Small business construction companies often have to walk a tightrope between asking for too little and too much in order to win lucrative construction bids. Cost estimates must be accurate and include all necessary material and expenses, but they can’t have too much extra padding built into it either since it could cause the bid to be too expensive.
There are a number of lessons that seasoned small business construction companies have learned over the years that help them win profitable work.
For instance, don’t scrimp on the equipment necessary to estimate costs and produce proposals. “When you buy a $30-software program for estimating costs, you get junk. After throwing out the cheap software, we learned our lesson and spent $2,000 on a high-end estimating [software] program that paid for itself in one month,” says James “Hoss” Boyd, owner of Premier CIRE Systems. “We bought a high-performance computer and the largest display monitor we could afford. Displaying blue prints on a 15-inch screen just doesn’t work,” he said.
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Still, buying expensive equipment and software isn’t for everyone. Connie Kaufman, vice president of Kaufman Home Improvements, Inc., still does field estimating by hand, but uses Microsoft Excel and Word to itemize the proposal and make it look professional. Since Kaufman’s carpentry work is high-quality, low-volume work, they have not found it cost effective to buy computerized estimating software.
Never underestimating the power of accuracy and a second set of eyes, however, is one piece of advice Kaufman recommends for every business. “When estimating costs of material and labor, accuracy is critical. Double and even triple check your estimates and have them reviewed by another person in your company before submitting them.”
Kaufman Home Improvements, based in
Boyd says he too looses a little business to companies that are not as professional as his. The way he deals with this unfortunate reality is to bid for larger jobs with larger companies that require proof of all his necessary insurance coverage and licenses. Since Premier CIRE Systems is a designated Service-Disabled Veteran-Owned Small Business, Boyd can bid on
Other tips provided by Kaufman and Boyd include:
Understand that you can’t win all work. If you are winning every bid you are submitting, your price is probably too low.
Realize that reputation is the most important asset your business has. Protect it by not taking on so much business that you can’t do the best possible job every time.
Do some due diligence on your customer’s credit, especially when you are doing commercial work. There are commercial general contractors doing business that may be financially shaky, and when they don’t pay, it can become a big headache to collect.
By following one or more of these tips, small construction companies should be able to maximize profits, minimize risks and win more bids.
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