George Hedley is the best-selling author of “Get Your Business to Work!” available at his online bookstore. As an entrepreneur, popular speaker and business coach, he helps business owners build profitable companies. Email: gh@hardhatpresentations.com to request your free copy of Business Tools To Boost Your Bottom-Line!” or sign up for his free monthly e-newsletter. To hire George, attend his "Profit-Builder Circle" boot camp or be a part of an ongoing "Executive Roundtable Peer Group" call 800-851-8553 or visit www.hardhatpresentations.com.
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Can You Sell More Than Price? Featured
Every contractor, subcontractor or builder I’ve ever met boasts how their quality and service is superior to the competition. But after you present your proposal and the excitement settles down, what really matters? PRICE!
Will your customers pay more?
It’s great to take pride in your company’s awesome service and quality workmanship. Thinking you’re better is one thing, but getting paid more than your competition for better quality is another. Ask yourself this question:
Do your customers pay your company more than your competition for the same work?
To get paid more, you must offer more. Most construction companies want to sell quality over price, but really don’t offer any more than their competitors. Getting awarded a contract is normally based on bidding lump sum for the minimum required per the project plans and customer’s specifications. When preparing an estimate or bid, most companies never consider including more than the minimum required. Why? They’ve got to be low bidder to get the work!
Imagine living in a world where project owners, developers, builders, and home owners actually pay more for quality work and excellent service. I took an interesting survey while speaking at a Construction Owners Association of America (COAA) convention. COAA is comprised of organizations and companies who regularly engage in building major construction projects as the owner or developer. During my presentation I asked the attendees to tell me how much quality and service matters when selecting contractors, subcontractors, suppliers or maintenance service. The results were not what I experience in the real world.
Is Your Bid Only An Estimate?
As a general building contractor, you know what I would really hate? It’s when you negotiate an easy project to build with a great repeat customer, and after the project is finally completed, you haven’t made any money. The customer trusted you, didn’t question your costs and then awarded the job to your company at a fair price. Seven months later, you find out your estimator didn’t have enough in the bid for labor or equipment to do all the work required by the contract. This is your worst nightmare! All the effort, time and energy invested building a loyal customer relationship enabled your company to negotiate the project. And now, it is now wasted!
So, you go and ask your estimator ‘what happened?’ He blames it on the project manager, or the superintendent, or the weather, or the engineer, or the City, or bad plans, or his bad childhood! So, what do you do? You can’t fire him. You need to bid lots of work to keep the pipeline full. Now what?
What is your estimator’s #1 priority?
When I speak at construction conventions, I get many different answers to this question. They include:
- Bid lots of jobs
- Get lots of profitable work
- Maximize sub-bid coverage
- Be competitive
- Know what things cost
- Make a profit
Is Your Bid-Hit Ratio OK? Featured
Is Your "Bid-Hit" Ratio OK?
Bid-Hit ratio is the rate at which you successfully bid or propose on construction projects. For example, a 5 to 1 Bid-Hit ratio says for every five jobs you bid or propose on, you are awarded one. Do you know what yours is? Do you keep track of it? How do you use it? What should it be?
Whenever I present my "Estimating & Bidding Strategies That Work" program at construction industry conventions, I ask everyone what their Bid-Hit ratio is. Most estimators, sales people, business development managers, and company owners don’t have a clue what their ratio is. In a survey I conducted of over 2,000 construction companies, less than 6% know and track theirs. To me, this is like driving a car blindfolded without a clue where you are headed!
Keep Track
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. Track it monthly, quarterly and yearly. Track it for all types of projects you bid on and each customer you bid to. Also track by job type: large versus small, local versus out of town, commercial versus industrial or residential, bid versus negotiated, plans & specifications versus design-build, or new construction versus remodel. Another item to track is the number of competitors you bid against on each project.
As you study your Bid-Hit ratio trends, you'll find certain customers who give you more work than others. You'll find certain kinds of jobs you do better with. You'll also discover when competing against too many competitors, your success ratio isn’t the best it should be. This simple tracking system will help you determine which jobs and customers to bid to. It will also help you determine when to eliminate a project type or customer from your plate and seek out better opportunities to invest your estimating dollars.
As a general building contractor, you know what I would really hate? It’s when you negotiate an easy project to build with a great repeat customer, and after the project is finally completed, you haven’t made any money. The customer trusted you, didn’t question your costs and then awarded the job to your company at a fair price. Seven months later, you find out your estimator didn’t have enough in the bid for labor or equipment to do all the work required by the contract. This is your worst nightmare! All the effort, time and energy invested building a loyal customer relationship enabled your company to negotiate the project. And now, it is now wasted!
So, you go and ask your estimator ‘what happened?’ He blames it on the project manager, or the superintendent, or the weather, or the engineer, or the City, or bad plans, or his bad childhood! So, what do you do? You can’t fire him. You need to bid lots of work to keep the pipeline full. Now what?
What is your estimator’s #1 priority?
When I speak at construction conventions, I get many different answers to this question. They include:
- Bid lots of jobs
- Get lots of profitable work
- Maximize sub-bid coverage
- Be competitive
- Know what things cost
- Make a profit
Customers have stopped buying, companies are closing, layoffs are common, banks have stopped lending, consumer confidence is falling, and the list goes on. Many business owners hope things gets better before it’s too late and are struggling to stay afloat during these tough times.
As a business owner, manager or leader your choice is simple. Do what you know you need to do and do it fast, or die a slow death. Most people are afraid to make tough decisions, try new ideas, or do business differently. So they continue to hope their outdated business strategies will keep working as they tread water or sink slowly and wait for something good to happen. Even if survival is your goal, past methods won’t work. Running your company the same way you always have will result in failure. The successful will make tough decisions. What difficult choices do you need to make right now to grow your business and make a profit?
You must do these 10 things right now:
1. Set goals to grow and make a profit now!
Stop lowering your prices and cutting costs. Start focusing on sales, customers, and making money. Write down your annual targets for revenue, direct costs, overhead expenses, and net profit for the next three years. This will get you aligned in a positive direction so you decide what steps you’ll need to take to achieve your profit goals.
