Avoiding Business Development Budgeting Pitfalls and Proposal Cost Cutting Blunders

As a proposal manager getting a proposal plan approved, I always found it difficult to get my management to approve a budget that was based on 40-hour weeks for employees and 50, 60, or even 70-hour weeks for consultants. It just didn't look good: a consultant often cost more per hour than an employee, and got paid for every hour worked to boot. Yet, I managed to stay on budget and win. I would like to share how I did it with you.

So, how do you justify hiring the consultants, how do you properly budget for proposals, and how do you save costs without sacrificing quality?

I am going to address each approach that has worked for me. But before I get to the budgeting and savings, I need to address three common patterns around business development expenditures that need to shift before you can think of efficiency and effectiveness in business pursuits. If you are already there, ignore this post, but read on if you recognize these in your organization.

Pattern #1: Keep Business Development Investment Low. I find it surprising how few corporate folks understand the simple truths behind business development. Everyone knows that business development directly feeds company growth, but some companies don't invest nearly enough to grow.

These days, companies have to either grow or die. When they choose to be conservative with funding business development, their growth is slow. Any disaster, such as a stop-work order on a bread-and-butter project or loss of a recompete, could wipe out the company.

I have worked for at least five companies where I observed the decision-making pattern of saving on business development costs when things get tight. This is exactly the approach that makes companies go under. In fact, early in my career I worked for two companies that got sold because they didn't do well financially, and I could directly trace it to the way they approached business development.

It may feel almost counterintuitive, but if the company has not been winning enough and is not doing as well financially, it has to cut costs elsewhere but spend more on beefing up their business development. The right approach is to make business development the company's utmost priority.

Pattern #2: Do Proposals on a Shoestring. Another pattern I wanted to address is the desire to keep individual proposal budgets very low. Sure, I understand what it's like to have a tight overall budget, especially when you are a small company or a small department. I just question the very common penny-pinching logic that usually drives this pattern.

Some people's rule is that they have to save everywhere-just like shopping for clothes that they always buy only on sale. It sure works for consumer goods, save for a few fashion disasters, but doesn't work as well for business development. A pennysaver mentality for proposals leads to cutting out the all-important capture activities, overworking and burning out staff, and deciding to save a few thousand dollars at the end to cut corners on a bid that could have won if the company hadn't scrooged on the last few touches that could have taken the proposal from green to blue.

As you know, a proposal that does not win means money out the window 98% of the time. It does not matter that you saved money producing the proposal, because it is not only the B&P budget that you lost. You also lose the potential revenues from this contract or other pursuits you could have used this money to win.

Pattern #3: Always Use Cheaper In-House People Rather than Hiring Proposal Consultants. Let's be frank here. Proposal managers know that every member of the proposal team is not the same: there are people who are the heavy lifters and can literally carry the proposal, and there are those who will work on a small section, diligently sitting in front of the computer and talking a good game, but not producing much or anything of quality. It all boils down to the 80-20 Pareto principle, where 20% of the people do 80% of the entire proposal work.

So, imagine when 80% of your people are charging their low rates to the proposal, producing only 20% of work with lesser quality. Some employees may be inexpensive, but when several of them charge full-time for doing just a small piece of the effort, your costs get out of control quickly. Besides, for the internal people, you have to count not only the hourly rate of their salary, but also the overhead, the fringe benefits, and any other compensation you may offer.

It may be cheaper to get one or two expensive twenty-percenters who can replace several underperformers and do a better job.

As long as you don't fall into those three common patterns, you are positioned to win more and grow aggressively. You can then focus on how to do it most efficiently and effectively. I will address the specific how-tos in the upcoming posts on how to be smart about the way you are spending the business development money, and by implementing the right controls - so stay tuned.

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