Obtaining Projects: the Winning Formula

Successfully tendering for and winning projects is the key to getting work through the door. Or perhaps work is coming to you through word-of-mouth or repeat business. Whatever the case, obtaining and completing work should be a contractor’s top priority if he or she is hoping to run a successful business.

This process can be broken down into 3 phases:

  • Phase 1: Obtaining work
  • Phase 2: Constructing the obtained work
  • Phase 3: Managing and reviewing the work

The faster and more efficiently you progress through the phases – whilst ensuring you deliver quality work on time and within budget – the more profitable your business will be. Inn this article I want to take a look at some important aspects of Phase 1.

Engaging with Potential Customers:

The more potential customers you engage with that fit your niche service and product offering, the more likely you are to obtain work (in sales terms, you would call these ‘qualified leads’. What makes these customers more likely to build with you?

  • You have built a relationship with them – whether this is via mutual connections, through recognition of your work on other projects, or through traditional advertising measures that have led to a well-handled enquiry
  • They have a clear goal or need – or at the very least they have a ‘want’ to build on
  • They have a deadline to work to – this might be a phase of a project that needs completion before the customer can move onto another phase (i.e. opening a venue, leasing premises, selling property, or getting their own customer into their new premises, etc.)
  • They have the ability to pay – a potential customer who is waiting on funds to eventuate is still a potential customer, but one less likely to build with you as soon as another who has the funds ready to go

If your potential customer ticks most of the boxes above, they are more likely to be in the position to do business of you and worthy of your time and efforts to obtain their business. Building on relationships, going the extra mile and following up without being pushy are all positive steps towards getting these customers across the line. The more relationships you can cultivate with potential customers such as these, the more work you are likely to obtain.

The above approach – if done well – should also afford you the opportunity to price your projects at a point that is competitive yet profitable. This is very important to running a successful business. Pricing work too low is simply unsustainable, whereas pricing too high will see you out of the running not only for the project you are bidding on, but also future works. But remember, despite what we may believe, cost isn’t always the deciding factor in who ultimately wins the bid for the project – at times you will find a customer just wants the job done ASAP, wants the reassurance of dealing with a known quantity and reliable end product and service, and is happy to work with you as a single select contractor that ticks all the boxes. This is made all the more likely if you have managed your initial dealings – and thus your relationship so far – well.

Pricing & Estimating

How can you ensure your pricing your jobs in that sweet spot between profitable yet competitive? Here are a few general rules to consider:

  • Give considerable thought to who you have estimating your work and how: Whilst technology has improved dramatically and we have myriad of CAD software and estimating programs, there will always be a level of human interaction (and therefore risk of human error) involved. Consider carefully the programs you use, the estimating staff you hire and the training you offer. This very factor could make or cost you tens, if not hundreds of thousands.
  • Know the cost of running your business and completing your projects: The financial side of your business should be monitored and reviewed constantly – and this includes all your overheads. Similar to accurate project estimating – knowing your running costs and how they should be allocated to each project to ensure recovery is highly important. If you ignore this aspect of pricing a job, you could be robbing yourself of what little profit margin you stand to gain in completing the project in the first place.
  • Know your breakeven price and profit margin: And this includes all the variables that will cause you to increase or decrease your margin – such as how much work you have on, how many other competitors are bidding for the same project, the kind of relationship you have with the customer, etc. To price a job without knowing these factors is to essentially go in blind – a potentially costly mistake.

If your company size or projects require the services of an estimator, here are some areas for which the estimator will be responsible:

  • Quantity surveying
  • Unit pricing
  • Overhead recovery costs
  • General conditions – or “soft” – costs
  • Working with you to determine the appropriate profit margin for a project
  • Working with you to determine appropriate terms and conditions for a project

Tendering or Bidding for Work

Here are four key tips for this crucial stage:

  1. Be selective. As we have discussed before, don’t bid for everything you set your eyes upon. Not all projects will be worth your while. Do your research, look at your capabilities and current workload, and bid accordingly. If you do decide to bid for a project you don’t really want, bid higher. If you are awarded the job, you can use the extra revenue to subcontract elements of the project if you wish, however, think long and hard about whether or not you want this to be your approach and if you have solid connections to pull this off. Remember, declining to bid on something that is a poor fit is usually a better option.
  2. Clarity is key. You must be crystal clear on not only the costing but – perhaps more importantly – the terms and conditions under which you tender or bid for a project. This is possibly your most critical chance to set out the conditions under which you want to get the job done. One area in which you want to be really clear is costing change orders. This is one area of the bidding process in which – if done well – you can minimise your risk of losing out financially, and instead, make any changes profitable.
  3. Uniformity and language are so important. Using tried and tested templates to set out your bid conditions clearly will minimise the potential for human error, where one missed element or miscommunicated condition could end up costing you precious resources or profits. Similarly, clear and – where appropriate – legally binding language will remove any ambiguity that can be contested later.
  4. Determine your approach. All businesses are different. Some contracting companies will bid purely from a financial angle, with the bottom line and ROI being the main elements on which they build their strategy. Others will take a more unique approach and consider other factors such as environmental, historical, and even competitor-driven strategies. Whatever your approach, let it be a strategic, rational one.

Phase 1… of this process need not be fraught with rookie errors that can lead to sometimes very heavy financial pitfalls. By applying these common-sense tips to the way you engage your customers, as well as to your pricing, estimating and bidding processes, you can minimise risk while increasing your chances of getting the profitable projects you want.

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