Calculating Proposal Win Rates

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.

Proposal win ratio for incumbents

The proposal win ratio for incumbents is calculated by dividing the number of opportunities you win from existing clients by the number of proposals you submit.

Proposal win ratio for new business opportunities

The proposal win ratio for new business opportunities is calculated by dividing the number of opportunities you win from new clients by the number of proposals you submit.

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.

Short list proposal win ratio

The short list proposal win ratio tells you how well you’re doing at writing proposals that get you to the short list. It is calculated by dividing the number of times you advance to the short list divided by how many proposals you submit in response to RFPs. For example, if you submit 100 proposals, and you advance to the short list seventy-five times, then you divide seventy-five by 100 to come up with a Short List Win Ratio of 75%.

Presentation proposal win ratio

The presentation proposal win ratio tells you how well you’re doing at delivering compelling presentations. It is calculated by dividing the number of opportunities you win by the number of times you make it to the short list. For example, if you win twenty-five opportunities, and you made it to the short list fifty times, then you divide twenty-five by fifty to come up with a presentation win ratio of 50%.

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.

Shot in the dark proposal response ratio

The Shot in the dark proposal response ratio gives you insight into how often you chase RFPs where your potential of winning is really, really low. It is calculated by dividing the number of RFPs you actually knew about at least six months before the RFP was issued, divided by the number of RFPs you responded to. Take the result, subtract it from the total RFPs you responded to, and this is how frequently you respond to RFPs you have little or no chance of winning.

Shot in the dark proposal win ratio

The Shot in the dark proposal win ratio clarifies the futility of responding to RFPs you receive out of the blue. It is similar to the response ratio, but it's focused on how often you actually win a contract when the RFP that prompted it was received "out of the blue." It is calculated by dividing the number of RFPs you knew about at least six months before the RFP was issued, divided by the number you ultimately won. Take the result, subtract it from the total RFPs you responded to, and this is how frequently you win RFPs you have little or no chance of winning.

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.

RFP response ratio

The RFP response ratio is calculated by dividing the total number of RFPs that are pursued by the total number of RFPs that are received.

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.

Win rates based on value vs. volume

Some sellers prefer to calculate win rates based on the value of the contracts won, not the number of contracts won.

Organize win rates by group or division

Some sellers calculate proposal win rates for each company division, sales territory, or product line. Organize your win rates in whatever way makes most sense for your business.

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.

Other related articles...

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.

 

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5 Comments

  • David Warley Reply

    I believe measuring by proposal stage is the most useful measure as it gives the business manager an overview of the pipeline. When using the pipeline to develop a forecast however, other measures are needed. What we’re ultimately interested in is how much business is going to close per period and how much will turn to revenue.

    What I therefore prefer to use is the idea of “yield”. Perhaps that’s the chemist within me. What we really need to know is whether the business is going to hit its numbers and what to do when forecast is below target. How many prospects will lead to biddable opportunities? How many will we down select? How many will progress to the next stage? How many will slip? How many will be bid and lost?

    • David Seibert

      You raise a great point, David. And I think worth discussing further.

      When I wrote this, my intent wasn’t looking at win rates as a forecast tool but as a performance measurement tool to see, historically, where we’ve been doing well and where we haven’t. Said another way, I’m looking backwards, trying to figure out what’s not working so we can invest more resources to fix it. Your idea of “yield” is more forward looking, trying to leverage this information to make reliable predictions.

      If our goal is to improve predictability, and ultimately I think that should be our goal, I think we need to put more effort into determining which performance measures more accurately predict future performance.

  • Caroline Boot Reply

    Fascinating discussion, Dave, I think there is an aspect that would also be good to include with your list. Who measueres their win rate on non-price attributes, vs. win rate on price.
    The #Plan A team tells me that the sweetest, (and most valuable) wins are those when our client’s proposal attributes win, despite the price being higher than other bids. That tells the bid writing team they are doing a simply outstanding job!
    Winning on the strength of a clever and well articulated solution is the BEST!!

  • Michelle Parks Reply

    Good article. Thanks.

    • David Seibert

      Thank you, Michelle. I’m glad you enjoyed it.

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