Bidding is an art. You tirelessly revise your process, involve your stakeholders, study what works, and cut out what doesn’t. Or at least, that’s what you would be doing if you weren’t moving a million miles a minute to keep your business running, right? The fact of the matter is, most subs don’t have the time to devote to perfecting their bidding strategy, even if they’d like to.
So if you’ve always sought to improve your bidding, but haven’t had the time to be as methodical as you’d like, you’re in luck. We’re laying out the blueprint for winning more work.
Every month, Billd holds online Subcontractor Meetups, a space for subs to gather and exchange insights on how to make their businesses thrive. In December, Clay Young, a subcontractor with a 55.5% bid win rate, led a discussion on how to sharpen your bidding strategy. The Meetup offered ample takeaways which we’ll unpack below.
Let’s dive into the art of winning more of the right projects!
Who Is Clay Young, and How Did He Build His Bidding Strategy?
About Clay: Clay Young is a Managing Partner and Owner at Kentech, an electrical subcontractor in Texas and Louisiana. A certified estimating professional, he holds a Bachelor’s degree in construction management and a Master’s in Construction Engineering. Clay has been a construction business owner for over 20 years.
At one point in his career, a business approached Clay for help. They had 4-5 senior estimators who had bid $174M worth of work, and won just $5M of it. “They’re senior estimators with 20+ years of experience,” he thought to himself. “They should be winning more.” This is what led him to develop a strategy that would enable subs to win more and bid less. Founded on the notion that selling has to be intentional, he crafted a data-driven, relationship-enriched process. We’ll show you how to implement it, and explain how to build the relationships that are instrumental to its success.
Step 1: Closely Define the Kind of Work You Should Be Bidding On
One of Clay’s mentors offered him a mantra he never forgot: Bad jobs will cost you more than a good job will ever make you.
To that point, when it comes to bidding, the goal shouldn’t be to indiscriminately win as much work as possible. If you’re not extremely intentional about what you bid, then # Bids Won is not a meaningful KPI. You could be winning jobs that barely cover the cost of your overhead, or worse, put you in the red.
With that in mind, profitability must be the gold standard by which you assess all potential projects. Clay insists that there are two things you need to figure out before defining your most profitable line of work.
The first step in implementing this bidding strategy is to ask yourself these key questions:
- What type of projects do you feel most comfortable with? What comes naturally to you and your team in the field? What are your strengths?
- This will help you understand what you’re truly good at from a workforce perspective. When you’re not stressed about winning work for the sake of payroll or cash flow, what do you consider to be your “ideal” work? Get the field’s input on this question. What do they like to work on?
- What was your “Profit per Man Hour” on the jobs you’ve done in the past?
This will help you scrutinize projects that may use more manpower than their profit can justify. Dedicate one meeting (or more) to work with your finance team on defining what your most profitable jobs are. By leaning on the profit per man hour metric, you could make a more meaningful determination on profitability in relation to work.
Clay came up with this two pronged approach after seeing too many salespeople gleefully return from an exotic golf trip and announce that they “got a job!”, only for the job to have meager profitability. “If the facts say that this is not a good job for me, then there’s value in saying no.” Clay explains.
When he and his team did this exercise, they had long touted themselves as “data center gurus,” in terms of their ideal projects. But after taking a closer look, they realized that brand new data centers were not all that profitable for them after all. They saw their best profit per man hour numbers were on data center renovations. This insight helped them refine which data center projects they bid on.
Once you figure out where your “ideal” jobs and your most profitable jobs overlap, you can start narrowing down which GCs are providing them. Henceforth, let’s call these types of jobs your “Bread and Butter” jobs.
Step 2: Rank Your GCs in a Tiered System
Clay advocates for breaking your GCs into tiers. The tiers will help you be more intentional in how you handle your relationship, how often you bid, and what you bid. This will ensure that you’re pouring your time into the GCs that matter most, who will ultimately get you more and better jobs. He typically does this process at the end of the year, during which time he sets revenue goals for the following year. Even if you’re not reading this at the end of the year, you can use whatever revenue goals you already set, or work with your team to define them now. We’ll use those numbers in later steps.
If you’re already working with a pool of GCs, there are two questions you should use to evaluate their quality as clients:
- How quickly do they pay?
- How much Bread and Butter work do they have available for you this year?
Depending on your answers for each GC, they should be sorted into one of the following categories:
A-Tier – GCs who pay quickly and have ample “Bread and Butter”
- Being mindful of their A-Tier status will help you give them what Clay calls, the White Glove treatment. This means:
- Doing second estimates
- You don’t have to give a full estimate every time. Sometimes, something as simple as a quantity check or a lighting quote (in Clay’s case) can go a long way in providing supplemental value to the GC
- Taking a look at jobs that you don’t necessarily want to look at, if and when they ask you, as a favor to them
- Making calls to check in with them every week
- Communicating when you send your bids — don’t just submit a number when the time comes with next to no communication
- Bringing your vendors into the conversation with the GC.
- Evaluate the project and the scope all together, both to build trust and because it will yield a better end result
- Doing second estimates
Pro Tip: Within reason, don’t hesitate to be extremely transparent with an A-Tier GC. The more information you offer, the more information you may get back in return. You’ll slowly get to find out their approach, how they do things, and what specifically you can do to please them. That being said, don’t mistake “White Glove Treatment” with saying yes to everything they ask. In fact, a well-justified no can serve to build trust, if you’re transparent about why it’s a no. For example, if you can’t take a job because you don’t have enough manpower for it, it’s okay to tell them that. They’ll appreciate the honesty that they’re probably not getting from more indiscriminately project-hungry subs.
B-Tier: GCs who have fewer Bread and Butter projects and/or who don’t pay as quickly
- Whereas A-Tier subs are checked in with once a week, B-Tier subs are checked in with every month and a half or so
- Favors like second estimates and the like are happening at about the same frequency
- B-Tier GCs are there to shore up any gaps in work that happen with your A-Tier GCs
Breaking apart your A-Tier and B-Tier GCs helps ensure you don’t dilute your focus. You shouldn’t try to provide all GCs with the same five-star treatment without considering their value as clients. It also forces you to be mindful about not going after too many B-Tier GCs just for the sake of growing your client base.
Step 3: Tell Your A-Tier GCs What Work You Want
Once you’ve identified your A-Tier GCs, specify what percentage of your total work you’d like to do with them. For the sake of this example, we’ll use Clay’s figures. Clay set an annual revenue goal of $30M, and would like to do 85% of that with his three A-Tier GCs. That means roughly $24M spread across three sources, at $8M a piece. (The remaining 15% will probably go to hard bid projects that you’re finding off a bid board, or things that the GCs just send, without you having known much about it prior.)
Once you know how much work you want to do with your A-tiers, it’s time to loop them in:
- Clay encourages you to approach the GC and say, “Hey, I know you do $150M. I would like to do just $8M of that. Here is the narrow segment of projects that I consider my Bread and Butter. What are you doing this year that fits in my category?” They will talk to you, often way before those projects hit the bid board. Knowing about these jobs in advance will help you put together a plan of attack to win it.
- At that point, start aligning vendors and any subs you want to work with on a given project. Find out as much information on the project as you can up front. See if it’s a design build or hard bid, and start strategizing from there. Clay and his team put together “strategic capture plans” that factor in every aspect of the project they’re aware of.
- Sell at every position. Establish an owner to owner connection. A VP to VP connection. Make sure your financial person likes their financial person. You want that GC to be happy in every department, and you want to start establishing this far in advance. Send your team members out to reconvene with their GC touchpoints every month. Have them go out and get lunch, report back with their updates, and watch the whole picture of the project come together in a new and powerful way.
Step 4: Carefully Evaluate Projects and Break Them Into Their Own Tiers
Projects and GCs are, of course, evaluated in very different ways. For that reason, Clay has developed a detailed system for grading projects, which you can check out below:
How Clay Grades Projects:
Every answer to the questions above falls into one of three categories. Each of the three categories carries either 5, 10 or 15 points, which are tallied at the end.
After assessing all the factors above:
- If it’s an A grade, Clay considers it a job he wants to target
- If its a B grade, he considers it a filler job, one to consider if:
- If an A drops, moves, shifts schedule, or isn’t won to begin with
- Man hours at your company dip
- If it’s a C grade, Clay will consider it only if it’s a smaller project with a new but promising GC who he wants to test the waters with
For the degree of difficulty question, Clay likes to use the NECA manual labor units. They have a chart for change orders, but he applies it for new construction. It yields a number that helps you estimate the difficulty/labor level that a project will need, which he factors into his grading scale.
When grading, Clay likes to see one GC firmly committed to a project, sending 3-5 bids out. If he sees a GC sending 8 bids because he’s looking for the lowest guy, Clay is going to pass. And he insists that the GC will appreciate you saying no because it’s justified. Furthermore, a Meetup attendee pointed out that sometimes you can put a lot of work into a bid only to find out it’s for a project that the GC hasn’t actually won. That’s why it pays to find out whether they’re contractually committed to the project.
Pro Tip: Seek out people who can help you keep a pulse on your immediate market, including mentors and subs in adjacent trades who are pursuing similar types of jobs as you. Meet with them for dinner or lunch to gather some of the information that is flowing freely between subs in other trades on the state of a project or your geographic market at large. This will help you refine your numbers and inform how aggressive you need to be in your pursuit of certain projects.
This methodical approach to bidding will help you eliminate waste across the board. You’ll stop bidding unprofitable jobs, enrich your best GC relationships, stop investing time in subpar GC relationships, and empower you to weed out “bad” projects with nearly surgical precision.
At the end of his presentation, the attendees were able to ask questions about Clay’s method, and also get his opinion on whatever they were interested in exploring with him. Some of these may overlap with questions you had while reading.
- What is your opinion on the practice of subs submitting their bids as late as possible, with as little info as possible, to prevent the GC from shopping it around? Clay asserts that the sub doesn’t need that GC, and shouldn’t bother submitting bids to them at all. It requires a shift away from the mindset of “Do I want that project?” to “Do I want that GC?” If they’re the type to shop your number, even if you get that job, you know that they’re not a friend to you. They’re not going to go to the owner and have your back. A good GC, by contrast, is the type you can go to when your material prices go up and have them offer to cover half, which Clay has seen happen.
- Making connections to GCs can be more difficult as a finishing trade. Do you have tips on building relationships with GCs for a finishing trade like flooring? You need to figure out who the decision makers within the company are in terms of the budget for your trade. You need to make them know who you are and what value you bring to them. There’s always going to be a smaller guy who is willing to just cover his overheard. So you have to differentiate yourself to those decision makers.
- It can be hard to maintain a laser focus on worthwhile projects when your inbox is filling up. How do you find the time to individually assess every new project, set goals, and reflect on past projects to zero in on your Bread and Butter? Setting your financial goals and discovering what you can execute on isn’t something you can or should push to the back burner. It’s a matter of making time for it, because it will pay dividends down the line. One Meetup attendee suggested that, shortly after a project wraps, it can be a great time to set a post-project review, where you have all the performance information for the job at your fingertips and can readily review it with your team.
- Are GC tiers fixed? For Clay, they vacillate. From year to year, A-Tier may drop down to B depending on their availability of Bread and Butter projects. But, if you hold a GC in high regard and only want to work with them, tell them that, rather than half heartedly seeking out other contractors.
- How do you use LinkedIn to promote yourself? To Clay, it’s a matter of trial and error to discover what works and what doesn’t. Anytime he posts something about his company or a win they’ve experienced, it gets very little engagement. On the other hand, when he talks about universal issues in the construction industry or processes at large, these posts blow up. Another facilitator at the meeting, Sarah Sagredo-Hammond, also chimed in that LinkedIn has been incredibly useful for her on the networking side. She intentionally connects with people in corporate offices for the commercial work she’s seeking out, and tells them she’s available in her area and what work she does.
- Can you elaborate more on profit per man hour? Clay describes determining profit per man hour as a collaborative effort. He gathered his finance and operations teams and communicated what he wanted to find out. It took roughly 30-45 days of digging, and they got results that didn’t make sense. So they started looking into why it didn’t make sense, and realized the jobs they were comparing were not apples to apples. This is what prompted them to break the projects out between new construction and renovations. It bears noting that if you’re not documenting your projects accurately, this is going to be more difficult.
- What other factors inform how you choose a GC or a project? Andee Hidalgo of Spearhead Construction fielded this question. She and her team look at whether or not the GC is union, the size and location of the job they’re offering, and certifications for being a minority or woman-owned business. They check whether or not the GC or owner is heavily involved in any litigation or disputes, and whether or not they give unreasonable deadlines.