by George Hedley
Every construction company business owner wants to charge a higher price for their 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 at prices 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 contracts at your price or higher than your competitors?
It is what it is!
Perhaps you are starting to realize that it’s not what it was. The new economic reality is here to stay for at least 3 to 5 years. If it hasn’t hit you yet, get ready. Just a few years ago you could do a pretty good 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 doing a good job, 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 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. At that time there was not a lot of competition and getting work was relatively easy. Through my business contacts, I could find a nice job to bid, call the customer, meet them, get a set of plans to bid, do the take-off, estimate the job, and then turn in my proposal with a reasonable mark-up on it. A few days later I would call to see if I could meet with the customer to review our bid. At the meeting we would negotiate the terms, inclusions, exclusions, and agree on a final price. Simple.
Low bid gets the job in public work.
In public works construction, the low bidder usually gets the job and there is little or no room for sales strategy or tactics. The best way to be the low bidder and awarded a 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 tight without gaps in scheduling, productivity, conflicts, or quality. This can only be accomplished with diligent leadership, accountable management, and ongoing training focused on productivity and efficiency.
Now you are in the sales business!
In private work, it takes a lot more than just 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 in the construction business. You now have to also be in the $ALES business!
Estimating and bidding used to be the only sales tactic you 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 your customer 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 guarantees
- Be the specialist or 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 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 you are the right choice
- Be aggressive following up on proposals
- Show appreciation for the opportunity
- Have a trusted customer relationship
- Do whatever it takes
- Meet customer’s goals
- Give customer 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 because it doesn’t matter which gas station you visit because they’re all the same. The construction business is the same. It doesn’t matter which contractors customers use. Customers generate bid lists of 4 to 6 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 different or value-added to meet their customer’s specific needs.
Can customers really tell the difference between your company’s bid proposal and your competitors?
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 or specialist 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 together 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 your customer meet their goals, make more money, increase sales, grow their 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 three to five reasons why you are the best choice for your customer to award this contract, what will you do to prove your company is the best choice? 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 completed projects similar to the one you are bidding on. Include a draft schedule showing how you can help your customer complete the project ten to twenty percent faster than a normal contractor can. 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 they will not get with another competitor.
What’s your bidding strategy?
After you have established reasons why customers should hire your company, now it’s time to find jobs to bid where you can be successful. Your overall estimating and bidding strategy is to get enough signed 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 versus 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 insure 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 insure 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 to not waste your time bidding jobs you can’t get or don’t really want. Always insist you have a chance to meet with the decision maker to present your proposal. Interview your customer before the job goes to bid to ask them some tough questions including:
1. Will they negotiate?
2. Number of other bidders?
3. Who have they awarded the last several jobs to?
4. Chances the job will be built?
5. Does the job have funding?
6. Can you present you bid in person?
7. How will the bids be reviewed?
8. Can you get a meeting after your proposal?
9. What is the most important selection criteria?
10. Who makes the final decision?
11. If all else is equal, what are the chances we have to 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 you and ask you to meet and present your proposal in person. Without a meeting, you 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 for your customer 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 that sells the many reasons why they should only consider hiring your company. There are many ways to entice customers to meet with you. Giving them a reason to meet is an most important concept 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.
ABOUT THE AUTHOR
George Hedley is the best-selling author of “Get Your Business to Work!” As an entrepreneur, popular speaker and business coach, he helps business owners build profitable companies. E-mail: firstname.lastname@example.org to request your free copy of “$ure $trategies To $urvive A $lowdown!” or sign up for his free monthly e-newsletter. To hire George, attend his “Profit-Builder Circle” academy or be a part of an “Executive Roundtable Group” call 800-851-8553 or visit www.hardhatpresentations.com.
George Hedley HARDHAT Presentations
Email: email@example.com website: www.hardhatpresentations.com
file: article – EMWLLL 7 – Margins, Mark-Up And Making Make More Money!