Business Development Performance

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?
  Average Annual Growth Rate Score
A % or less -10
B 0% to 5% -5
C 5% to 10% 0
D 10% to 15% 4
E 15% to 20% 7
F 20% or above 10

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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.

 
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