The question of how much to budget for proposals and pursuits can be a challenging riddle. You can dump tens of thousands of dollars into a RFP response, only to find the money goes down the drain because your competition either is much better or (worse) had already wired the job to win. Nevertheless, there are good arguments for benchmarking and budgeting this stuff — both the hard and soft costs (labor), and with these cost in hand, you can also determine your historical success results and thus your overall business plans.
A poster on the Certified Professional Service Marketer (CPSM) site within the Society for Marketing Professional Services (SMPS) asked the questions about costs and percentages. While the list isn’t public — and so I won’t name names here — I think this response is worthy of review.
It really varies depending on the market and client type. We estimate anywhere from 3.5-4% of gross revenue for our private, low competitive type clients but anywhere from 5-8% for public sector and/or design-build efforts.
We build our marketing and BD budgets by market sector as a percentage of sales goal then we break down by activities (pursuits, proposals, conferences, thought leadership, new market research, client relations, etc.).
Some factors that go in our pursuit budgeting include:
- Competitive landscape (invite only or public)
- Level of design effort needed for proposal phase and how much of that can be carried into project execution phase
- New or existing client
- Project location (for travel expenses)
- Timeline in regards to pre-proposal positioning/capture planning efforts
- Potential for additional add-on, negotiated work vs. competed task orders
At a previous firm, they used a strict 4% of gross margin for every pursuit no matter size, client, or location.
So there you go. Look around 4 to 5 per cent — but perhaps you have different numbers/experiences. Please feel free to share your thoughts in a comment.