Blog: 5 Steps to a Successful Residential Bid
Construction Manager Should Know (But Most Don't!)
Whether using competitive bidding or cost plus fee contracts, implementing best practices will raise your chances to win bids. For small to midsize residential projects, most will fall into one of three categories: remodels and renovations where existing homes are updated and owners intend to keep living there; custom home construction where the owners have commissioned a house be built at a specific site for their family; and “spec” home remodeling and construction, where a developer, investor, or builder is updating a house to be sold, betting that it will sell for more than the cost of construction.
Find your niche and build on it
If you have been in the business of renovation and construction for a while, you will be able to examine your past work and determine what types of jobs are most profitable to you. Perhaps you know the ins and outs of homes built in a certain decade, or green materials, or second-story additions. Take time to examine past jobs that worked best for you, both financially and at a level of general satisfaction.
Another way to figure out your niche is to ask Who, What, Where, and When. Who is your ideal client – how old are they, what is their income / financial situation, how well do you understand their priorities? What kind of project do those clients typically want and how does that fit into your specific range of knowledge and experience? Where are your target clients located - how long is that commute for you and your team? When is the best time to undertake these jobs – consider seasons and other likely events for your target client, then figure out when to step up marketing initiatives.
Acquaint yourself with the house AND your customer
Viewing the house or build site in person is important for two reasons. For one, you will be able to make proper assessments of the space – for measurements, materials, and possible issues – to help put together a comprehensive and accurate bid. When you are there, you can collect initial measurements using a laser measurement tool that attaches to your phone and saves directly into an app. With just a laser measurer and your phone, you can have project photos and floor plans all in one place and right at your fingertips.
Secondly, making a face-to-face first impression with potential clients allows you to get a sense of who they are – another factor that will help when presenting your bid. Listen to their concerns and encourage them to ask questions. Get a sense of their priorities – are they looking for the lowest bid? Is the timeline of greatest importance? Meeting your client in person gives them a chance to get to know you, too, so be aware of how you present yourself.
Let them know your communication style right away, as that establishes the crux of your work relationship. Linking your entire team into a project management app is a great way to display top-notch communication to the client. Show them how quickly and easily updates can be shared among your various subcontractors, yourself, and them. They will be impressed with your tech savvy workflow and command of various trades in a complicated project.
Figure out the cost of work and a timeline you can stick to
Once you have collected measurements and properly assessed the work that needs to be done, your next step is to estimate costs. Your bid should include all costs – beyond materials and subcontractors – such as HVAC, finishes, equipment, and overhead. Vehicles, office expenses, accounting, advertising, insurance, and other non-job-specific costs should be included in your overhead pricing. Keep in mind the disposal of unusable material at the end of the job, too. Always check and double check your estimates.
Because competitive bidding takes so much time, you want to streamline the process as much as possible. This is where organization of past work, contacts, and reference photos help most when they are all in one place. Use modern technology for project managers that allows you to access all the info you need on-the-spot from your phone.
Scheduling is especially important for remodels and renovations. Homeowners want to know when disruptions from the construction process will be over and they can get back to a normal routine. Figure for delays when you plan out the project. Subcontractors may be held up at another job longer than expected and late deliveries can launch an entire week into disarray. Keep up with communication - always check in with your work team before and during the job.
Add an adequate profit margin
You have to plan for profit if you want a job to be profitable to you, so be sure to include it in your bid. If possible, calculate markup based on at least a year’s worth of data (provided your bookkeeping is accurate).
Michael Stone of Construction Program and Results, Inc. and author of Markup & Profit: A Contractor’s Guide breaks down markup and margin in this way:
If overhead costs average 32% of your total revenue and you want a 10% profit, that means your average job costs are 58% of your total revenue. You just estimated a job with total job costs of $1,000. You arrive at your sales price by adding overhead and profit to the job costs:
$1,000 + 32% overhead ($1,000 X .32 = $320) = $1,320
$1,320 + 10% profit ($1,320 X .10 = $132) = $1,452
Now, job costs of 58%, overhead at 32% and profit at 10% means you should be using a 1.72 markup times cost to get to the sales price for your work.
Sales price with markup of 1.72: $1,000 X 1.72 = $1,720
You now have an additional $270, or $270 per thousand dollars of job costs.
Presentation is important
When it is time to present your bid, remember it is not all about money. You stand behind knowledge and experience, and you represent a group of trades who work hard for you. Avoid emailing your bid and present your residential construction bid in person so you can take the client through your numbers step by step.
Build on your first meeting with the client to re-establish your plan for updating them on progress. Technology will serve you well, so take the visuals and organization of a mobile management application and apply them to your presentation. When you show how you will collaborate, manage, and track progress it highlights the work ahead of you (validates markup) while involving your client in the process.
Visual aids and movement both play well into bids. The potential client will likely remember what they saw and how you acted more than the details of what you said. Rehearse the day before and you will be that much more confident at bidding time.
Use a prepared agenda to guide the meeting. Be prepared to talk about how past work has qualified you for what the job entails and why your bid might be different from others. Keep in mind the bidding deadline and do not let your hard work go to waste by missing the date. With a combination of relaxed confidence, thorough numbers, and tech savvy communication, you are sure to land more bids on residential jobs.