Business Development Metrics | How to Measure Business Development Success to Create an Informed Budget
We're on the cusp of Q4, and your 2023 business development budget deadline is popping in to say hello.
So, how do you plan your 2023 budget?
If you're like most business development and marketing professionals, you hit copy + paste from last year's budget to get started. Before you change all of the dates to align with 2023 and submit to your CFO, we need to ask you one question:
Was your 2022 business development program successful?
Regardless of your answer to this question, we want to know HOW you got your answer. While we appreciate the value add of a good gut feeling, it's not the metric we recommend to determine success and ensure profitability in your future business development program. Accurately evaluating the profitability of your business development programs will not just help you plan your future budgets but will also help increase profits for your firm or company. Planning a successful business development strategy for your organization is dependent upon deep analysis of Key Performance Indicators (KPIs), and there are many KPIs to assess. One of the biggest problems plaguing professional service firms and organizations in their attempt to drive meaningful business is a lack of understanding and application of data and KPIs.
There is a lengthy list of possible metrics, and we're here to talk about the ones that make the most impact to your business development plans. These KPIs are most easily tracked in a project management dashboard, but don't sweat it if your firm or company doesn't track progress and data that way. You can work with your firm's operations professionals to pull together these numbers.
It's time to let go of our past copy + paste ways and use real data to determine business development success for 2023!
Time to Take Inventory
ROI of Events
Taking inventory of what you've done in the past is a great first step to completing your 2023 budget, and it's kind of a "give me" to easily cross off your to-do list. You know these events like the back of your hand. You barely have to plan for them, and they're expected. Easy, right?
We know that the bulk of firm events become fixtures in BD plans because.... "that's how we've always done it." However, that doesn't mean you should keep doing it. It's important to take a step back from the expectation of events and break down their impact to your bottom line.
Breaking down the dollars spent on firm events, from small to stately, in comparison to the business generated by them will allow you to make tough calls on old staples that might be past their prime profitability, loosening the purse strings and giving you the option of investing that budget money in other more profitable activities.
Pull the numbers of how many clients attended the events you hosted or sponsored, then get with your friends in accounting to see how much revenue those specific clients generated. It might surprise you (and the partners who lobby for these events) to find out your annual staple is really a flop, despite how much folks look forward to it.
Event Size Doesn't Always Equal Size of Spend
It doesn't need to be just big annual events, either. Review all of those little outreach methods your professionals attend and host in hopes of developing new business that can add up quickly and quickly drain a strong budget.
Did these business development events in 2022 deliver desired financial results, lead to closing deals, boost revenue growth, and improve your company's performance?
Remember, it's not about your gut feeling. Pull the metrics and ask the hard-hitting questions:
How many new prospects did you convert?
What's your win rate?
Did these outreach and engagement events boost your lead generation rates?
What was the average scope and average deal size of the work that resulted?
All of those concrete numbers are key indicators of performance that matter, so make sure you’re bringing data to the decision-making table when it comes to planning your 2023 events and activities.
Here's a list of firm events you might not think of as true events, but the spend says otherwise. Every form of outreach shares strategic goals of better understanding clients and bringing in new customers, so be sure to include their cost in your assessment:
Over-the-Top Points of Touch
Annual parties
Industry group outings
Summer intern calendar of events
Corporate tailgates
Box seats and suits at concerts
Professional sporting events
Philanthropic Opportunities
Non-profit sponsorships via financial donation
Participation in mock court/trial development with area law schools and universities
Chairing/involvement in community organizations and committees
DEI initiatives
Business Development via Professional Development
Attending and hosting conferences, especially when hosted in a different geographic location
Attending and hosting webinars
Continuing education hours
"Invitations" to present that come at a cost
Mini Meetings with Big Impact
Happy hours
Coffee meetings
Breakfasts
Lunches
Dinners
Gift cards for coffee or lunch for virtual meetings
Proposals Sent vs Proposals Won
RFPs, RFQs, and RFBs are easy to forget about when building your 2023 budget. Most come in unexpectedly, and there's usually a mad dash to complete them... and they are almost always beasts to tame with very tight and specific response requirements.
Other annual RFPs and RFQs that your firm expects to complete are a bit more manageable, but still very costly in time and effort spend. That time and effort quickly accumulate and equate to dollars spent on response. Are you including all of that in your profitability assessment?
Some of your company's leaders might think proposals and responses just magically populate, but we know your business development teams and marketing team understand the labor investment these require. Ask them to track their lengthy hours spent working on those endless spreadsheets.
How many of those proposals did your firm win? Be sure to deduct the time spent on those proposals from the overall revenue generated from their corresponding clients and prospective clients, if any. This will help you pinpoint which requests are worth your time and which your business development teams would be happy to decline in the future.
There is a particular customer/client RFQ/RFP/RFB category of note with these. It's especially important to carefully track the clients and prospective clients who are required by law to send RFPs and RFQs annually, even if they have no interest in changing firms and engaging with you in business.
While we encourage clients to "shoot their shot," (as Lizzo so eloquently puts it), the juice is not always worth the squeeze. A bulk of that particular market segment has no intention of engaging with your firm. They're simply required to send requests. RFQs and RFPs from these types of prospective customers aren't necessarily the same things as solid inbound leads.
Annual Requests that Could Cost You
Closely review your conversion rates on annual requests for qualifications, bids, and proposals:
Universities
Public schools
Government agencies
Military service branches
Non-profit organizations
Corporations committed to diversity and equity opportunities
Financial institutions
Professional sporting teams
Hospitals
Medical groups
Cooperatives
Again, we don't list these to discourage firms from participating. We're all about building business, but we strongly believe in having a strategic plan to determine what's profitable. Taking a moment to review the steep requirements or likelihood of winning one of these annual requests for bids can save you big in the end. Remember to think strategically.
Cost of Rewards
When it comes to professional service awards, weighing cost and profit is imperative. We know that there are very established annual lists and recognition opportunities that, like most firm annual events and sponsorships, are expected each year.
Not every award or honor is this way, but many of the avenues firms take for recognition or seals of approval are very costly. While we understand the appeal and the "we've done it for years" mentality, we'd like you to consider whether or not any of your clients or prospective clients actually found or chose you as a result of those annual stamps of approval from various service lists and magazine awards.
Not only do those applications come with hefty fees for entry, your business development and marketing teams put in long hours to collect the data needed and format it for your firm, especially if you are a nation-wide or global firm. It's an enormous cost and a big undertaking. Look deeply into those costs, and even consider sending a client survey to gauge the importance THEY place on such annual lists and awards.
Having these metrics will allow you to better decide on future applications and give you the real data to have those tough conversations with the professionals in your organization who think having their name on those lists is their bread and butter.
Here's a list to remind you of "honors" you want to check.
Are You Really Winning?
Remember to look closely at the spend on these types of honors before you graciously accept or apply:
"Best of" lists in annual publications
Pay-to-play panels of recognition
Entry fee keynote speaker opportunities
Annual industry directories that "rank" your firm, practice groups, or professionals
Person of the year "awards" that also have a price tag
You don't have to be overly suspicious of every honor that comes your way. We know our clients are incredible and very much worthy of recognition. We also know that many "awards" and forms of recognition are costly and may not return their ROI.
These are critical metrics you should include for an informed and successful 2023 budget.
Cost of Client Acquisition
Every professional service firm has the movers and shakers who seemingly know everyone, keep a schedule packed full of prospective client lunches, are magnets for new prospects, and are always getting great referrals... but at what cost?
While it's instinct to laud these business development pros for helping your organization build a bigger book of business, it's imperative to weigh the cost. This one requires some help from your friends in accounting again, but only after you assess the crucial metric of the effort that went into closing this long list of new customers.
How much are you spending to convert?
Hop on your project management platform or work with your team to pull the hours your firm's professionals put into business development. Gather expense reports that show how much was spent, including time, on these tasks. You might be surprised to see just how much money was spent on closing these clients, especially if they are out-of-town and travel cost went into their meetings.
Ready for an even more eye-opening experience? Go bug your friends in accounting to find out just how much revenue these new clients brought to your firm to compare the cost that went into converting said client with the actual revenue their work brought to your firm.
Data-Informed Decisions
Ooof! The realities presented by real numbers can mean you have to make tough calls when you allocate business development spend for your firm's professionals in 2023, but the good news is that you have real data to back you.
Client Loyalty and Retention
Many people wrongfully assume that business development is about creating relationships with qualified leads and prospective customers to convert them. While a big portion of an effective business development process and solid marketing campaign is about building new growth, there's an often forgotten key performance indicator to include.
Enter: client retention
Existing Client Engagements
The maintenance of good relationships after having courted and onboarded a client is vital for establishing long-term businesses, and business that's profitable. It's easy to forget about the existing clients who don't make waves, always pay their bills on time without complaint or question, and who always, always, always boost your customer loyalty stats by using your firm, year after year.
In fact, many firms don't allocate any of their organization's BD budget for client retention. Big mistake! But we digress, as that's a topic for another day.
The most profitable clients are the loyal ones we've mentioned here. Take inventory of who has been with your firm the longest, who keeps returning for continued services, and look deeply at what you've spent on them in business development activity cost, hours, and even the time you've saved in repeat business with a client that doesn't require a comprehensive setup in your firm like your new clients need.
Do More for Your Most Profitable Clients
Now, looking at that profitability and, with so little spend, you might want to consider just how much more business longstanding customers acquired could bring your way if you were to move around that 2023 budget to include them on your priority list as predominantly as you place prospects. There's so much potential value there.
Remember, clients and customers acquired for long-term work across various industries are exponentially impactful in business success because they don't require onboarding and time to collect meaningful information and details for your CRM. They're already there!
Check Your Cross-Sell Rates
Which lead is best, you ask again? Your current client. Use this information to see whether verticals responded well to services for which they'd not initially signed on to receive. If you're not cross-promoting other practice groups and services to your most loyal clients, you're missing out on incredible growth opportunities.
If you are doing that, and you know your attorneys or business development activities have helped grease those wheels, be sure to include that data in your approach for 2023. Whether you already prioritize customer lifetime value or plan to, remember to include the cost of your marketing efforts and engagement towards existing customers and clients.
Invest in Client/Customer Satisfaction
Recognition for milestone years of client and customer loyalty with gifts or outreach
Annual meetings between your business development representatives and longstanding clients to take their pulse on key areas to improve
Annual trips to meet with overseas clients or customers in different geographic locations (pro tip: do some market research in those regions to schedule meetings with prospects in those regions to boost your customer acquisition rate while lowering your customer acquisition cost)
Digital Marketing Key Performance Indicators
While your engagement and presence online should be included as a pillar of your marketing process and business development strategy, we really encourage each company to review these scores on a different time period than we recommend for an annual budget.
Monthly website traffic, email campaigns, and client communication can shift very quickly as a result of tech issues like changes in platform algorithm, spam settings, and even current events. Don't wait until the very end of the year or even the next quarter before you gauge effectiveness in these key areas of digital outreach. You should pull your digital metrics on a monthly basis, at the least.
We know this list is expansive, but successful businesses need business metrics in order to determine where they stand with met and overdue milestones in order to distribute funds appropriately to the key area of their business development process that actually make sense.
Monitoring the success of your business development program is crucial to future growth, informed decision making, and even stronger leadership as you are making tough calls that are backed by actual data. Examining these KPIs and other metrics you should consider for business development plans shouldn't be daunting or cause you more grief than good.
If you're still struggling to identify the KPIs that are crucial for your firm's success or hate having to sift through emails, spreadsheets, and bug your friends in accounting to collect the data you need, there's a better way.
Gathering and assessing your business development metrics to better inform and reach your business goals should not be a time (and dollar) suck. Don't let lack of time and no ease of access to these key metrics keep you from crushing your BD goals.
We've made it easy to make fun of work with our INform technology that combines gamification and on-demand access to department productivity reports, data between revenue and productivity in business development efforts, and measures the ROI of sponsorships, conferences, client events.
Reach out to us to learn more about gauging success using key performance indicators to build the most impactful budget for the improved gross margin and net profit margin of your firm or company.