As a CEO striving to
build company value, the growth of revenue and the
return-on-investment from business development
expenditures are two key factors. Are your business
development efforts paying off in a meaningful way
that can be translated to increased company value?
Below is a short-hand scoring system to develop a
simplified view of the relationship between
revenue growth, business development ROI and company
value.
Revenue Growth - What is the
average annual rate of revenue growth over the past
four years for your firm?
Clearly there is no argument regarding the negative
impact of the negative revenue growth ratings A and
B, but what about C? The zero for C reflects the
notion that revenue growth is just barely staying
ahead of inflation. Consider that revenue growth
varies from year to year for most firms and that may
mean some year's revenue growth matches or is less
than inflation. Look at your firm's specific
performance and adjust the scoring numbers as
appropriate. You may also need to make an adjustment
in scoring for D, E, or F if your year-to-year
numbers vary significantly.
Win Rate - What is your average win rate for
competitive contracts? Measure your win rate using
the maximum potential revenue value of all submitted
proposals in a given time period compared to the
proposals you win. (If your firm does not track win
rate it is likely that serious business development
improvements are needed.) Also note that repeat
business, while extremely important, is not likely
to be a good indicator of increasing equity value.
Win Rate
Score
A
0%
to 10%
-5
B
10%
to 25%
0
C
25%
to 38%
4
D
38%
to 50%
7
E
50%
to 65%
10
F
65%
and higher
7
You can measure win rate using a rolling two-year
period and measuring both number of proposals won
divided by number of proposal submitted and also by
total contract value (all options and potential
modification) won divided by total contract value
submitted.
If you are winning more than 65% of the competitive
proposal that you submit it is likely an indication
that you have the capability to expand you market
position or that you are too conservative. You are
proposing only on the safest opportunities.
Interpreting your score
-15 to 0 - Your revenue growth and
business development performance is a serious
detriment to the value of your firm. You should
consider postponing any sale or merger activities
and determine if you can improve your revenue
growth. Consider immediate and comprehensive
corrective actions to overhaul your business develop
capability.
1 to 10 - Revenue growth and new
contracts performance are unlikely to be major
factors in the valuation of your firm. Unique
intellectual property or patents may be the primary
basis for determining your firm's value. If you do
not possess unique assets you should delay sale of
merger for two or three years. Consider diagnostic
and selected corrective actions to improve business
development capability and performance.
11 to 17 - Revenue growth new
contract captures will be positive factors in the
valuation of your firm. However, you might consider
delaying sale or merger for 18 months and improving
performance. You should consider diagnostic and
selected corrective actions to improve business
development performance and revenue growth.
18 to 20 - Shop for the yacht!
Business Development and revenue growth performance
are likely to command a premium value for your firm.
You have established optimum business development
performance, no corrective action recommended but
management should maintain coaching and performance
enhancements.
