The 120-Hour Proposal
Your 12-person firm has $1.6 million in net revenue and spends $64,000 a year on business development. A university issues an RFQ for a $450,000 fee library renovation. A full response requires a technical proposal, three references, and an interview; you estimate 120 hours of principal and associate time, at an internal cost of $95 per hour. Your win rate on similar pursuits is 1 of the last 12; a typical pursuit consumes about 80 hours, or $7,600 at the same internal rate. On the same due date, a current client asks for a proposal on a $60,000 repeat tenant-improvement project. You estimate 25 hours at the same cost and a 60% win probability; your typical profit margin is 20% of fee. The principal championing the university job says, “We can’t afford to skip a $450,000 opportunity.”
1. Calculate the expected profit and pursuit cost for each opportunity, and compare them.
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University job: expected profit before pursuit cost is 20% × $450,000 = $90,000. Applying the historical win rate of 1/12 gives an expected value of $7,500. Pursuit cost is 120 hours × $95 = $11,400. Net expected value is $7,500 − $11,400 = −$3,900. Repeat project: expected profit before pursuit cost is 20% × $60,000 = $12,000. At 60% win probability, expected value is $7,200. Pursuit cost is 25 × $95 = $2,375. Net expected value is $4,825. The small job has a positive expected value and uses 25 hours; the large job has a negative expected value at the firm’s actual conversion rate and consumes nearly five times the effort. The $450,000 fee is not the same as $450,000 of profit, and the firm cannot spend its way to a win it rarely achieves.
2. What go/no-go recommendation do you make, and what factors could justify overriding the arithmetic?
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Recommend pursuing the repeat project and declining, or heavily qualifying, the university pursuit unless something changes the win probability. A rational override would be evidence that this RFQ is different: a shortlist you are likely to make, a prior relationship with the university, a library portfolio that matches the selection criteria, or a partner with a stronger position. If the university has a history of rotating consultants or favoring local firms, the 1-in-12 rate may overstate your chances. Do not override merely because the fee is large. If the firm can staff both without hurting quality-for example, a junior architect prepares the repeat proposal while a principal leads the university response-the decision changes, but the deadline collision and 120-hour burden still create a real opportunity cost.
3. What changes would you make to the firm’s business-development process?
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Move from chasing opportunities to qualifying them. Build a go/no-go scorecard covering client type, prior relationship, selection criteria, competition, budget, and probability of interview. Track win rates and pursuit costs by market and client, not just total marketing spend. Set a proposal budget as a percentage of expected fee-say 3% to 5%-and stop pursuing when the estimated cost exceeds the risk-adjusted value. Debrief every loss and ask why the shortlisted firms won. Invest earlier in relationships and pre-RFQ conversations, because a 120-hour response is a poor substitute for being known before the solicitation. The current $64,000 budget is only 4% of revenue; if typical pursuits cost $7,600, the firm can afford about eight of them a year, not an unlimited pipeline.