5 Proposal KPIs: How to Track Proposal Performance to Improve Results
All things being equal, if you want to make an immediate impact on your sales growth, one of the biggest levers that you can pull is to improve proposal performance—to convert more proposals in less time for higher revenue and profit.
So, in this article, I’ll help you identify—so that you can fix—the most significant weaknesses in your proposal process.
But how do you get accurate and honest visibility into your company's proposal performance?
Conduct a proposal audit by examining these five key performance indicators (KPIs).
1. Proposal Volume (PV)
Proposal Volume—the number of proposals completed and presented to the client—gives you insight into the health of your sales pipeline.
How many proposals has your sales team submitted this month?
How many did they submit last month?
How do those numbers compare month-to-month, year-over-year?
You’re looking for the trend. If proposal volume has slowed, you have an issue in the earlier stages of your sales pipeline.
Perhaps you need to improve your team’s prospecting systems to generate more new leads.
Or, you have a solid number of leads coming in but too high a percentage of them are dropping out after the sales presentation or demo, not taking the next step to request a proposal. In that case, you need to reevaluate the story you’re telling the customer to determine how you can improve it to generate more proposal opportunities.
Sales is a numbers game. If you’re wanting to hit more home run sales, you need to get more at-bats. And none of the other four KPIs really matter if you’re not getting enough swings at the plate.
ACTION: Focus on Proposal Volume first. What can you and your sales team do to improve your company’s prospecting, lead nurturing, and presentation/ demo processes to help you pump up the volume in proposal opportunities?
2. Average Proposal Value (APV)
This is the average quoted price per proposal (total proposal pricing/ proposal volume).
If you haven’t been tracking this metric, see if you can get proposal data from the last three to six months to give you a baseline to work with as a starting point.
Ultimately, you want to track APV from these time perspectives:
That’s because, as with tracking Proposal Volume, you want to stay on top of the APV trend. If APV is trending lower, this might be a red flag that you’re dealing with increased competition or other market forces driving down pricing. In this case, APV serves as an early warning system that you’ll need to make strategic changes to navigate around the market headwinds.
But, for right now, you want to know your current APV to serve as a baseline to drive proposal improvement—to be more productive with each at-bat that you get.
Think of APV like this. If Proposal Volume is your number of at-bats, APV reflects the strength of your swing. This way, when you do connect the bat to the ball—and get “yes’ to your proposal—it will result in a double, triple or home run. Tracking APV will let you know whether you and your team are swinging for the fences or still playing small ball, going for singles.
ACTION: Identify your baseline APV. Then ask: “What can we do to increase the productivity—and profit—of each new proposal?”
For example, let's say your average proposal value is $1,000, and you and your team talk about, "Okay, how can we raise that by 20% to $1,200? Do we need to upgrade our clientele? Are there other services that we should be offering that can bring even more value to our client?”
3. Proposal Conversion Rate (PCR)
Proposal Conversion Rate is an indicator of your proposal efficiency. It's your batting average. Out of every ten at-bats—proposals that you submit—how many of those result in hits—and convert into business?
If you’re converting fewer than 50% of your proposals, that could be a red flag, depending on your industry and type of business.
Here are some of the factors that could be dragging down your PCR:
Submitting proposals to non-buyers—those who are not qualified or authorized to influence and/or make the final purchase decision.
Submitting proposals to buyers who won’t be ready to move forward for another several months. (In this case, you would offer to provide a budget range and then put together a firm proposal within 30 days of the client being ready to commit. See: “One Question Guaranteed to Boost Your Sales Performance.”)
Submitting proposals that are too long, too complex, and take too much time for the client to understand, which causes the client to either put off making a decision or punt on your proposal altogether.
Submitting proposals without offering clear “Next Steps” to do business with you. STOP sending proposals that close with: “If you have any questions or concerns, don’t hesitate to ask.” This is weak—and communicates that you’re not confident in your offering. Instead, close your proposals by outlining precisely what the client needs to do next to get started. (For an example script, see: “How to Close Your Next Proposal to Achieve Breakthrough Results.”)
How can you improve your PCR?
Focus on putting together proposals only for qualified prospects who are able (they have the budget), willing (they’ve expressed interest in doing business with you), and ready (the timing is right) to buy.
Don’t shortcut the sales process. Whenever possible, work on building high-trust relationships with prospects before crafting the proposal.
Craft an easy-to-read proposal that clearly outlines the client’s objective and problem, the scope of your solution, the results the client can reasonably by adopting your solution, and the next steps to move forward with you.
BEFORE submitting the proposal, schedule a call or in-person appointment (depending on the size of the deal) to review the proposal together. This way, you can address any questions in a “live” conversation, eliminating time-consuming back-and-forth emails. And, if no one else needs to be involved in the decision, you’ll be in a much stronger position to seal the deal on the spot.
ACTION: If you’re not already doing so, start tracking PCR. Where do you stand? If it’s below 50%, find out why. If it’s above 50%, you still want to look for ways to keep driving up that number.
4. Proposal “Ghost” Rate (PGR)
The ideal situation is that you want a decision—whether it's a “yes” decision, a “no” decision, or a “later” decision (meaning, "Hey this is what we want. We want to do business with you, but we're looking at three to six months now down the road.")
What you DON’T want is to submit the proposal and 30 to 60 days later you still don’t hear anything. That's where the prospect has “ghosted” on you.
Your Proposal Ghost Rate (or PGR) is a percentage of proposals that don’t elicit a response within a specified timeframe (usually 30 to 60 days, depending on how you set it up).
Where do you want to keep your PGR?
But the important point here is to know what your PGR is right now so that you have a baseline to work with and improve upon.
A general rule of thumb is that if your PGR is over 10%, that's a huge red flag. It indicates that you and your team are going after prospects who are not an excellent fit for you or there is a breakdown somewhere in your sales process that you need to address.
Ideas for improving PGR:
Whenever possible, arrive at a conceptual agreement on product spec (or project scope) and terms before putting it in writing in a formal proposal.
Get a commitment to feedback before agreeing to write the proposal. “I’ll be happy to put together this proposal. It will take me some to get quotes from suppliers. In the mean time, may I ask a favor of you? I’m confident that we’ll put together a very attractive offer. But, if, for any reason, you decide not to move forward with us, would you be willing to give me feedback as to why? This will really help me keep improving our approach to ensure that we’re bringing the best value to you and our other customers moving forward.”
Schedule an appointment to review the proposal together in person or on the phone. “I’m finalizing the proposal and should have it ready for you soon. In the meantime, let’s schedule a call to walk through the proposal together. This way, I can make any clarifications you might need during our call, saving both of us a lot of time from back-and-forth emails. How does Tuesday at 2pm ET work for you? If that timing is not good, let me know what works best for you.” If you don’t get a response, hold off on completing the proposal and focus your time on more qualified prospects.
ACTION: Decide on the maximum amount of time a proposal is considered “pending” before you label it as “ghosted” for tracking your PGR. My limit is 30 days. Your business might be different, depending on your customer’s decision-making cycle. But, in my experience with consulting with companies, 60 days is usually the maximum. Beyond that, you can usually expect it to be a dead deal.
5. Proposal-to-Conversion (P2C) Cycle
Proposal-to-Conversion Cycle (or P2C) is the number of days it takes from when you submit the proposal to when you get a “yes” decision.
Why should you track P2C?
It keeps you and your team honest about how many proposals are actually in play and which ones are in trouble and not likely to close.
For example, suppose your P2C is 10 days.
If you go to your sales team and say, "What proposals do you have working right now that we can push over the finish line in the next week?"
There might be 20 proposals in the queue.
But 15 proposals are past 10 days—your P2C.
What does this tell you?
Sure, you may have 20 proposals that are technically “pending.” But, in reality, only five are still within the P2C—the timeframe in which they are most likely to close.
And each day that the other 15 proposals age beyond the 10-day P2C range, the odds of closing those deals diminish further and further.
When you know the P2C, you’re able to keep everyone honest. “Team, if we’re honest with ourselves, we don’t really have 20 deals working right now; we have five. Let’s see what we can do to get feedback on the 15 proposals that are outside our 10-day P2C range to see where we actually stand on those deals. In the meantime, let’s work on increasing our Proposal Volume to get more in the queue.”
ACTION: If you discover a lot of proposals falling outside your P2C range, you can bet that something is broken in your prospect qualification process. Make sure you and your team are submitting proposals only to prospects who are able, willing, and ready to buy.
The Bottom Line
As you as audit your company’s proposal performance with the five KPIs, look for the lowest hanging fruit that offers an immediate opportunity to make the biggest impact on sales.
For example, suppose you're doing really well on Proposal Conversion Rate—closing 70 to 80% of proposals—but your Proposal Volume is trending downward. That’s your lowest hanging fruit. Focus on improving PV by removing bottlenecks in your prospecting, lead nurturing, and presentation processes. Then craft a strategy to make those improvements happen.
Sean M. Lyden is CEO of Lyden Communications LLC, an Orlando, Fla.-based consulting firm that helps companies use storytelling to unlock sales growth.
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