Knowing how to successfully bid the right jobs is a unique art form in the contracting business. Poor bidding, can result in taking on projects that are financially challenging. Insufficient bidding can choke the business. Here is advice to help you take your bidding practices to the next level.
Bid-Hit Ratio
To bid, or not to bid? This familiar dilemma is notorious for keeping contractors up at night. As Construct Connect sums up: “Finding the right balance between bidding and winning enough jobs can be difficult. On the one hand, you don’t want to bid and win so much work that you can’t properly manage and complete the projects you’ve been awarded. You also don’t want too little work that you aren’t making any money and your workers aren’t staying busy.” Sound bidding strategies, according to construction expert Kendall Jones, are anchored in an analysis of the your bid-hit ratio:
Your bid-hit ratio is the number of projects you must bid to win one job. Understanding your bid-hit can help you how many projects you need to be bidding to keep your pipeline full and weed out the opportunities that don’t have a high probability of winning.To really make your bid-hit ratio work for you to maximize your bidding efforts you need to do an in-depth analysis. Sort the projects you’ve bid and group specific categories. Consider things like public versus private work, building type, scope of work, geographic location, contract size, and the general contractor or owner of the project. By categorizing and analyzing your bid-hit ratio, you get better insight into which types of projects to go after.
Following this method for categorizing and analyzing your bid-hit ratio, you may find, for example, that overall, you have a 6:1 bid-hit ratio, but your ratio for local public school bids is 4:1. This is an indicator that you have a stronger chance off success going after more school projects—and therefore should concentrate more on cultivating and bidding those opportunities.
Profitability Analysis
Of course once a bid is won, it actually has to turn a profit. Here again, taking time to record and analyze your results will help you increase profitability. Pros offer these pointers for scrutinizing profitability:
Make sure you are recording accurate job costs for materials, labor, and equipment. Compare your actual costs to your estimates and ask the following questions:Were your estimates for labor and materials accurate? Did you include all the job costs in your estimate including like bonding, supplies, and equipment?Did you factor in your profit and overhead mark-up correctly?
Was your contingency budget adequate? If your profit margins on projects aren’t what you expected there are two possible reasons. Either your estimates are too low, or you are having productivity issues on the jobsite which is causing job costs to be higher. Regardless of which is the cause, you should work to resolve the issues to get your profit margins where they need to be.
Always Be Bid-Ready
With clarity about your greatest chances for success in hand, you can bid with confidence—but are you at the ready to do so, efficiently and quickly when opportunity strikes? With Colonial Surety on your side, you can always be ready to bid—and do so faster than the competition too. Let’s connect and talk about The Partnership Account® for Contractors. Once qualified, builders position their companies to win with:
- a surety line of credit—in writing;
- a private digital dashboard;
- a daily snapshot of single and aggregate limits
- the ability to update work on hand—and increase your aggregate.
All this, plus, we give you power of attorney to issue your own bid bonds! With The Partnership Account® on your side, you’ll win more work then ever. Get in on the action, starting now:
Pre-qualify for The Partnership Account® Right Here.
Reduce Debt
Successful contractors know that working capital is essential for bid-readiness—and growth. Indeed, underwriting experts at Colonial Surety remind us that working capital is essential to securing bonds for new, and larger commitments. Accordingly, contractors in the habit of maxing out lines of credit from the bank near the end of the year, may want to think ahead about changing this strategy: utilizing a chunk of your banking credit line at year end, and carrying unpaid bills into the next calendar year means your financials likely reflect too much debt. While this tactic may dilute net earnings and result in paying less taxes, it also reduces working capital, weakening capacity to secure larger bid bonds. Bottom line: contractors aiming to secure larger bid bonds should reduce debt and concentrate on working capital.
Running a contractor business is hard work. Why go it alone when it comes to plotting your finances for strategic growth? With The Partnership Account for Contractors® from Colonial Surety you’ll have lots of useful intel at your fingertips—and our expertise on your side— as you advance your business strategically, one step at a time.You’ll receive free insights and financial scores just for completing a pre-qualification. Then, once qualified, leverage The Partnership Account® for a surety line of credit—in writing—and a private digital dashboard. Use it to access real time financial intel, including a day to day snapshot of single and aggregate limits and current and available bond capacity. Go ahead: update work on hand, increase your aggregate and move that next project forward.
Today’s the day: Pre-Qualify and Get Free Scores
Founded in 1930, Colonial Surety Company is a leading direct seller and writer of surety bonds and insurance products across the USA. Colonial is rated “A Excellent” by A.M. Best Company and U.S. Treasury listed. Let’s connect today: Colonial Surety.