If you had a dollar for every hour you have spent preparing bids over the years, would you be a millionaire yet? Well, maybe not a millionaire. But, if you consider the opportunity cost for the hours that bid preparation takes away from other more profitable activities, cranking out numbers in the tradition of the construction/building industry is costing you money — big money.
For that reason, consider getting customers by implementing a different “system.” In approaching the way you communicate your services and the information the customer needs to make a decision, without focusing on a “bid,” you further differentiate yourself from the competition by being unique. Additionally, you shift the emphasis of comparison among companies from price to another aspect of your offering, such as experience in the business or quality of work.
What I am proposing has been successful for me. It is simply this: replace the traditional bid process with a system that represents the chain of communication and engagement with a client. Consider the outline below for your system, and say goodbye to wild goose chases and the hours of bid preparation associated with them.
Step 1: During the initial meeting, identify the client's objectives, vision, desires, and budget. By applying your experience during this conversation, you can likely provide a ballpark estimate on the spot. This should not be a number you pull out of thin air, but a figure that you back up with square-foot and component figures. Ballparking will allow you and the prospective customer to decide if you're even close to being on the same page and if it is worth moving to the next step of the process.
Step 2: Assuming you move on, the second step is to give the customer a budget estimate — oral, written, or both. The budget estimate is done in-house without field visits with subcontractors. This estimate goes over the major components of the project — getting the customer to within 5% or so of the actual cost.
Step 3: If the customer decides to continue with you, the third step is to present a pre-construction agreement and request a retainer. Explain that this fee will be applied to the final job, but forfeited if the job does not go through or if the client hires another contractor. The point of this is to separate serious clients from shoppers, not to make a profit.
In the pre-construction agreement, it is agreed that the client has selected you as their general contractor and that, in exchange for the retainer fee, you will prepare a specification and design and cost analysis.
In preparing these analyses, include a list of “what ifs” that could save the customer in one area to free-up funds for something more important to them. An additional bonus to this effort is stronger customer relations, since your clients see that you are obviously concerned about both their desires and their budget.
This is the part of the client-builder process that involves a tremendous amount of customer communication and education. By this point, since a relationship has been established, the customers trust your recommendations much more than they would have earlier in the process.
Step 4: The last step in this re-engineered process is the final fixed price and contract, which must be signed so the work can begin.
From a management standpoint, you can likely see that this proposed alternative to the bidding process will save you time, money, and a lot of frustration. You will have more trusting, relationship-oriented customers and more time to serve them. —Bill Rauser is president of Rauser Professional Contracting, which he founded in 1981 (www.rauser.com). He serves on the board of the Remodelor's Council of the Home Builders Association of Maryland.