When construction work comes to a crawl—as we saw in the most recent recession—it can be difficult to turn down any job, even if you should. But now the industry overall is experiencing healthy backlogs (an average of 8.3 months, according to recent numbers by the Associated Builders and Contractors). This is a good time to get serious about your construction bids. What jobs you should take, and which projects you should say no to?
A good first step is to understand clearly the type of projects that are “best fit” for your business. This is where you need to have a really good handle on your actual project costs and profit numbers. Start by looking at all your projects over the past two to five years.
- Do you see common trends across your most profitable projects?
- What patterns do you see between projects with less than acceptable profit margins or where you lost money?
- Are there certain types of projects that bring in more money than others?
- Is there a difference in profits based on geographic location, customer characteristics, project duration, or other project components?
Also, pay attention to less than obvious trends and potential opportunities. For example, maybe some smaller jobs were not as profitable but led to more work. Or perhaps you did well on projects that were not perfectly in line with your capabilities. This could identify areas of expansion for your company if you invested in improving your skill set.
Next, include this information into a checklist that you can use to evaluate each project before you decide to bid on it. In addition to your “best fit” criteria, consider assessing:
- Quality of site conditions
- Job duration
- Difficulty of work
- Client reputation
- Strength of other bidders
- Special equipment needs
- Match to your company’s core competencies
Involve everyone responsible for estimating and operations in rating each item on a one-to-five scale. The results should help you evaluate whether or not to bid the project. And if you decide to go for the work, the information can help you bid more successfully.
Editor’s note: Sage 100 Contractor and Sage 300 Construction and Real Estate can help you determine your “best fit” criteria by giving you a better understanding of your actual project costs and profit numbers.