Talking with potential new customers, answering to RFPs or RFQs, making project estimates, putting together budget proposals, negotiating contracts: these are some of the most underestimated and under-appreciated activities in a software services company.
For many, it might seem that new, interesting, long-term projects just materialize out of thin air.
If you are reading this, I know that you know how difficult it is to find and sign new contracts. Let’s see what can be done to make this job a little bit easier, or at least more effective.
Win rate = New contracts signed / Number of financial proposals submitted.
Just looking at the definition doesn’t tell you much.
If you want to improve your win rate, you have to dig deeper into the process, to see where you can make changes for the better.
There are 4 big steps that you go through, from first contact with a potential new customer to the moment you learn if it’s a win or a loss:
- Project estimations
- Budget proposal
For each of these steps you could decide to spend various levels of effort. The effort could be measured in time spent by team members, certain resources allocated, direct financial costs or opportunity costs.
In practice, the process with these 4 steps takes many shapes.
At a minimum, they are all rushed into:
- 1 short call (15-30 minutes)
- 1 short internal discussion between sales and technical colleagues
- 1 document sent: company presentation, rate card and some generic projects estimates
- 1 follow-up email to ask the prospect whether they made a decision
At the other end of the scale, you can have:
- 1 discovery call to learn about the project
- multiple interactions between sales and technical colleagues to discuss the project requests
- 1 follow-up call with the client to ask clarifying questions, maybe present some high-level technical alternatives to choose from
- Internal effort to define the project solution, make estimates, document them in detail
- 1 call with the client to present the technical solution, get feedback and revise
- Research client industry, context, business objectives
- Involve internal team to create a design or technical mock-up to include in the proposal, to show-case your capabilities and impress your potential client
- Internal effort to create a complete project and budget proposal: effort, timeline, pricing, risks, constraints; prepare at least 2 different scenarios
- 1 call with the client to present the full project proposals, discuss all aspects in detail
- 1 follow-up call to discuss their feedback, negotiate terms
- 1 final call to reach a conclusion
How much effort should you spend?
There are multiple variables that will impact how much time and effort is worth spending on each project opportunity.
- Project size
- Type of client and project characteristics: how interesting is this opportunity for you?
- Sales team availability, experience and discipline
- Sales pipeline status: how many other opportunities do you have open at the same time?
- Cashflow position: how badly do you need this project?
- Your business strategy and plans
Here is a simple formula you can use to improve your win rate. There are 4 parts to it:
- Have a consistent structure and approach. Not having to reinvent the wheel with every new opportunity means that you can be efficient and productive. Your sales team will be able to manage more opportunities in the same amount of time.
- In the first steps (discovery, project estimations), spend just the amount of effort needed to move to the next stage. Not more, not less.
- At the later steps (proposal, negotiation), spend at least 10-20% more effort than the potential client asks for. This will greatly increase the chances that you will do better than the direct competition on this project, because most companies answer only to the questions they are asked.
- Look for the NO as early as possible: you don’t want to hear that the customer is not a good fit after 6 weeks of work and 40 man-hours spent by your team. It’s better to hear it in the discovery call, when you just committed 30 minutes of your time.
WHAT THIS MEANS FOR YOU
Your win rate on project proposals has a big impact on the financial results at the end of the year.
Maybe it’s something worth spending time on?
PS. For a few days, then weeks, it seemed that for people living in this part of the world there were more important things to think about than pricing for software services.
That was the reason for the break in my publishing schedule. I am now resuming the rhythm of 1 post per week.