Numbers surround us every day. They’re woven into the fabric of our lives, part of the advice and cliched folk wisdom that we dispense to each other: Two's company, three’s a crowd. A bird in the hand is worth two in the bush. And so forth. Every one of these cliches, however, started out as a rule of them, intended to help us learn from our previous positive experiences and failures. They’re patterns we can follow that can help contribute to our future successes.
I'll be posting over the coming months numbers I heard from the design businesspeople I interviewed while writing Success by Design: The Essential Business Reference for Designers. These people had specific rules of thumb they followed as in order to ensure the health of their design business. They were either handed down to them from co-workers or mentors, or derived from hard-fought experience. I’ve added to these numbers the ones that I’ve recorded from my experience working at a range of small and large design studios.
It’s my hope that these numbers will help you establish useful guidelines that'll help you better manage your projects and operate your design studio.
Let's start things off with your business's bid/win ratio.
Anyone who runs a design business knows that if you aren't winning projects, you won't stay in business. So when you seek out new business opportunities, how do you determine which to pursue and which to turn away?
When researching Success by Design, a number that kept coming up in my interviews with studio owners was fifty. Or, to be clear, a 50% bid/win ratio for your studio's new business efforts. This is the number you should try to hit or exceed, and it correlates with how many potential projects you need to convert from proposals to paid projects every month. Otherwise, you'll be billing to much time to studio overhead (writing proposals) instead of working on paid client projects.
There are specific criteria you should use in order to try and hit that 50% number. These include gauging the following:
Dollar value of the proposal. This should be averaged over the number of staff members and hours required to fulfill the estimated scope. This assumes, of course, that you have the capacity in your studio to fulfill the work.
Level of competition. If your client won't tell you what other design businesses are in the running for the work, at least ask them how many other businesses might be in competition for the work. If you're filling out an RFP or RFI and throwing it over the wall—the odds of winning the work can be stacked against you.
Fit for the studio. Is this work that will contribute to staff happiness and morale just as much as your portfolio and pocketbook? You should determine this before you agree to write a proposal as part of your pre-qualification process. (You've got one of those, right?)
Relationship with the client. If you haven't sat down with this client and truly understood the problem they're trying to solve, you may not even be in the running at all. You also may miss nuances and politics that may be stacking the deck against you.
There are other factors to consider, but the above are mandatory considerations before you go down the path of agreeing to craft a proposal. Think about like going to a casino and choosing how to gamble your money. Say someone handed you $10,000 scot free and said, "Go bet this all on the roulette table, and if that number comes up, you get to keep the money I gave you." Would you rather put your money on a single number? Or on all odd numbers? This benchmark is intended to help you control risk and look beyond individual project possibilities to the overall impact your business development choices are having on your cash-flow. This isn't to say that you shouldn't take risks on projects that may be a great boon to your studio, per the above criteria. It's to say that your risks should be measured.
Be aware as well that when using this ratio is that you may not be winning the most valuable projects, balancing the above factors against sheer dollars and cents. If you aren't winning approximately 50% or more of the potential revenues available across the proposals in your pipeline, you may need to reassess your new business strategy.