Cost of Client Acquisition

Original source: – CFMA’s Update – January 2014

What does a new client cost you? This is the million-dollar question, and the answer is probably harder to pin down than finding gold at the end of a rainbow.

One of the easiest ways to begin decoding the cost of a new client is to start with proposals. Not all marketing is trackable, because sometimes you legitimately do something simply to increase brand awareness, and some items cost more to track than it is worth.

The goal of tracking is to make educated decisions about the future based on past results. Marketing is part science and part art, and many times it comes down to educated guesses. At the end of the year, you ideally will have some data to make planning for next year easier.

I’m going to give you two pieces of advice that can help your company save thousands of dollars a year, make your entire team happier, and gross you more money for less work.

First, track the cost of a proposal, including man hours (estimate costs at $50 per hour to make it easy). This will be difficult for an internal team that isn’t used to tracking its time, but in the end it will give you a real estimate of how much time is spent on a proposal. Don’t forget to track everyone else’s time as well, including PMs, estimators, business developers, administration, and even your runner’s time if the proposal is hand-delivered. Be sure to also include the hard costs (e.g., binders, copies, FedEx, etc.) and any outside help, such as design/marketing assistance or photography.

Tracking your proposal costs will help with my next piece of advice. Create and, more importantly, follow a Go/No Go Process. I’ve seen these processes take place in numerous formats, including a list of questions to ask yourself until you say, “No”; a scoring sheet where the score determines your next action; or simply a gut decision made by asking yourself if you can honestly win this project.

The goal of the Go/No Go process is to only go after proposals you can win, and ignore the rest. It may sound counterintuitive to get more work by going after less, but it really works – I see it every year in the construction industry, and it usually takes a strong, experienced marketer urging the executive team to take a leap of faith. You hit the target more by shooting a rifle compared to shooting a shotgun blindfolded.

I had a competitor that was doing 100-plus proposals a year for medium-sized marketing and advertising RFPs. This company pushed its marketing and design teams beyond their limits and chewed through good business developers quickly. The company generally only won about five bids a year, so morale was down and the best employees were gone. When your best employees and business developers leave, it gets even harder to win projects.

The intent with a Go/No Go process is to strategically go after 20-30 of those 100 proposals so that you can dedicate more time and energy to each one. If you have 2,000 hours a year to spend (40 hours a week x 50 weeks a year), how should you spend it? Would you prefer to put 20 hours into 100 proposals or 40 hours into 30 proposals and have 800 hours to spare?

Would your team be able to put out a better proposal if they had more time on each one? Yes. Would focusing on fewer proposals and deadlines improve each proposal? Yes. Will the improved proposals help you win more of the bids? Yes. Will winning more proposals make you and your team happier? Yes. Also, turnover goes down because your team is winning and happy, which increases efficiency and profits.

Create your own unique Go/No Go process. It can be simple at first, but remember that the goal is to answer if you have a legitimate chance of winning this project over your competitors. Some questions to consider:

  • Do we really know this client?
  • Does the client know us?
  • Does the scope match our expertise?
  • Does the project fit into our company’s vision?
  • Does the client fit our brand culture?
  • Do our competitors have a better relationship with this client?
  • Do our competitors have more expertise in the required skills?
  • Can we do the work without jeopardizing our reputation?
  • Can we do the work without hardship?
  • Will we damage our reputation if we don’t create a stunning proposal?
  • Will we miss out on other bids by focusing on this one?
  • Is this project worth the bidding cost and effort? (i.e., If you profit $100,000 on this project and the proposal costs you $10,000 to create, is this project worth pursing?)

Yes, my team has a Go/No Process, and because of it we’ve passed on a great deal of work. Sometimes, projects are too small for us to make a profit, and some aren’t a good fit for our niche of construction marketing and design, so we pass them up to focus on the right prospects. A few years ago, a very large construction company contacted us about a project. It wasn’t our core competency, so we passed on it. It would have been profitable, but if we didn’t get it perfectly right, it could have negatively affected our future. It hurt at first to let such a huge opportunity go, but the more I think back on it, I know I made the right decision.

Now, what does a proposal cost you?