Know When to Bid, When to Pass
For contractors who earn most or even part of their revenue through bidding, there are some secrets to being more effective.
1. Give a range. George Monzures, 38, owner and founder of Scottsdale, Arizona, general contracting firm Monzures Development, says the market downturn has made customers more price-conscious than ever. He prefers working with a modified guaranteed maximum price, or GMP, bid because it gives a range of pricing for many line items. "It has a safety level for the owner and the contractor, especially if there are some parts of the job that still need to be decided on," he explains. "If the owner isn't sure what type of granite will be used, you could have a $50,000 to $60,000 differential."
2. Let history repeat. Nick Ganaway, an Atlanta contractor and author of Construction Business Management: What Every Construction Contractor, Builder & Subcontractor Needs to Know, advises keeping historical job costs on hand so you can easily refer to past projects that were similar in scope and materials. That way, you can also see where your pricing flexibility might be.
3. Inspect the site. "We once bid on a job that had a large utility pole where the driveway was supposed to be," says Ganaway. "We estimated $5,000 to move the pole, but it turned out there were some heavy-duty wires attached to it. It ended up costing us much more than that, and we had to eat it." He says a site visit would have revealed the wiring attached to the pole.
4. Be picky about pitching. Monzures is wary if a prospect is collecting many bids or asks for too much upfront work before a commitment is made. One prospect wanted him to do $20,000 worth of engineering specs upfront and then said they would try to get him in to meet with the decision maker. "Companies that do [upfront work] aren't in business for very long," he says. Instead, Monzures puts more time and effort into requests for bids that come from valued referral sources, since that type of lead is more likely to be interested in doing business with companies that have a track record of doing good work.Gwen Moran is co-author of The Complete Idiot's Guide to Business Plans. Reach her at firstname.lastname@example.org.