Intentional Bidding - Part 4 of 4
In the first three articles in this series, we looked at three of the four common obstacles to bidding with intent:
Lack of a target
Confusion about margin and markup
Confusion about price vs. cost, and
Lack of confidence
It’s time to look at the fourth obstacle: Confidence.
Do You Have the Confidence to Bid Intentionally?
You’re familiar with Intentional Bidding. You know your actual cost, you don’t add burden to your bids, and you use margin, not markup, to price jobs. You have a target, and you know how to bid at prices that will pay overhead and debt service with enough left over to pay taxes and grow your business. You know how to do all those things, but what do you actually do?
Do you bid at or above your target, or do you back off at the last minute to “get the work?”
I can hear the protests now (because I’ve heard them many times before). “If I get the work, I’ll find a way to keep some of the money,” or “I need the work to keep the guys busy,” or “I need to keep cash coming in [eventually] to pay the bills,” or the catch-all reason “I have to get the work because it’s what we do.” If you’re using those reasons to reduce prices below your target, I have a question for you: How’s it working out? Did you earn enough last year to pay your overhead and debt with enough left over to pay taxes and grow your business?
Intentional Bidding - 4-1
If you did, it’s because you bid at or above your target (even if you didn’t realize it [see article three]).
If you didn’t, what are you thinking? What’s the plan? Hope? Your numbers show what is likely to happen. Are you hoping the numbers are wrong and that things will just work out?
Hope is not a plan. It is the opposite of bidding with intent. Hoping sets you up for a slow death from losses accelerated by cash starvation that comes with rising accounts receivable and inventory levels.
You must know what you must do and then you must do it. That’s intentional bidding. It takes confidence - or maybe courage is a better word - to pull it off. If the market truly will not accept the prices you must have, quit the business. It is better to quit with intent than to suffer the prolonged agony of a slow death¹.
Intentional Bidding - 4-2
If you’re interested in working together to improve your margins, establishing bid processes, and more, please contact me. I’d enjoy talking to you.
¹There is an alternative to quitting. Become more efficient. Efficiency allows you to meet your goals at lower prices, but it is a topic for another series of articles.