This is the ninth in our 2009 series, "Earn More, Work Less."
Every construction company business owner wants to charge a higher price for his services and products. And especially today, I'm sure you are looking for the magic ingredient that will give you more jobs at your price. But why should customers award your company a contract?
In this tough economy, there are less jobs to bid and more competition. Many of your competitors are pricing jobs lower than their costs. They are trying to keep their doors open and crews busy, hoping something good happens soon. Ask yourself this question:
Why should customers award your company construction contracts at your price or higher than your competitors?
It Is What It Is
The new economic reality is here to stay for at least three to five years. If it hasn't hit you yet, get ready. Just a few years ago, you could do a decent job and get lots of work from your customers. But today, your old sales strategies won't get you enough work to stay profitable. It takes more than producing quality work and bidding projects per plans and specifications to win contracts. Now, you must do more and offer something different than your competitors to win construction contracts. You need to renovate, innovate, change, improve and upgrade your estimating systems, bidding strategies, proposal format, presentation methods, customer contact approach, marketing plan and sales tactics to be successful today.
I started my construction company in 1977. There was not a lot of competition at that time and getting construction contracts was relatively easy. Through my business contacts, I could find a nice job to bid, call the customer, meet, get a set of plans to bid, do the take-off, estimate the job and then turn in my proposal with a reasonable markup on it. A few days later, I would call to see if I could meet with the customer to review our bid-we would negotiate the terms, inclusions, exclusions and agree on a final price. It was all simple.
Low Bid Gets the Job in Public Work
In public works construction, the low bidder usually gets the job, leaving little or no room for using sales strategies or tactics. The best way to be the low bidder and awarded a construction contract is to have the lowest possible costs and the most efficient construction management and field operation possible. To keep your costs lower than your competitors, your field crews must be lean, productive and well-trained. There must be no downtime, job problems, quality issues, coordination conflicts or mistakes. Your subcontractors and suppliers must also be supervised and managed tightly without any conflicts or gaps in scheduling, productivity or quality. This can only be accomplished with diligent leadership, accountable management and ongoing training focused on productivity and efficiency.
You Are in the Sales Business
In private work, it takes a lot more than bidding and negotiating to win contracts. You've got to give customers a differentiating reason to hire your company. It's not just about the price, inclusions and exclusions. Now there are too many competitors who can do the same job as your company and will cut their bid below their cost to get a job. To win more contracts at your price, you must face reality-you are not only in the construction business, but you must also be in the sales business!
Estimating and bidding used to be the only sales tactic needed to win jobs. Today, that's only a small part of the process. Sales involves more than pricing jobs, delivering bids and negotiating with the decision maker. It is about giving customers what they specifically want on each job you're bidding. You need lots of sales strategies to make a positive difference in your customer's decision making process:
- Create the perception of best value
- Offer completion, service and quality
- Be the expert in the project type
- Professionally present your company
- Use cutting-edge technology
- Be well-financed and bondable
- Have well-trained foreman and crews
- Have large crews available to man the job
- Be able to finish the job faster than competitors
- Offer more than the minimum required
- Understand the contract terms and project
- Understand the project goals and deadlines
- Offer value-added engineering budget ideas
- Build confidence that you are the right choice
- Be aggressive following up on proposals
- Show appreciation for the opportunity
- Develop a trusted customer relationship
- Do whatever it takes
- Meet the customer's goals
- Give customers what they want
What Differentiates Your Company?
Imagine you are driving down the freeway and need to fill up your gas tank. Do you look for the best quality, service or price? No, you look for the closest gas station. It doesn't matter which gas station you visit because they're all relatively the same. The construction business is the same. It doesn't matter which contractor a customer uses. A customer generates bid lists of four to six or more contractors or subcontractors who are all equal in the customer's mind. Most of these contractors do a pretty good job with expected quality in an acceptable and professional manner. But what doesn't set them apart from their competitors are their proposals. They almost always bid the minimum required per plans and specifications and don't offer much difference or added value to meet their customer's specific needs.
If all else is equal, the only differentiating factor between your company and your competitors is the lowest price. What do you do to stand out from the crowd? To set yourself apart and charge a higher price, you must be different than your competitor. Differentiation can include doing more than your competitor for the same price, being the expert in a particular type of work or project, adding more value than required or having a deep loyal trusted customer relationship.
Give Customers a Reason to Hire You
The best way to win a contract is to have a relationship with your customer that goes beyond doing past projects for them. It is based on trust and friendship developed over time. It is built by spending lots of time together having fun fishing, golfing or doing other activities not related to work.
If you don't have this kind of loyal customer relationship, you have no other choice but to differentiate your company from competitors. Low price is one way and creating and offering real differences is another. Before you bid the next project, ask yourself why the customer should hire your company for this project. Are you better or faster? Do you have more qualified trained people who know how to perform this type of work? Can you help your customer make more money?
As you create a list of reasons the customer should hire your company for the project, think about what you offer that no other competitor offers. Think about what else you can do for the customer that is not required by the scope of work. Think about how you can help the customer meet goals, make more money, increase sales, grow his/her business, build a better project, reduce risk or have more fun while working with your company. I know what you are thinking: "We don't get paid for all those extra things!" If you want to win jobs today, you must do more than the minimum.
After you create a list of reasons why you are the best choice for your customer to award this contract, what will you do to prove this to the customer? In your proposal, you can include a list of past projects where you beat the schedule and delivered results that made the customer excited about your company (this is more than the standard reference list). Include pictures of similar projects completed. Also include a draft schedule showing how you can help your customer complete the project 10 to 20 percent faster than a competitor. Schedule a field trip with your potential customer to other jobsites where you can show them how you solved difficult problems. Give them a list of added services your company will provide if awarded the job. Offer a guarantee such as completion date, punch-list completion, quality or added warranty that they will not get with a competitor.
What's Your Bidding Strategy?
Once you have established reasons you should be hired, you must find jobs to bid where you can be successful. Your overall estimating and bidding strategy is to get enough signed construction contracts at your price to cover your job costs, overhead and then make a profit. This requires several winning plans. The first strategy is to have a strategy! Many contractors bid any job they are offered to bid. They don't have a strategy that helps them decide which jobs to bid and when to say no. What's your estimating and bidding strategy?
Before agreeing to bid a project, create a list of questions to determine if you will have an excellent chance to win the contract.
1. Do you want to negotiate the project?
- How will you convince the customer to negotiate with you?
2. Do you want to be the select or only bidder?
- How will you implement this strategy?
3. Do you want to get the last look?
- How will you make this happen?
4. Do you know your bid-success ratio against your competitors?
- How do you keep track of your success vs. competitors?
5. Do you have competitors you don't want to compete against?
- How will you discover this information?
6. Do you have some competitors you will bid against?
- How will you ensure the bid list gives you a chance to be awarded a contract?
7. Do you have an ideal number of bidders you'll bid against?
- How will you ensure this happens?
8. Do you have a maximum number of bidders you'll bid against?
- How will you decide when not to bid a job?
Implement Your Bidding Strategy
To help you determine which jobs you have the best chance of winning, always pre-qualify your customers. Make it a policy not to waste your time bidding jobs you can't get or don't really want. Always insist on meeting with the decision maker to present your proposal. Ask the customer some tough questions before the job goes to bid:
- Will they negotiate?
- How many other bidders are there?
- Who have they awarded the last several jobs to?
- What are the chances the job will be built?
- Does the job have funding?
- Can you present your bid in person?
- How will the bids be reviewed?
- Can you get a meeting after your proposal?
- What is the most important selection criteria?
- Who makes the final decision?
- If all else is equal, what are the chances you will be awarded the job?
The main purpose of every bid is to get a meeting with your potential customer. Think of your bid as bait to get a customer to bite by calling and asking you to meet and present your proposal in person. Without a meeting, your proposal looks like the others, just a list of items on paper with a price attached to it. In a meeting, you can discuss the inclusions, exclusions, price, and present what your company will do that your competitor doesn't offer.
Remember, the purpose of your bid is to entice your customer to meet face to face with you and your project team. At the meeting, your role changes from just another contractor reviewing their bid to a producer of a dynamic presentation, which sells the many reasons why the customer should only consider hiring your company. Giving the customer a reason to meet is the most important concept for you to grasp. Make a list of five reasons customers need to meet with your company after you present your bid. Constantly call them to ask for meetings. Leave messages like these: "Regarding the bid we submitted last week, I have a way we can save you money, finish faster, make your job easier, improve the quality at no extra cost, give you better payment terms, help you with supervision, do more for less, etc." If you can't give customers a reason to meet with you, you can only hope your low bid is low enough to win a contract.
Winning contracts at your price is not easy-it takes more work than it used to. Now you must also sell and present your company as the best choice. This takes a restructuring of your time and commitment to excellence. Learn how to upgrade you presentation, improve your proposal, be more aggressive with follow-up and don't take "no" for an answer.
Construction Business Owner, September 2009