate, it’s more of a KPI, or key performance indicator. Its purpose is to measure how discriminating a company is in determining which RFPs to pursue. Its value is the awareness it creates among managers about how internal resources are being used. For managers who automatically respond to every RFP they receive, the RFP response ratio encourages them to invest time thinking about whether an individual RFP represents a legitimate opportunity that is winnable, or whether it’s a poor fit that will more than likely result in a failed bid.
Other win rates you can calculate
The proposal win rates presented in this article do not represent a complete list. In fact, there are many other ways you can calculate proposal win rates to provide more insight into how well you are doing. Consider these examples.
Different sellers require different kinds of information, and therefore, should calculate the win rates that are best for them. However you choose to calculate your win rates, though, hopefully this article has encouraged you to explore some ratios you may not have considered before.
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If you enjoyed this article, you may also appreciate reading, Average Proposal Win Rates When Responding to RFPs.
David Seibert is a professional salesperson, proposal trainer, author, writer, and business development consultant. He is the founder and president of The Seibert Group, a proposal consulting and training organization serving businesses that sell to other businesses, schools, and to state and local governments. You can contact him at David.Seibert@ProposalBestPractices.com.