Selling Your Company

As the construction industry begins the slow crawl out of the recession, many companies and contractors are increasing the number of bids they submit for residential projects. In fact, the competition is as fierce as it has ever been. Obviously, everyone wants to present the winning bid, so what can owners do to increase their bid-to-business-award ratios? 

The answer is to “sell the company” to buyers in order to stand out and apart from the competition. That means adopting a successful strategy that includes creating rapport and understanding buyers’ needs, preparing accurate bids, following up with buyers after the bids are submitted and asking for the sale. Leaving this process to chance is an approach that may result in rapidly decreasing instead of increasing profits.

Identify Company Strengths

Selling the company to the prospective buyer is not a literal act. Rather, it means understanding the market and the competition to provide bidders with information they need to create distinction. However, this advantage only is useful if owners understand the strengths of their companies and how to use those strengths to their advantage. 

For instance, if a company recognizes that their bids are higher than the competition because they use higher-grade materials or because of the specific qualifications and expertise of the employees, it’s crucial to explain this in the bid and outline the benefits of differences. There is a reason why upscale department stores charge higher prices for their clothing as compared to discount department stores. Acknowledge and use these strengths to win the jobs. 

Understanding Costs

Unfortunately, many owners and contractors cannot produce accurate bids because they lack the most critical component of the entire process: an understanding of the true costs of doing business. There are other costs to consider besides the direct costs (such as labor and material). These include “forgotten items” like rental equipment, mistakes, permits and licensing. 

Additionally, for fixed costs, such as the overhead recovery absorption rate, many ne-glect to determine the company’s specific fixed costs. Instead, they use either the standard industry rate or market practices to calculate these costs. This approach can decrease the profitability of the project. Then, there are the consumables; it can be difficult to estimate how many screws, nails, saw blades and sandpaper will be used on the project. 

Successful construction companies realize that consumables represent a specific percentage of their sales revenue. Until all of these costs are captured accurately in the bidding process, companies will not realize their full profit potential. 

Profit Goal

Another area of concern in the bidding process occurs when owners and contractors neglect to have a desired profit in mind when calculating a bid. Instead, they write up bids believing it is acceptable to simply take whatever is left over as the profit. A more effective strategy is to determine a target profit objective and build this amount into the bid. 

Most contractors are in business to make money and therefore should not be ashamed of including profitability in the bid process. However, the profit objective needs to be realistic and competitive, which comes only as a result of understanding the true costs and breakeven point of the business. 

Due diligence

When creating bids, it’s also important to engage in due diligence before submitting the proposal to the prospect. Here are some suggestions on what to research and investigate about the proposed project:

  • The requirements and specifications of the project as well as the submission process;
  • The buyer’s credit history and rating;
  • liThe payment process and schedule; and
  • The environmental, zoning and community/neighborhood issues.

Construction companies are not banks. It’s important to include benchmarks in the bidding process for draws and payments to cover all the project expenses in a timely manner. This is why it is a good practice to examine the client’s credit history and rating to determine if there are prior payment issues. Additionally, research environmental, zoning and community issues, such as whether or not equipment can be parked on the street, if the structure meets specific requirements or if there are any restrictions with material deliveries. These items, if not addressed in advance, can turn into added costs.

Follow-Up Communication

The bidding process is not over after the bid is submitted. In fact, this is the time to follow up with prospective clients to address concerns and questions. Most buyers crave communication and information from contractors. This type of exchange helps position contractors as experts and builds buyer confidence. 

It’s the contractor’s responsibility as a bidder to convey the advantages of the bid as compared to competitors’ bids. Taking the time to communicate to the buyer prior to, during and after completion of the project demonstrates the contractor’s concern for providing reliable and timely service.

Ask For the Sale

The No. 1 reason why contractors do not get jobs is because they neglect to follow up and ask for the order. In other words, they submit a bid and leave it to chance, believing there is nothing else they can do to win the project. 

Yet, the most crucial step of this process is following up with the buyer and asking questions that demonstrate an interest in and understanding of what the buyer needs. Any time a contractor submits or sends a prospective client something, there is an opportunity to engage in dialogue to answer questions, address concerns, reinforce the company’s expertise and demonstrate value-added services. If contractors do not take the time to do this, the buying decision might be based solely on price or on the last call received by the prospective customer. 

When there aren’t any objections or questions, many contractors just say, “Okay, I’ll wait to hear from you.” A more effective approach is to ask for the sale. For example, ask, “If we can complete your project within three months with no extra charges guaranteed, can you think of any reason why we shouldn’t proceed?” If the prospect answers, “no,” the contractor just won the business. If the prospect answers, “yes,” it represents an opportunity to address the prospect’s objections and ask for the business again. 

Who is the Expert?

Perception is one topic not often addressed when it comes to learning how to increase bid-to-business-award ratios. Many contractors do not see themselves as true professionals. In other words, because they aren’t doctors, lawyers or scientists, they do not consider themselves “experts.”

It’s time to abandon this misconception and recognize the specialized expertise that a contractor brings to the table as a benefit to customers. In other words, it is important for owners, employees and contractors to recognize their knowledge, experience and professionalism as a competitive edge. Just like most people don’t tell their mechanics how to repair their cars or their dental assistants how to clean their teeth (because they are the experts), potential buyers do not want to tell contractors how to build a structure. They want to hire the best contractors for the best price. When buyers are educated on why a particular company is better than all the rest, they are likely to make a positive buying decision. 

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