George Hedley works with contractors to build profitable, growing companies. He is a professional construction business coach, popular speaker and best-selling author of Get Your Construction Business to Grow & Profit!, which is available online at hardhatpresentations.com. To sign up for his free monthly e-newsletter, get involved in a BIZCOACH program or get a discount for online classes at hardhatbizschool.com, email email@example.com.
Providing free construction estimates is a good marketing and sales tool that seems to attract a lot of potential contracts. But providing free conceptual estimates for almost anyone and any type of project is not a good use of time or money and produces a low return on investment. Proposal-win ratio for these potential projects is less than five percent, as most never come to fruition or get built. Lots of people kick the tires and think about buying, remodeling or constructing buildings without the funds, resources or commitment to make it happen. And when optimistic real estate brokers encourage their clients to consider building or remodeling, potential construction customers get optimistic, too, and seek help determining costs for potential projects from contractors willing to work for free, without compensation or firm commitments.
To solve this problem, estimate less jobs, win more work and improve your proposal-win ratio, make some big changes in how you do business. In order to get firm commitments from potential customers, insist that you always must meet with project decision makers to review their project needs and your qualifications and proposed contract terms before you agree to do any work preparing estimates for them.
This decision reduces your estimating workload and eliminates the potential wasted time on dead-end projects. You should demand letters of intent from project owners that outline your pre-construction services and fees for helping them through the design
process and the project build itself.
To reduce your estimating workload, which can increase your proposal-win ratio on potential projects and get a higher return on your estimating budget, start by developing your step-by-step plan to win more contracts.
1. Project Targets
You must determine and write out your business development marketing and sales targets. Decide what type of projects on which you want to focus your marketing, sales and estimating efforts to get the highest return. Customers seek out contractors who are experts in the specific type of work they need done for their projects. When your website or brochure says you do all kinds of projects, you will never be perceived as the right choice for their special project.
2. Customer Targets
To increase your focus, you must determine the type of customers and specific customer targets you want to go after regularly. It is difficult to market to every potential customer in your area, but if you choose a specific customer type or industry, you can develop a plan to penetrate that market and become the recognized best-in-class contractor in your area of expertise.
For example, by deciding to become an expert in building food manufacturing facilities, it is easy to locate potential customers and become known in that industry as the preferred provider of construction services.
To determine how you want to do business, what type of customers you want to market to and what type of contracts you want, make a list of your targets.
- Customer types
- One-time customers
- Repeat customer potential
- Loyal customer with little or no competition
- Low bidder preference with unlimited competition
- Qualified list with expertise
- Performance and added services
- Technical or engineering requirements
- Safety and quality control
- Private customers
- Public and government
- Institutional and utilities
- Contract types
- Lump sum
- T&M/Cost plus/Unit price
- Industries or markets
- Specific customers
3. Customer commitment
In order to win more work and improve your proposal-win ratio, you must always ask for the order, rather than offer another free estimate or a lower price. Too often, contractors don’t clearly and specifically tell customers that they want the job. When you don’t ask, the answer is always no, unless you’re the lowest bidder.
Getting customers to commit to hiring your company involves a proactive strategy to inform customers that you want them to commit to hiring your company. By providing free estimating services, you are hoping your helpful attitude and fast service will be enough to win contracts.
You must insist on meeting with decision makers early in the process in order to present your company and get firm commitments from the customer.
When meeting with customers, present a convincing case why they should hire your company, and then ask the most important question: “What will it take for you to hire us now to be your contractor for this project?”
If they can’t or won’t answer this question, they are likely planning to get lots of other bids from competitors, will award the contract based on the lowest price or aren’t sure they want to commit to spending any money at this time. All of these hesitations are bad for your company. When you meet with potential customers regarding a specific project, ask them the following questions.
- Will you negotiate?
- What other contractors are you talking to currently?
- Who have they used as their contractor previously?
- What are the odds you will actually build this project?
- What’s the most important criteria you have in selecting a contractor?
- If all else is equal, what are the chances we have to be awarded the contract?
- Will you sign a letter of intent to hire us as your contractor if you are satisfied with our pre-construction services and help you meet your budget?
Present them with a simple, one-page letter of intent to hire your company as their contractor. In consideration of your commitment and time investment estimating, attending meetings and providing preconstruction services, you are asking them to also commit to working with your company.
If they are not fully satisfied with your services, they can cancel their commitment for any reason, including if the project final bid estimate doesn’t meet their budget. Many contractors also ask for a small preconstruction services fee if the fee is warranted or if the project is cancelled after you do the work.
By focusing on how you want to do business and asking for the order in a convincing manner, you can improve your proposal-win rate and reduce the time spent estimating construction projects you will never win.