3 Elements of a Great Bid

Long-term success hinges on achieving and sustaining lasting business growth. However, many entrepreneurs simply work to work—without a clear process, metrics, or profit goals for their business.

All of this is key to your overall business plan. However, it’s also key to every individual project you bid on. Without a strategic framework at the project level, you’ll risk not being able to:

Get a return on investment (ROI)
Balance the costs of running the business
Pay yourself a market-based wage

The right bidding plan ensures you receive a market-based salary for your work and get a return. But how can you do it well, time and again? The answer comes down to 3 must-haves for a great bid:

Establish an operational process
Understand your gross profit margin
Make 10% your breakeven point

1. Establish an Operational Bidding Process

From the first phone call to the final invoice, you should have a process for your business operations. And bidding is no exception.

Think about how you accept new customers. What exactly is your process for this? Do you go out to see everyone who calls in for a quote? Or do you have a prospect qualification process for each lead?

Not everyone who contacts you will be a good fit for your business, so it’s important to establish a screening process. Know when to say no, and when to let go. It’s common for small businesses to hang onto clients who aren’t the right fit for far too long. As a result, they make little money and waste much time.

Moving From Consultation to Quote

What do you do once you have a qualified prospect? Create a workflow for how consultations happen. Ask yourself:

Do prospects visit your office?
Do you provide an onsite consultation?
Do you prepare designs in advance? If so, do you charge for that?

It’s important to charge for all your services and make sure you are paying yourself and your teammates fairly.

Planning Your Bid

Once you’ve qualified the right client and completed your consultation, what are the next steps for planning the bid?

How do you prepare your bids?
What is the turnaround time your prospect should expect?
Do you break down the job based on hours and materials?
Do you factor in some time/expense beyond your initial estimates?

Developing Other Workflows

Remember, how you accept new customers and handle bids are only a few examples of processes in your business. If you haven’t already, it’s a good idea to map out the standard operation procedures (SOPs) that define the other areas of your business. That way, you can:

Onboard new team members faster
Create accountability in your company
Improve team member experience
Boost efficiency for all business operations
Minimize errors
Etc.

2. Understand Your Gross Profit Margin

The second must-have for any business is to understand and track its costs and how they impact the Gross Profit Margin (GPM), which represents earnings after subtracting the cost of goods sold. This profitability ratio helps you quantify how efficiently you’re executing.

On a project, typical costs include:

Direct Labor: The labor directly attributable to building a project
Direct Material: Material specifically purchased to build the project
Equipment Rental: Equipment explicitly rented for a project, like a jackhammer or mini excavator
Subcontractors and Other Direct Costs: Costs incurred for a specific project, e.g., multiple mobilizations, porta-johns, plan costs, or attorney fees to review a contract

To foster a successful business, you must work as much as possible, and you must clearly understand your costs before beginning each project.

Pricing Tasks Appropriately

Costs vary from one project to the next, so measure them as accurately as possible.

Hint: If your company is still stuck in square-foot pricing, how do you know you are accounting for all variables accurately?

Every project requires a wide variety of tasks, such as

Removals
Downspouts
Excavation
Screeding
Etc.

As an estimator, it’s your job to understand a project’s tasks and costs, as well as how much time it will take to perform them.

And project-specific tasks don’t account for the non value-added items, such as:

Travel time to and from the project.
Clean-up at the end of each day.
Indirect labor costs you might incur, like running to Home Depot for an extra tool.
Equipment maintenance, like greasing a machine or replacing the starter rope on a cut-off saw.
Progress meetings with the client.
Toolbox safety talks with your team.
Etc.

If you get these wrong, you’re doomed from the onset.

Remember that the elements of a great bid come from your understanding of what it takes to build a successful application.

3. Make 10% Your Breakeven Point

As a business owner, you should pay yourself a salary for the work you do. You should also receive a return on investment for what you own—your business.

However, many small business owners operate under the assumption that breaking even is equivalent to success. Worse, they misconstrue what “break even” really means.

In reality, if you want to break even, you need to:

Cover all your costs first
Pay yourself
Earn a fair return

To do this, you need to reframe what you consider your breakeven point. Ideally, if you want to create a business that’s not just successful, but actively thriving and growing, 10% net profit should become your new baseline.

Why 10%? If you understand your business well enough, you will have already discovered that labor is a make-or-break factor: it is the number one variable to contend with in the landscaping industry.

With rising labor costs, unpredictable schedules, and hidden overhead, targeting anything less than 10% puts your business at risk.

In fact, if your breakeven point is less than 10%, you may be losing money without realizing it.

The Bottom Line of an Excellent Bid

Don’t be so eager to grow the top line of your business that you don’t truly attend to making money on the bottom line.

Ask yourself this: Would you rather be a million-dollar business doing 20% on the bottom line after paying yourself a market-based wage? Or a $5 million business making ½ of 1%?

Take the above 3 must-haves for bidding success, and get to work on developing the metrics and processes you need for your business’s long-term health.

Then use that planning to drive a margin like it’s nobody’s business.

Pitter patter, let’s get at ‘er.

Matt!