Setting the budget for your business development program doesn’t have to be an agonizing experience fraught with power plays and exaggerated estimates. Your goal is just to establish a budget that enables your architecture or engineering (AE) firm to get the job done. Here’s a simple approach:
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Start with your net revenues from last year. Use net, not gross, because the effect of pass-throughs to subs and vendors can skew the numbers. Remember, it’s the net revenue that keeps your firm going.
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Determine your BD expenditures for last year. That’s why it is so important to take out and use proposal numbers. They enable you to get a good handle on proposal costs, and you should be able to estimate the other BD costs reasonably well.
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Divide the BD expenditures by net revenues and convert to a percentage. For most firms in our industry, that number lies somewhere between three and ten percent. A good average is five percent. That is, about five percent of net revenue is expended in a good, healthy BD program.
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To compute your BD budget for next year, multiply your desired percentage (likely, not too far different from last year’s) by your target net revenue. The result should be your BD budget—in dollars—for the year.
Related posts:
What Pieces of the BD Picture Are You Missing?
Where Are Firms Allocating Their Business Development Time?
Looking for more info on improving your BD efforts: PSMJ is offering a two-day Proposals Bootcamp geared towards helping you position yourself as a front-runner before the RFP is even announced. In this intense, two-day, hands-on workshop, you’ll learn the newest and most innovative techniques for writing winning proposals, making memorable presentations, mastering today’s technology, excelling in networking, and much more.