What is business development cost analysis?

Business development cost analysis encompasses tracking and evaluating all expenses related to winning new business, including sales staff time, proposal development, marketing, client entertainment, and related activities. For professional service firms, this analysis enables understanding of sales efficiency and informs decisions about business development, investment, and strategy.

Key characteristics

• Tracks all costs related to winning new business

• Includes time, marketing, proposals, and entertainment

• Should be tracked separately from delivery costs

• Enables sales efficiency analysis

• Informs BD investment decisions

• Compared to the revenue generated

Why it matters for professional service firms

Business development consumes significant resources, but firms often do not track the full cost. Understanding BD investment relative to new revenue won enables strategic decisions about where and how to pursue business. Professional service firms should track BD costs by activity type and opportunity, calculating return on BD investment to guide strategy.

Real-world example

David's firm knew partner time went to BD, but did not track the cost. BD cost analysis: partner BD time $145K (valued at billing rate), BD staff $85K, marketing $42K, proposals $35K, entertainment $18K—total BD investment: $325K. New revenue won: $1.2M (approximately $400K annual profit contribution). BD cost as a percentage of new revenue: 27%. BD return: 1.23 profit dollars per BD dollar. Analysis by source: referrals had a 3.2 return, cold outreach had a 0.8 return. Shifted BD investment toward referral development; overall BD efficiency improved 15%.