Creating accurate, timely bids is one of the most essential components for any contracting or construction business. Nonetheless, how to bid on a construction job is not as straightforward as it may seem. Calculating the numbers, sorting through piles of data, and making sense of it all can be a daunting task.
It’s no surprise that creating an accurate and fair bid is something all contractors have had difficulty with at some point in their career. Whether it’s your first year or you have decades of experience, bidding can be one of the trickiest parts of running a successful business. Bidding can often seem like a gamble. You crunch the numbers, send it off, and hope luck is on your side. The truth is it doesn’t have to be a gamble. You can be calculated and intentional with every bid to ensure you are bidding at the right time, on the right jobs, with accurate numbers, to reliably secure profitable jobs.
This article will explore how you can upgrade your bids to be faster, more accurate, and more profitable.
Only 31% of all projects
come within 10% of the original budget.
43% of construction firms
prioritize immediate financial goals over organizational resilience.
60% of all contractors
are putting in higher bids due to stresses on the industry resulting in a more competitive landscape.
14% of all construction rework
may have been caused by bad data creating $88.69 billion in avoidable rework across all industries.
How to decide what jobs to bid for
Before any number crunching begins, it’s critical to understand which jobs are worth, or not worth, bidding on. It goes without saying that you don’t want to waste time bidding on a project that won’t be profitable. However, the trouble begins when you deem certain jobs profitable, which then turn out to be over budget and costly in the end. This is where the power of job costing and evaluating previous jobs becomes evident.
In fact, job costing can answer nearly all the gray areas around bidding and budgeting. Data is the name of the game here. Analyzing and reviewing past jobs will help make sense of profitability issues and uncover where inefficiencies exist or where unnecessary money is being spent. Referring back to historical data from past jobs will make predicting costs for future or similar jobs much easier and will provide a foundation for creating accurate bids.
For example, a contractor could find themselves in a position where specific jobs regularly incur unforeseen costs. Consistent job costing will help identify negative patterns and shed light on when and where they are emerging in your projects. Once you can pinpoint these costly patterns from specific jobs, it’s worth evaluating whether or not you still want to pursue those types of jobs.
However, if you are new or just starting out, you might wonder how to bid on a construction job when you don’t have any historical data to reference. This is why you must begin recording detailed information on your jobs as soon as you get them. When calculating costs, you need to account for as much as possible. If you are trying to determine labor costs be sure to account for taxes, and the all-in cost of employees, including insurance, workers comp, benefits, and anything else you spend on your employee’s time. Do not skip out on what might seem as minor details as well, such as drive time to and from a job.
The more granular you can get with tracking and accounting for costs, the better your job costing will be. The result will be a personalized and comprehensive bid that will go a long way towards setting you up for a profitable project. To do this properly, you must have the right tools to back you up.
A business management tool makes capturing and organizing data as accessible than ever. The industry seems to agree with this sentiment as 70% of contractors feel that using technology such as software can improve productivity. With that said, it’s estimated that up to 95% of all data captured goes unused. Consequently, contractors must carefully choose software that will sort and present data in a way that is actionable and meaningful. For example, many business software out there will tell you how you did at the end of a job, while others will help you set up budgets. Ideally, a contractor should seek software that can do both.
How to create an accurate bid
When determining how to bid on a construction job, every contractor runs through the balancing act of bidding high or low. If you bid too high, you may not get the job. In contrast, if you bid too low, you can put yourself in a position where you are not making enough money to stay afloat, or you may even be losing money. Creating an accurate bid priced reasonably but lucratively is an art form all its own.
If you have historical data available from similar jobs in the past, it’s essential to review this data regularly. Did you underperform? If so, why? Did you overperform? If so, you need to determine precisely where you were able to improve efficiency or cost-effectiveness to apply that approach to future jobs.
Once you know your numbers and can speak confidently about the performance of past jobs, it’s time to evaluate the job site. Take the time to assess the overall condition and try to identify any potential problems that could arise so that you can factor those in and adjust your pricing and estimates accordingly. For example, will the site be challenging to work in? Will it be hard to access? Will other crews be working on the site? Depending on the answers to these questions, your costs and bid could change drastically.
Above anything else, make sure to over-communicate and seek clarification whenever possible. Assumptions always lead to disputes and lost revenue. If something isn’t clear on the project or expectations, it’s your job to step up and get the information needed.
Gather as much information as possible and channel that into a well-thought-out proposal summary that includes a scope of work, any plans or permits needed, expectations, roles and responsibilities, and an evaluation/inspection summary. Again it’s critical to be honest, and transparent here.
From here, ensure you are taking meticulous measurements as being inaccurate here can throw off your materials and labor estimates and, in turn, will cause your job costing to be off. This will cause future bids to be over or underestimated.
Consider using takeoff software to ensure that correct measurements are taken to further strengthen your evaluation and bid. Using takeoff software will help calculate precise quantities, dimensions, and materials needed for a project helping build a more robust proposal with accurate numbers to back it up. Traditionally a laborious task, the days of performing a takeoff by hand with pencils are over.
For more on how to bid on a construction job refer to our complete step-by-step guide on developing a properly vetted proposal to ensure you stand out from the competition and win more jobs.
Tracking & following up
Once a bid is developed and submitted, you should continue to keep an eye on it. A process for following up and tracking your proposals can help you stand out as a professional and may just win you the job.
Use a follow-up process to increase visibility and communication. It can help you differentiate yourself and shows that you care. Following up can reveal valuable feedback and help you make revisions or changes to make yourself more competitive. If you didn’t get the job, following up will allow you the opportunity to gain a better understanding of why.
Tracking all bids and setting reminders to reach back out will go a long way in keeping a steady stream of business and helps you to be able to calculate and evaluate your bid-hit ratio. The bid-hit ratio is the number of bids won compared to the number of bids submitted and can be used to determine how effective your bids are.
You can gain valuable insights from evaluating your win rate. Gain a better understanding of which projects have the highest success rate, how many bids you should have at any given time, and what clients are awarding the most contracts. This can help you determine and refine who your target market is so you can improve marketing and promotional efforts and will help segment which clients you should be pursuing. You can bid more effectively from this information and increase your chances of winning more jobs.
If you want to start bidding more effectively incorporate the following factors into your bidding process:
- Use good data
- Consistently job cost
- Track & follow up on bids
- Utilize software
It’s imperative that you have good data and have a system in place for acquiring, tracking, and evaluating that data. When taking the time to figure out how to bid on a construction job, you need to know your numbers and use them to make honest bids on jobs you are equipped to handle. Be transparent and honest, and remember to never sell yourself short.
Taking the time to be accurate and honest with your bids will transform your bidding process. Software like Knowify exists to reduce repetitive tasks and increase efficiency in all areas of the construction proposal and project management process.