For architecture, engineering, and construction (AEC) firms looking to consistently win the best work, it’s crucial to broaden your perspective and leverage a more holistic measure of success that truly captures the value of the projects you undertake. Establishing the right key performance indicators (KPI) is how you can monitor and track your firm’s overall business development efforts.
We often measure success and failure by our win rate - the number of deals won versus the number of deals pursued. Unanet’s AEC Inspire Report 2022-2023 identifies another metric that provides an even more comprehensive picture of a firm’s performance and profitability – your capture rate.
Let’s dive into what your capture rate is, why understanding it is so critical to your success, and how you can use the information to your advantage.
Understanding what your capture rate is
Despite its massive potential, capture rate remains under the radar in many firms as a metric. The capture rate does more than simply record victories; it measures the monetary value of those wins against the total value of the bids made by a firm.
This adds a whole new dimension to gauging success, moving beyond the simple win-loss ratio. Unlike the win rate, which merely tallies the number of jobs won, the capture rate encompasses the dollar value of these wins. By measuring the dollar value of projects won, a firm can begin to understand the quality (e.g., the value) of their wins, not just the quantity.
Why knowing your capture rate is so important
A higher capture rate can significantly impact a firm's bottom line. It reveals which projects bring the most value to your business. For instance, several smaller jobs might bring less value – revenue, profit, etc. – to the firm than a few focused, highly profitable projects in an emerging market. As such understanding your capture rate sets you on a path to deeper insight into the effectiveness of your business development pursuits and the profitability of the projects you’re winning.
While the win rate can be misleading due to factors like cherry-picking, where firms selectively aim for smaller, easier-to-win deals, the capture rate provides a much-needed angle on performance. Coupled with metrics like profitability, direct labor multiplier and utilization, capture rate provides a holistic view of performance and effective growth.
Capture rate stands as a quantifier of your firm's “sweet spot” – the projects that bring in the greatest value relative to the effort invested. Focusing on these kinds of projects helps AEC firms bring in work that is more sustainable and engaging for the long haul. Capture rate is all about creating a consistent and profitable growth trajectory.
How you can use your capture rate to your advantage
Prioritizing the capture rate can encourage a more strategic approach to business development. It can help firms to bid smarter, carefully selecting the markets and projects they want to pursue based on potential profitability rather than just the likelihood of winning. This makes the chase for new business much more strategic, and results focused.
But realization is only one half of the equation. It is equally critical to establish robust systems and tools that can effectively track, analyze, and leverage this data. Not only will it enhance your understanding of the capture rate, but it will also empower your business development decisions, underpinning them with concrete data. Informed decision-making, fueled by accurate capture rate data unearths opportunities for growth and profitability.
When harnessed correctly, your capture rate can become a guiding beacon, illuminating the path towards sustainable growth and success in the challenging AEC landscape. Prioritizing the capture rate doesn't mean disregarding the win rate. Instead, think of it as an additional layer, a lens that shapes a much richer and more accurate picture of your firm's position, potential, and profitability.
For more on what top AEC executives are thinking, download a free copy of the AEC Inspire Report today. The next part in our series will discuss additional metrics your AEC firm will want to consider when growing your business.