by George Hedley
Bid-Hit ratio is the rate at which you successfully bid or propose on projects. For example, a 5 : 1 Bid-Hit ratio says for every five jobs you bid or propose on, you are awarded one. Do you know what your Bid-Hit ratio is? Do you keep track of it? How do you use it?
Whenever I present my "Estimating and Bidding Strategies That Work" program at conventions or companies, I always ask everyone what their Bid-Hit ratio is. I have observed that well over 50% don't have a clue what their ratio is. Less than 25% know and track theirs. To me, this is like driving a car blindfolded. Trying to go somewhere without a clue where you are headed!
In order to determine how many jobs to bid, what type of jobs to bid 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 projects you bid on. Track it by each customer you bid to. Also track by job type: large versus small, local versus out of town, commercial versus industrial, bid versus. negotiated, plans & specs versus design-build, etc. 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, you don't often succeed. This simple tracking system will help you determine which jobs to bid and which jobs not to bid. 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.
The Right Ratio
I have surveyed over 10,000 companies to determine what a good Bid-Hit ratio should be. The results vary from 1.5 : 1 to a worst case of 35 : 1. Which is the best ratio for you? Obviously, the lower the ratio, the better. But, the right ratio is what works for your company.
Companies who negotiate lots of work tend to have lower Bid-Hit ratios. They also require additional overhead expense marketing, pre-construction services, customer development and public relations. Companies who obtain most of their work from public works, tend to have higher Bid-Hit ratios. But, they usually have more estimators which offset fewer marketing dollars needed. The trade-offs usually balance out at the bottom line.
"Bid-Hit" Ratios Revealed
See how you compare to the averages observed around the country.
General Contractors Bid-Hit Ratio
- Public Works 6 : 1 to 10 : 1
- Private Bid Work 4 : 1 to 6 : 1
- Negotiated Work 2 : 1 to 4 : 1
Subcontractors Bid-Hit Ratio
- Public Works 7 : 1 to 11 : 1
- Private Bid Work 4 : 1 to 6 : 1
- Negotiated Work 3 : 1 to 4 : 1
The right Bid-Hit ratio is what works for your operation. 35 : 1 is too high and 1 : 1 is impossible in today's competitive market. The highest reasonable ratio for public works should not exceed 10 or 11 : 1. Higher than 11 : 1 costs too much to bid and won't provide a reasonable profit. For private work, I recommend to strive for a 4 : 1 ratio or less. This can be accomplished by pre-qualifying your customers before you bid to insure you are on the right bid list.
The key is to track and know your Bid-Hit ratio. With an accurate history of your results, you can determine which road you want to take. Keep your eyes open, look for ways to improve your Bid-Hit ratio and hit your target every time.
George Hedley owns a $75 million construction and development company and
Hardhat Presentations. He speaks to companies on building profitable businesses,
leadership, and loyal customers. He holds 3-day in-depth "Profit-Builder
Circles" open to construction company owners in an interactive roundtable
format every 3 months. His "Profit-Builder System" includes proven
tools to always make a profit, build equity, create wealth, win profitable
jobs, motivate your people, and enjoy the benefits of owning a profitable company.