Category Archives: Bids

Fill The Seats Or Go Broke!

If you were the owner of a NFL football team, your number one goal would be to fill all the seats every week. To fill seats takes a multiple approach. You must put a winning product on the field and you must sell seats. Seats don’t sell themselves. It takes a huge effort to create sellouts at profitable ticket prices.

Over the last ten years, you didn’t have to sell very hard to keep profitable revenue flowing into your company’s coffers. If you put a mediocre team on the field, called the usual plays, and used an average business strategy, your customers would keep coming back for more, if your price was somewhat competitive. And because business was plentiful, you didn’t have to try to win over many new customers. You stayed focused on doing the same type of work for the same type of customers and your business grew. Because there was enough work, you also didn’t have to try different types of projects, customers, or contract delivery methods. In fact, you even prided yourself as a specialist in a very focused type of business niche.

Fast forward. Today it is hard to fill the seats, revenue is scarce, and customers are hard to find. Having a winning team doesn’t matter if they can’t find a game to play in. You’ve cut your overhead and reduced your expenses as low as you can to survive. You continue to bid more and more work against too many competitors at lower and lower prices. Now you are even calling on new and potential customers you really never wanted to work for. You’re trying to get on any bid list you can including public works, which you always avoided because of the paperwork and prevailing wage issues. You’ve assigned your office manager or estimator to cold-calling and emailing any lead they can find in hopes of a miracle. Nothing is working and getting new business at a reasonable price is next to impossible.

Now what? You’re thinking you’ve got to fill the seats with paying customers or go broke. If the sudden slowdown in the economy taught everyone one thing: ‘Putting all your eggs in one basket won’t work forever.’ Many contractors and business owners focused their efforts on doing only one kind of project and service for one type of customer. For example, to keep revenue and jobs flowing in, many focused on only building housing tracts, or shopping centers, or industrial parks, or custom homes, or office building interiors. Some focused on building for general contractors, developers, or home builders. Some expanded and did more than one type of project. But, most didn’t crossover into totally different or diverse types of work. And offering a service component to their revenue stream wasn’t even considered as they were too busy to mess with little jobs.

Multiple streams of income sells more seats!
A diverse business plan includes three types of revenue streams with many different types of projects per stream. For example, here is a partial list of the unlimited revenue and business opportunities contractors have to choose from:

Multiple Revenue Streams & Opportunities          

1. Contracts & Bids

Private Construction
Retail shopping centers
National chain stores
Industrial buildings
Manufacturing & factories
Metal buildings
Office buildings
Medical buildings
Self storage
Interior Improvements
Utility Company Projects
Housing Tracts
Custom homes
Residential remodeling
Residential home upgrades
Residential replacement work
Site improvements

Public Works Construction
Roads & highways
Transportation projects
Sewer & water projects
Storm drain systems

2. Service Work & Ongoing Accounts

Ongoing Monthly Or Annual Accounts
Property management
HVAC maintenance
Electrical maintenance
Plumbing maintenance
Landscape maintenance
Site service & management
Spring & winterization
Light bulb replacement
Roof service
Road and drainage repair work
Generator service
Energy management & controls

Repairs & Service To Fix Broken Components
Plumbing & mechanical repairs & upgrades
Window replacement
Tenant improvements
Tenant relocation
Carpet and flooring service
Building damage repair
Clean-up and debris removal

3. Wealth Building & Passive Income

Own income producing real estate

Rental homes
Shops and yards
Industrial buildings
Shopping Centers

Own income producing businesses
Rental equipment companies
Wholesale materials
Services Continue reading


What Is Your Bidding Strategy?

After you have established reasons why customers should hire your company, now it’s time to find jobs to bid where you can be successful. Your overall estimating and bidding strategy is to get enough signed contracts at your price to cover your job costs, overhead, and then make a profit. This requires several winning plans. The first strategy is to have a strategy! Many contractors bid any job they are offered to bid. They don’t have a strategy that helps them decide which jobs to bid and when to say no. What’s your estimating and bidding strategy?

Before agreeing to bid a project, create a list of questions to determine if you will have an excellent chance to win the contract.

 1. Do you want to negotiate the project?
– How will you convince the customer to negotiate with you?

2. Do you want to be the select or only bidder?
– How will you implement this strategy?

3. Do you want to get the last look?
– How will you make this happen?

4. Do you know your bid-success ratio against your competitors?
– How do you keep track of your success versus competitors?

5. Do you have competitors you don’t want to compete against?
– How will you discover this information?

6. Do you have some competitors you will bid against?
– How will insure the bid list gives you a chance to be awarded a contract?

7. Do you have an ideal number of bidders you’ll bid against?
– How will you insure this happens?

8. Do you have a maximum number of bidders you’ll bid against?
 – How will you decide when not to bid a job? Continue reading

Low Bid Gets the Job In Public Work

In public works construction, the low bidder usually gets the job and there is little or no room for sales strategy or tactics. The best way to be the low bidder and awarded a contract is to have the lowest possible costs and the most efficient construction management and field operation possible. To keep your costs lower than your competitors, your field crews must be lean, productive, and well trained. There must be no downtime, job problems, quality issues, coordination conflicts, or mistakes. Your subcontractors and suppliers must also be supervised and managed tight without gaps in scheduling, productivity, conflicts, or quality. This can only be accomplished with diligent leadership, accountable management, and ongoing training focused on productivity and efficiency.

Now you are in the sales business!
In private work, it takes a lot more than just bidding and negotiating to win contracts. You’ve got to give customers a differentiating reason to hire your company. It’s not just about the price, inclusions, and exclusions. Now there are too many competitors who can do the same job as your company and will cut their bid below their cost to get a job. To win more contracts at your price, you must face reality. You are not in the construction business. You now have to also be in the $ALES business! Continue reading

Boost Your Bottom Line! 20 Business Tools To Build Bigger Profits

1. Buy Low and Still Sell High
2. Double Every Discount!
3. Be Low & Then Charge More!
4. Buy In Bulk!
5. Get Another Quote!
6. Mark-Up Your Mark-Up!
7. Trash Your Tools!
8. Estimators Are Not Professional Visitors!
9. Empty Your Yard!
10. Finish Faster Quicker!
11. Clean Out The Dead Wood!
12. Do More to Get More!
13. Markup Smaller Bigger!
14. Fire The Deadbeats!
15. Collect Your Cash!
16. Multiply Your Money!
17. Stop Giving It Away!
18. Two Heads Are Better Than One!
19. Accurate General Conditions
20. Motivate With Money!

Increasing your bottom-line is a tough task. Many competitors price work too low  which doesn’t allow you to charge enough for the service and quality you want to provide. Your employees aren’t as efficient as you want them to be. The weather and other trades get in your way and slow you down on the jobsite and hurt productivity. Poor plans and specifications stop your progress while you get clarifications from the architect or engineer. And then, trying to get paid is not an easy task either.

Every dollar counts. Every penny wasted is precious and can add up to thousands of dollars at the end of the year. So what are you to do? Maximizing your profit must be a top priority right along with getting your projects completed. By taking a little time focusing on increasing your net profit will boost your bottom-line and allow you to make a lot more money. When you’re too busy working, don’t forget to take enough time to focus on your finances, financial tools, and business strategies which will make you more money. Consider implementing these tips and tools to grow your bank balance.

16. Multiply Your Money!
When I ask construction business owners specific questions about their finances, many respond they don’t really know much about their numbers. They let their wife or bookkeeper worry about the money. To me this is an oxymoron! Work all day stressing and struggling trying to get things done but don’t really care or know much about how much money they’re making. The main purpose for owning and managing a company is to make a profit and increase its’ net worth. In order to make this happen, you should also focus on your numbers as part of your everyday activities to stay on track and get the results you want.

A simple way to multiply your money and increase your net profit at the end of the year is to manage your cash aggressively. It doesn’t take much time, but can return a nice sum of money for your efforts. If your company is generating $3,000,000 in annual sales, you will average $250,000 in monthly revenue. Most likely you collect your money throughout the month but only pay your bills twice a month. This means, on average, you should have a bank balance of around $125,000 at all times. If you average $50,000 monthly in materials and are offered a 2% discount for quick payment, this will generate an extra $12,000 annually. And if you invest your cash balances in interest bearing accounts or programs, you should be able to make another $5,000 to $15,000 every year. Not bad for a few minutes a week of time focused on your money.

Make an appointment with your business banker and discuss the many options and programs they have to maximize the return on your bank balance. Ask them about “sweep accounts”, “overnights”, “money market accounts” and “T-bills”. A good banker wants you to make as much money as you can. After the meeting, decide how your company will invest their money and then delegate the task to your accounting manager. Track your monthly progress and watch your money multiply.

17. Stop Giving It Away!
If you had ten dollars for every extra work item your company, project manager, field superintendent, or foreman did without a signed change order before the work was performed, could you have retired several years ago? When your customer asks for extra work, why is it so hard to get it in writing? Everyone knows the contract requires signatures on change orders prior to starting extra work. But when you postpone getting a formal approval for extra work until days, weeks or months after the event occurred, you have no leverage. And when you have no leverage, your customer is in a great position to negotiate the final price with you, change their mind, or decide the work wasn’t really extra and should have been included in the original contract.

Present a complete cost breakdown for every proposed change order your customer requests in advance of starting the work. Use a standardized format and cost template to make sure you include everything the additional work actually costs. Every time extra work is performed, the followings costs occur:
   – Project Management to process the paperwork
   – Supervision to supervise the work
   – Accounting to pay for the work
   – General condition costs – job takes longer to build
         • Trailer & toilets
         • Power & power poles
         • Utilities
         • Truck
         • Equipment
         • Small tools, ladders, etc.
         • Small items: nuts, bolts, hardware, etc.
         • Temporary protection, barricades, etc.
     – Liability insurance
     – Overhead
     – Profit

Don’t short change your company by not asking for everything you deserve. I see most change order requests presented as labor, materials, and subcontractor costs plus a markup without extra costs for the many items listed above. If your company does $3,000,000 in annual sales of which $300,000 is performed as change orders or on a cost plus basis, not charging for everything you spend can cost you as much as $30,000 or more per year in lost revenue for things that you actually had to pay for.

18. Two Heads Are Better Than One!
As a progressive leader of a growing construction company, I wanted my key project managers and superintendents to accept more responsibility. As a result, I tried to delegate as much of the work to them as possible including writing subcontracts, ordering materials, signing contracts, and approving change order requests from subcontractors. Time went on and my inspection of their actual work became less and less as I trusted them more and more. But then the worst scenario happened and we experienced some major financial setbacks. A customer pressured a project manager to agree to some contract clauses that seemed innocent. Months later, when the project was nearing completion, the customer held us to these clauses which added lots of items into the scope of work we never had intended to do. Upon my review, it was obvious the project manager had agreed to contract terms he didn’t understand.

This caused me to take a hard look at how we do business. I discovered many problems with our ‘trusting’ system we were using. Some project managers were not getting the complete scope of work included in many subcontracts they were writing thus causing cost overruns on several projects. Some managers were not tracking their employee timecards properly and keeping track of all the vacation time they were taking. Some managers were approving expense accounts without reviewing all the bills in detail. The payroll department wasn’t charging costs accurately to the right jobs and cost codes. And I found some people were ‘stealing’ from the company using creative accounting. Oh well, some much for trusting your long term employees 100%.

It is my opinion people over time feel entitled to a little bit extra the longer they work for your company if you give them the chance to take advantage of the situation. Little things like leaving early without docking their own pay, asking a supplier for a little material for their home remodel, filling their car with gas using the company credit card, and lots of other little things add up to big bucks. In order to remedy the situation, we re-implemented our company policies and made it clear there would be no exceptions for anyone regardless of their tenure, relatives, or position in the company. Theses new rules required two people to review, approve and make every decision involving company contractual commitments, financial obligations, payments, or monetary transactions including the following:
      – All contract terms and conditions
      – All subcontract pricing, awards, terms & conditions
      – All checks issued
      – All change orders
      – All expense account approvals
      – All employee reimbursable items
      – All overtime pay or requests
      – All vacation or time-off requests
      – All payroll preparation
      – All sick time approvals
      – All project payables
      – All job purchases

19. Accurate General Conditions
Estimating accurate general conditions for projects can be a simple task when the estimator is accountable to get it right. Most estimators use unit prices which are never checked against the actual final job costs. For example, creating a budget for temporary toilets seems easy. An eight month job should cost 8 times $100 per month = $800. But when the field superintendent sees there are 40 men on the job, more than one toilet and more than one servicing a week is required. This might increase the actual job cost by as much as $200 per month. These extra costs will add up to lots of lost cash.

The estimator’s job is to calculate an accurate bid of what it will cost to build each project. After every job he must look at the actual job costs and see if he miscalculated any items. Before he prices the next job, he should get with the project manager or superintendent to determine what will be required to run the project he is currently bidding. Take a hard look to determine if you are charging the right price for:
     – Project manager, superintendent, and their vehicles
     – Project photos, sign, as-built drawings, etc.
     – Temporary facilities, trailers, toilets, sanitation, etc.
     – Temporary utilities, electricity, power poles, water, phones, etc…
     – Temporary fencing, gates, barricades, site lighting, heating, etc…
     – Safety, first aid, shoring, access roads, security guards, etc… 
     – Water quality control, dust control, etc….
     – Trash, cleanup, window washing, final punch-list

20. Motivate With Money!
I get asked about profit sharing programs at every convention I speak at. Incentive compensation can be broken down into two types: earned or arbitrary. Earned incentive compensation is based on a specific formula that rewards for results based on tasks, accomplishments, or results you want to measure. Arbitrary compensation bonuses are based on what the boss feels is the right amount to pay for good work, reward for a positive attitude, or a thank-you for a job well done. It is often based on what the boss thinks is expected to keep employees happy.

I don’t think arbitrary compensation encourages employees to do their jobs faster or better. But often it is expected as a part of the overall employee compensation package because other companies do it or employees feel entitled to something at year end. To me this is no more than a gift of generosity from the employer as it is not required. It’s a nice gesture and will keep some employees from looking for jobs elsewhere until after they get their year end bonus. But they usually don’t make the company any more bottom-line profit.

Extra compensation based on measurable results will produce positive bottom-line results. If employees know what’s expected and are compensated for hitting their targets, they will hit them.

If they don’t know the exact results expected and don’t have a reason to achieve them, why should they want to go the extra mile? This requires the boss to determine the exact results that will make the company more money. For example, if you want an eight month project finished in 7 months, a generous bonus for the crew or superintendent will keep the team focused on achieving the goal and motivate them to hit the early completion target. Without a financial incentive, the target is a nice idea but of no benefit to the crew to finish early or work harder.

Our workers compensation insurance rating was suffering due to field employee claims for jobsite injuries. We implemented a ‘Safety Bucks’ program to motivate the crews to work closely together and watch out for unsafe workers or conditions. Each worker received $1 per day if the entire crew had no accidents. If anyone on the crew had an accident, no one received the safety bucks for the period. We paid this cash bonus out quarterly. This instantly focused everyone on all of our field crews on safety and making sure their were no accidents on the jobsites. This program really worked as it kept everyone focused on the target. Plus I always enjoy giving out bags of bucks to my field crews for no accidents! Examples of measurable clear targets can include:
     – Total man-hours to complete a job
     – Hours without an accident
     – Project milestones completed by a date certain
     – Customer referrals
     – Project punch-list or close-out completion
     – Improving your bid-hit ratio
     – Customer satisfaction
     – Project profit
     – Project completion and sign-off by customer
     – Change order profit
     – Estimating accuracy
     – New customers signed-up
     – Average job size increase

Making the most money you can is fun if you make it your priority. Too often you get so busy you don’t have time to do the little things to boost your bottom-line. Give several of these twenty tips and business tools a try and you will make more money. See you at the bank!