July 2013

Business Building

Use Your Bid as Bait

By George Hedley

Does this sound familiar? “It’s impossible to compete in this tight construction market as there’s always too much competition.” “The only way I get any jobs is when we leave too much money on the table.” “I get tired of cutting our bids to beat the competition.” “How can we ever make enough money to survive?”

I have been hearing these same complaints about the construction business since 1977, when I started my general contracting company. It seems as if nothing changes as contractors continue to compete against low-price competitors.

Bid like you fish

Before you go fishing, you need the right bait to lure the fish to bite. Think of your bid as tasty bait customers will want to bite, so you can land a juicy contract. When you fish, your goal is to catch either the big one or lots of fish. So you look for the secret fishing holes where they bite.

When looking for profitable projects to bid to, you must seek opportunities that will give you the best chance to make the most money. When you finally catch a fish, you can reel it in, weigh it, and decide if you want to keep it. After you submit a bid and get the call to cut your bid or match a better price to get the job, it is your choice to accept that offer as well.

When you go fishing and they aren’t biting, what do you do? You try different fishing techniques, change your bait, or move on to another fishing hole. But stubborn contractors don’t look elsewhere when they don’t land enough contracts.

Contractors often think if they bid enough the same way, eventually they’ll get their share. This effort won’t get you the positive results you want. Like fishing, you must change your estimating and bidding strategies to get the big ones to bite more often.

Bid-hit ratio

Bid-hit ratio is the rate at which you successfully bid or propose on projects. For example, a 5-to-1 bid-hit ratio states for every five jobs you bid or propose on, you are awarded only one. In a survey I conducted of more than 2,000 construction general contractors, subcontractors and design-build companies, less than 10 percent know and track their bid-hit ratios.

Do you know what yours is? In order to determine how many jobs to bid, what type of jobs to go after, and which customers give you a higher percentage of their work, you must know your bid-hit ratio for these different categories. Track it by types of projects, customers, job type, job size, and project location. As you study your bid-hit ratio trends, you’ll find certain customers give you more work than others, and you’ll find you do better with certain kinds of jobs.

Offer what customers want

Think about what you include in your typical proposal or bid: price, terms, scope of work, specification section number, inclusions, exclusions, a list of the plans and specifications, and payment provisions. These facts and figures don’t take into consideration what your customer really wants. Sure, he wants a low price based on an “apples-to-apples” scope of work, but what else?

• Ability and experience: understanding the plans and specifications, reputation for excessive change orders, in-house design and value engineering, and experience in similar projects
• Customer service:?? trust with a delicate customer, service department, flexibility and response time
• Solid workforce: properly trained professional field crews, foremen who can make decisions, large-enough crews, ability to make the schedule, and quality workmanship
• Image: great safety record, maintain clean jobsite, jobsite image and uniforms
• Financial security: financial strength and bonding capacity, payment schedule and need for cash.

Every project has unique requirements, which often are more important than price. Before you start working on an estimate for a customer, always ask the decision maker what’s important on this job. Then, custom design your bid proposal accordingly. Highlight the differentiating factors, and make it clear that their priorities are the same as yours.

Use your bid as bait!

Remember your bid is bait to go fishing for a contract. The main purpose for your bid is act as bait to get a meeting with your customer. At this meeting, you can discuss the project in depth, review how you can help your customer meet goals, explain why you are the best choice, review pricing options, get a second chance to be the selected contractor, and get last look.