“How do I know if my BD strategy is successful?”
It’s an important question to consider.
Some business development managers may rely on gut instincts or the monetary success to determine whether their business development strategy is effective, but that’s not a winning strategy to meet growth targets.
Business KPIs, or key performance indicators, are measurable metrics that provide strategic insights into your business development efforts.
Not setting KPIs is like driving down the road blindfolded.
It’s important to know whether you are heading in the right direction so you can find the best path to avoid obstacles, and successfully reach your destination.
KPIs vary in importance, similar to your car’s dashboard. Some indicators can signal a checkup, while others might cause you to immediately pull over to investigate.
Having KPIs in place is a critical step to gain the analytics you need to maximize your resources and ensure you meet growth targets.
Inside this guide, we’ll cover over 70 KPIs across 8 categories.
But remember, the “right” metrics may not be the same for every organization.
It’s important to find the right KPIs for your business.
We cover a wide range of business development KPIs in this guide and some metrics are only relevant to B2G organizations. Businesses involved in Government Contracting (GovCon) have a more complicated business development and capture process that often span several years.
And just like B2B organizations, it’s important for B2G organizations to have metrics to gauge how effective their efforts are along the way. If you’re interested in more B2G resources, visit our blog.
Ready? Let’s dive in:
Many metrics can be tracked, but which KPIs are best to improve your BD process?
In Change Factory’s article, “Common mistakes with KPIs,“ they identified the 3 most common mistakes business make when selecting KPIs:
- Selecting KPIs that were not actually key performance indicators.
- Choosing too many KPIs.
- Creating KPIs that can’t be measured.
So be selective and make sure you focus your metrics around the business outcomes you want. You can then reevaluate your metrics plan as your business evolves.
When selecting your metrics, it’s helpful to determine whether your KPIs are leading or lagging indicators.
- Leading metrics are predictive of the future.
For example, the probability of a win (Pwin) is a leading indicator of bid submissions. - Lagging metrics are often rear-facing and historical.
A lagging indicator only records what has already happened, while the leading indicator provides data to change your future strategy. For instance, a win percentage is a lagging indicator.
It’s also important to use a combination of quantitative and qualitative indicators.
- Quantitative indicators, like Value of Opportunities by Stage, measure the quantity and provide “hard” data for comparison.
- Qualitative indicators, such as Customer Intimacy, can be trickier to apply, but they help explain why something happened. For example, why your Customer wasn’t as happy with your delivery team as expected. By combining both types, you get a balanced view of your product’s performance.
In this guide we’ll review over 70 KPIs that can be used to measure your BD and capture performance. This is not an exhaustive metrics list but an introduction to commonly used KPIs to get you started.
Remember: Often, less is more.
It can be tempting to track many KPIs, but it’s important to narrow your focus to a few key metrics that provide your team the most valuable insights while keeping things simple.
Collaborate with key stakeholders, then select the most impactful KPIs for your organization that you believe can give you the ability to monitor and respond effectively.
Let’s imagine that your organization is already tracking revenues and profits as key performance indicators, so let’s focus on the following areas:
- Bookings
- Profitability
- Activity-Based
- BD and Opportunity Pipeline
- Diversification
- Capture and Proposal
- Project Execution
- Win Rates
A metric for BD across an organization can be determined by The Capability Maturity Model® for Business Development (BD-CMM).
The BD-CMM codifies established industry best practices in Business Development into a framework that supports maturity growth through well-defined, proven growth paths.
This metric is determined by an independent assessment, where several best practices are rated using a 1-5 scale.
It’s important to note there are several KPIs that are affected by your Relationship Quality.
For those metrics in this guide, we will feature the following icon:
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Outside of the KPIs listed below, Winning Relationships™ can also improve:
- Number of Opportunities Identified and Qualified: Early access to information about upcoming opportunities and agency requirements.
- New Customer Acquisition: Relationships with government officials and industry partners can open doors to new markets and opportunities
- Profitability: Efficient project execution and can improve profitability margins.
- Brand Reputation: Customers are more likely to engage or refer you if they like and trust you and your organization.
- Employee Morale and Productivity: Strong internal relationships foster a sense of collaboration and teamwork.
- Risk Mitigation: Better communication can alert you to potential program risks and facilitate collaborative risk mitigation strategies.
One of the easiest BD metrics to track is bookings. Bookings are work that has been “won,” whether you have billed against it or not.
The booking is usually recorded when an organization is awarded a contract, and it’s typically broken into billings (what has been billed) and backlog (what is still to be billed).
However, in the Federal market, businesses get multiple award contracts, multi-year contracts, and task order contracts.
So business development typically focuses on “estimated bookings” (i.e., the expected value of the contract throughout their performance.)
CFOs and the financial community generally focus on “funded bookings.” This is especially important in a publicly traded organizations where bookings are most often estimated bookings.
This high-level KPI gauges BD success and measures value or actual vs. target bookings.
In the Federal market, many bookings occur near the end of the Government fiscal year (late September). So, the actual bookings have to be tracked against the forecasted bookings on a monthly or quarterly basis.
Sometimes it’s helpful to check bookings to see where corrective action might be needed. To do this, you might want to assess bookings such as:
- Recompetes vs. New Bids
- Repeat Clients vs. New Clients
- Business Units, Departments, or Functional Areas
- Geographic Locations
- Market Sectors or Client Types
Knowing your current booking metrics can help you make decisions for success in future bookings.
These are arguably the most critical metrics and are the ultimate measure of your success.
REVENUE AND GROWTH ANALYSIS
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Net Revenue Growth: This is a method to check your organization’s pulse. Are you growing steadily over time? This metric tells us a lot about its financial health and expansion potential.
Revenue Trends: Are there seasonal ups and downs, or is it fairly consistent? Keeping tabs on these trends helps us adjust to stay on track with our revenue goals.
Top 3 Clients: You want to ensure you’re not overly reliant on a small number of big customers to mitigrate risk.
Budget vs. Actual: Did we hit our revenue targets? Tracking reality versus forecast gives us the power to make changes to maximize income.
Labor Utilization and Efficiency
Average Billing Rate: This is the actual rate a company makes after considering the hours its team has spent on a project.
Effective Billing Rate: Effective billing rate measures the average rate at which a company bills for its services per billable hour or day.
Utilization Analysis: Utilization rate is a metric that measures the percentage of an employee’s available time that is used for productive, billable work. It’s calculated by dividing the total number of billable hours by the total hours available.
Cost Management and Overhead Analysis
Tracking costs over time paints the best picture of how well we’re managing expenses:
Indirect Rates: These include things like benefits, overhead, and general expenses.
Direct Margin Trend: Are we getting more or less profitable on specific jobs? Looking at this helps us spot problem areas and adjust for profitability.
Wrap Rate: Knowing our fully “loaded” labor cost lets us price jobs accurately
Financial Oversight and Compliance
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Bid and Proposal Costs: Ideally, these costs stay around 1-2% of our yearly revenue (depending when you start officially tracking them).
Unallowable Costs: The government has rules about what we can’t charge them for. Avoiding these keeps everything above board and boosts your bottom line.
Cost Variance: Did a project go over or under budget? This tells us where to focus to get costs back on track.
Average Days Payable Outstanding (DPO): We need to know how quickly Customers pay as it directly affects your cash flow.
Organizations often try to gauge their success by tracking activity-based metrics, like how many meetings were held or how many emails were sent.
These metrics usually try to identify how often team members are engaging in business communication activities such as:
- Meetings
- Phone Calls
- Emails
- Social Media Activities
- Networking Event Conversations
Activity tracking is used to make sure that those with BD responsibilities are being held accountable and doing the activities that, when done correctly, lead to improved win rates and revenue goals.
An example of an activity-based metric would be “arrange 2 meetings with new prospects per week” or “contact 4 former clients per month.”
Often, having these metrics as KPIs often leads to resentment. Team members feel pressured to meet a set number of activities, and managers feel pressured to micro-manage ensuring those numbers are hit.
Experienced business development professionals understand that it’s not the number of engagements but the quality of engagement that’s important.
Logging a phone call with someone doesn’t mean that the interaction went well, discriminators were found, or even that it improved the Probability of Win (Pwin).
When your team uses a repeatable engagement method, they will no longer be “winging it” in Customer conversations and will understand how to consistently build trust in every engagement, identify opportunities and bring that intel back home. It’s a critical component of an organization’s growth playbook.
If you decide to track activity-based metrics, you’ll probably want to use Customer Relationship Management (CRM) software to easily track this data.
CRMs can be an avenue to gather data that can be analyzed, but one downside is data input often slips in organizations, impacting the quality and relevance of the data itself.
Although mandatory fields and actions can increase updates and feedback, 91% of CRM data is incomplete and 70% of that data deteriorates and becomes inaccurate annually.
Some of the most important business development KPIs are tied to the Opportunity Pipeline. A pipeline lets you track your opportunities from beginning to end.
The pipeline stages are usually unique depending on the organization, but in the GovCon market, many are aligned with industry best practices, like the Shipley Capture Process.
OPPORTUNITY PIPELINE SIZE
Here, most GovCon organizations look to have a pipeline that’s 3-7x annual revenue needed, with highly effective teams targeting 2x. In 2023, Deltek reported 26% of companies had a 3x target while over 31% targeted 4x.
In most B2B organizations, a 3x -3.5x pipeline is considered standard.
In GovCon this is referred to as a Target Pipeline-to-Win Ratio or Opportunity Pipeline Ratio, while in B2B you’ll hear it often called a Pipeline Coverage Ratio or Forecast Coverage.
It’s calculated by dividing the total value of opportunities in your pipeline by the revenue (or sales target) for a certain time period. For example, if your pipeline is worth $600,000 and your target is $200,000, the ratio is 3:1 or 3x.
Simply put, the lower your win rates, the larger your pipeline will need to be to hit your growth targets. Some organizations target a Pipeline-to-Win Ratio as high as 10x! An incredible number of resources are wasted this way.
According to Deltek, high-performing teams see 87% win rates on new bids and an 80% win rate on recompetes. If you’re not seeing these win rates in your organization, it’s likely your Target Pipeline-to-Win Ratio is much higher and you’re wasting more resources vs. your competitors.
AVERAGE SIZE OF OPPORTUNITY IDENTIFIED
The Average Size of Opportunity Identified helps you understand the pipeline make-up and the number of opportunities that are needed to achieve the desired goals.
An example would be measuring the difference between large deals or task orders and the level of effort required from BD, capture, and proposals to win.
The pipeline timeline would also be a factor—task orders may result in bookings relatively quickly, while a Cat 1 acquisition may take many years.
PIPELINE VELOCITY
Pipeline Velocity is a KPI used by mature business development organizations to measure the speed that opportunities pass through the pipeline.
So it’s a measure of successfully moving opportunities from identification to fully qualified to solutioning, proposal writing, and finally to award.
The formula for calculating pipeline velocity is: Qualified Opportunities (Lookback Period) x Average Contract Value x Win Rate (Lookback Period) / Sales Cycle Length / Lookback Period (Duration).
The time that opportunities go through the pipeline vary. Some task order contract awards can take a few weeks, yet others may take a few months—or even years. So this formula can be modified to fit the needs of your business, but make sure you decide on a consistent method for measuring it across your organization.
VALUE OF OPPORTUNITIES BY STAGE
It’s important to track efficiency. You can expect some opportunities to be disqualified as you move through the process.
Some will be disqualified because the requirement was canceled, others will be disqualified because you didn’t have great customer communications throughout the process, and some because you can’t find the right partners.
Over time you should know the rate for opportunities moving through your pipeline. Remember, the better screenings you do early on, the less time you’ll waste on poorly qualified leads.
QUALIFIED VS. UNQUALIFIED PIPELINE
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This takes us to the next metric, which is the Qualified vs. Unqualified Pipeline.
Most organizations have their definitions for what qualified means.
Still, in most cases, it’s an opportunity where the customer has a funded need, and someone from your organization has engaged with them to figure out if they’re qualified to be a future client.
This qualified vs. unqualified metric is often used at a stage level.
For example, in the early stages, you would expect the ratio of unqualified to qualified to be high. Later on in the process, you might expect zero unqualified opportunities.
According to a 2024 Deltek survey, 81% of business development teams ranked “more or better opportunity identification” as their most important initiative for the year. While 67% of respondents noted they wanted to focus on a better understanding their company’s fit against requirements to assess best-fit opportunities earlier in the process.
This trend is understandable, as many organizations realize there is incredible waste in poor opportunity identification.
Deltek notes that top-performing teams value opportunity identification more highly (48% vs. 31%) and select fewer sources for new opportunities, indicating they are more effective by focusing on their best opportunities.
Sounds simple. But the reality is many teams don’t have the necessary people skills to connect and ask the right questions to determine if there is a good fit, all while feeling the pressure to add more opportunities to the pipeline.
Your most experienced BD team members are hiding something from you.
If you’d like to improve your customer relationships, try The Hi-Q Success Path. This method empowers your team to increase contract value and win recompetes without process changes or complicated methods, instead focusing on customer engagement.
QUANTITY AND QUALITY OF CUSTOMER INTELLIGENCE
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This is a subjective metric, but often organizations will assess the level of customer intelligence during their post-award debriefs and lessons-learned sessions.
Effective business development (BD) personnel are accountable for developing relationships, gathering customer information, and shaping the customer’s thinking.
Most BD teams *think* they know how to create Winning Relationships and get intel.
But they really don’t.
Strong relationships can result in higher-quality intelligence. So, while there isn’t an absolute metric for this, your team needs to gather and validate the highest quality intelligence they can.
RETURN ON BD INVESTMENT
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This is calculated as the value of new bookings/ revenue generated from BD investment divided by the dollars invested in BD efforts to win the business.
RETENTION RATE OF BD PERSONNEL
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This non-financial metric measures the percent of current BD personnel retained annually. This calculation usually excludes personnel removed or reassigned for non-performance or legal reasons.
Retaining top talent remains the top challenge for many BD organizations as skilled BD professionals are limited and employee expectations have increased. This has pressured companies to focus on developing the talent they have and provide support for initiatives such as hybrid working models and development programs.
According to the Workplace Learning Report survey 94% of employees would stay longer if their company invested in their skills, and Deloitte reported organizations with strong learning culture see 30-50% higher retention and engagement rates. So it’s no surprise leading organizations have training included in their employee retention strategy as turnover is incredibly expensive.
Relationships can also play a significant role in your retention rate, as it affects how your personnel feel about their Customers, colleagues, leaders, and work in general.
There are various types of turnover issues to be sure, but employees that feel they work in a positive, supportive and engaging environment are much less likely to go elsewhere and bring their organization a 21% higher profitability.
Diversification is a key metric with companies focused on acquiring new customers (agencies), gaining access to new markets, and offering new product lines to their customers.
DIVERSIFICATION INTO NEW CUSTOMERS
This is the percentage of this year’s revenue from new customers.
DIVERSIFICATION INTO NEW MARKETS
This is the percentage of this year’s revenue from new markets.
DIVERSIFICATION INTO NEW PRODUCTS
This is the percentage of this year’s revenue from new products.
Knowing the most important KPIs that impact your capture efforts can help you identify new opportunities to capture and help prioritize your business development and capture resources.
PROBABILITY OF GO (P-GO)
Evaluates the likelihood a customer will fund and execute a project.
PROBABILITY OF WIN (PWIN)
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Pwin measures various win factors to assess the possibility of winning an opportunity.
It is often reported by relative probability (low, medium, high) or by percentage.
P-Go and Pwin metrics can be tricky because they are typically subjective and the calculation process can vary greatly from business to business.
Many organizations use a combination of methods to determine their Pwin, which could be based on various evaluation criteria such as the stages of the opportunity, weighted questions such as relationship quality, or even KPIs.
You Pwin is only as accurate as your assumptions, and most teams overestimate their probability of win significantly as they have an overly optimistic view of their capabilities and Customer Relationship Quality (CRQ).
Added to this, many BD and Capture managers feel pressured to use assumptions that generally favor their organization, resulting in meaningless calculations.
Ultimately, Pwin cannot paint an accurate picture of your chances unless you understand the opportunity from the Customer’s perspective and your team has deep knowledge of their real problems, how your solution might help them, and your competitors.
If you would like to learn more on how to calculate Pwin, check out this article from William Rogers.
Other standard lagging capture metrics include:
CAPTURE RATE
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Capture Ratio is calculated by: Pursuits Awarded / Pursuits Qualified.
CAPTURE RATIO (WIN RATIO)
Capture Ratio (Win Ratio) is calculated by: Percentage of Dollars Won / Value of All Bids Submitted.
However, often the real insights are found in determining the following:
SUBMISSION BY PROPOSAL TYPE
Fixed Price, Time & Materials, Cost Reimbursable/Plus, ID/IQ.
SUBMISSION BY SELECTION TYPE
Sole Source, Competitive, Negotiated, Prequalified, Set Aside.
SUBMISSIONS BY CAPABILITY
Opportunity submissions grouped by the organization’s capabilities.
SUBMISSIONS TO EXISTING VS. NEW CUSTOMER
Opportunity submissions sorted by existing vs. new accounts.
Monitoring key project execution metrics ensures you are ahead of recompetes. If a project is struggling, you can take the correct action to ensure it won’t negatively impact future opportunities where you might need that project as past performance.
Here are some metrics you could track:
- Client Satisfaction
- Cost Variance
- Change Order Win Rates
- Employee Retention
- Earned Value Management
- Lead Times: Hired to Billable
- On-Time Delivery
- On-Contract Growth
- Schedule Variance
- Time to Fill Positions
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