The great news is that the construction industry is booming. With lots of opportunities come lots of competition and pressure on estimators to accelerate the bid process. But in reality, you should be careful to avoid winning jobs that could expose your company to unnecessary risk. From a rushed estimator making take-off mistakes to not pairing training with experience, the estimating landscape is littered with potential landmines and pitfalls.
For example, do you ever want to win the bid you spent the least amount of time preparing? Is your business winning the right work for your special skillset? Overzealous efforts to chase more projects that aren’t necessarily profitable is not a great strategy. To help you navigate around these issues, let’s start by reviewing your approach to bidding.
Improve Profit Margins by Being Selective
Many contractors fail to recognize they have an issue with not being selective enough in the bidding process. Are you landing work in the right market, business segment, or geographic area? The hard truth is that no one business is really good at everything all the time. The risk of not being selective is that you could put your firm’s reputation at risk. Will customers trust you if you fail to deliver as promised?
For example, some contractors build new homes while others specialize in remodeling. In down economic times, the remodeling specialty might serve you better. By slowing down and being patient with your bidding process, you can highlight your strengths to beat the competition.
Bid What You Do Best
It may seem obvious, but bidding what you do best should be your rallying call. It is the simplest approach to improving your odds of winning the most profitable construction work for the long haul. Some experts say that companies that offer specialized services win almost twice as many bids when compared to firms offering general construction services.
Ready to ace this strategy? Let’s look at some examples. A concrete contractor could specialize in decorative concrete. Guess what? They can charge more for expertise and quality by serving a particular segment. There are a wide-range of options for specialization. Some contractors focus on second-story additions, kitchens, and bathrooms, or develop an in-depth knowledge of how older homes in a particular neighborhood are constructed. Consider these specialization categories:
- Government jobs
- Hospitals and medical facilities
- Schools and universities
- Renovation and adaptive reuse
- Sustainable building
Another way to accomplish this is to consider obtaining special security clearances, certifications, and training for your team. If you’re still stumped on how to pick the best projects for your business, here’s a simple formula:
- Review and calculate percentage of profits from all jobs in the last year
- Sort the list of jobs from most profitable at the top to least profitable at the bottom
- Only take leads for work based on the top three most profitable jobs
Bidding and Winning the Right Work
As discussed here, your business should strike a balance between bidding and winning enough work and the right work. When you stop trying to be all things to all people or bidding every job in your local plan room, your business will likely thrive. Now is the time to take a step back and focus on the right projects to maintain a profitable business.
Want to take a more in-depth look at this issue and other estimating pitfalls and learn how to remedy them? Download On Center Software’s white paper, Overcoming the Pitfalls of Estimating. Get strategies now to elevate your business outlook.