This template comes from our free ebook, How to give your business a strong forward outlook.
Your pipeline of prospects (which consists of active tenders, quotes and proposals) is one of the five key factors we consider when assessing the strength of a business’s forward outlook. The others are:
- Work in progress
- Contracts and agreements
- Client portfolio
- External market trends
Pipeline of prospects
The pipeline is indicative of future sales that the business may benefit from, but they’re not formal confirmed orders.
It includes the projects and jobs you have submitted tenders or quotes/proposals for, but which have not yet been awarded, the value of those tenders, and the likelihood you will win them.
For example:
Business X has tendered for 15 projects with a total value of $120 million and which are due to be awarded over the next three months.
Based on Business X’s past form, which the managers have diligently recorded, the possibility of success (the ‘win rate’) for those projects is 20% (i.e. two project wins per 10 projects tendered).
20% of $120 million is $24 million.
So, the likelihood is Business X will win $24 million worth of tendered projects in the next three months (i.e. this level of business is likely to flow through to the business’s WIP over an extended period beyond this time).
The pipeline element has more risk attached than work in progress (WIP), but it is still part of the run-rate for the business.
Use our template to regularly record the tenders, quotes and other proposals in your pipeline.
What’s your win rate?
When valuing a business, we’ll invariably ask a business owner: “What’s your win rate on tenders?”
Often, they’ll look at us vaguely and say: “I don’t know – we only care about the tenders we win.”
It’s critical to document all tenders – successful and unsuccessful – to enable you to prove your win rate to potential purchasers doing due diligence.
No one likes uncertainty when buying a business; providing this data will remove guesswork on their behalf. It will also help you improve management practice by identifying areas for estimating and tendering improvement that may help increase your win rate over time.
