How to Bid Smarter, Not Harder

When construction work is plentiful, there’s more than enough projects for every general contractor, subcontractor and supplier in town. All you have to do is wait for the continuous supply of requests for proposals from your customers. Then download the plans, do your takeoffs, submit your bids, and wait for results.

With this estimating effort, odds are you will get awarded enough jobs to hit your sales revenue goals, generate enough margin to cover your overhead, and keep your crew busy. This simple, low-bid estimating strategy will keep your pipeline full and your field busy when opportunities are abundant. And because there are lots of jobs to bid, you don’t need to implement a focused estimating and bidding strategy or be selective in what you bid to win enough work. But will this effort help you hit your profit goals?

My recommendation is to seek higher-margin work against fewer competitors. Doing this requires a strategy to better target customers and projects to win work that involves more than just low prices. Simply bidding a higher volume of projects is never the way to grow a successful construction business and make more money. You won’t increase your yearly net profit by bidding the minimum against multiple competitors who only sell by low price.

Bidding on projects with open bid lists wipes out your chances of making high margins. The only way to higher margins is bidding the right customers and projects, with the right profit margin potential and against the right competitors.

The long-term solution is to seek better customers, aim for better projects, and focus on better opportunities. Improving your bottom line means making the decision to find customers who value service, quality, professionalism, experience and trust.

Seek the Customers & Projects You Want

To increase profitable sales against less competition at higher margins, you will have to implement an estimating and bidding strategy to get off the low-bid treadmill. By focusing on projects and customers you want, versus open bid lists, you will improve your profits.

Would you rather build your business doing repeat construction for hospitals and universities, or bidding on low-price shopping centers or public projects against every low-bid contractor in town? Or build high-end custom homes versus low-price remodels? The choice is yours to make as you fill your pipeline with either low-price or high-profit work.

Seek Quality over Quantity

Construction companies continue to waste lots of time bidding on jobs they can’t get unless they are really low priced. This doesn’t help them make an above-average profit margin.

When your estimating department is busy bidding too many jobs you can’t get without a low price, they generally pass on the good jobs they should be going after. Deciding to focus on projects where your company is the best choice, in specific locations, for certain types of customers, with specific qualification requirements, and a reasonable markup rate, will improve your bid-hit-win ratio dramatically.

Seek Projects with a High Barrier to Entry

Many customers demand more from their general contractors than low prices, good work and on-time performance. These customers typically rely on a few qualified contractors to do all of their work. Generally, the harder it is to get on a customer’s bid list, the fewer the competitors and the higher the profit margins.

Many customers only hire recognized experts who specialize in a specific type of project. Other customers may demand specialized skills, design-assist capacities, engineering services, intense training standards, or multiple certifications from manufacturers, safety programs and specified product providers.

Seek Loyal Customers Who Trust You

Another option to increase your margins is to develop loyal customers who award you at least a third or more of their regular work. Repeat customers award you contracts when you’re the low bidder. Loyal customers try to give you their work whenever possible because, together, you have developed a trusted relationship.

Many contractors do good work and finish projects on time. Being a good contractor is expected, but it’s not enough to build loyalty against a field of too many competitors trying to beat your bid. It takes a specific sales action plan to build customer loyalty.