Be sensitive to competitors' pricing.
While you may not know the exact bid strategy your competitor is using - and remember, most contractors don't have a bid strategy - you should be able to piece together by how much money you are losing jobs. Often a customer will share with you that you were too high by a certain amount or within a percentage. Always ask what the difference was in losing a bid. Over time you may be able to see a pattern that you are 5 percent or 7 percent too high. Likewise, when you win jobs, don't be shy about asking how close some of your competitors were to your price; you may find out that you are pricing your work too low.
Mix your bids with different mark-up values.
Be strategic implementing this step, but try bidding similar type of work at different MV factors. You may be able to circle your competitors and find what MV will land more work for you. If a 1.5 MV factor gets you 70 percent of the work you bid you might try a 1.8 MV factor to see where the up limit is. If you continue to get 60 to 65 percent of the jobs you bid at 1.8 MV, I would suggest you are still leaving money on the table and should raise your MV to 1.9, maybe even 2.1, just to test the up limit.
Now, if you want a lot of work at a particular price range and you're getting 60 to 70 percent of the jobs you bid then leave well enough alone. Just remember, if you're winning percentage is high (greater than 60 percent), chances are just as high that you are pricing work too low.
Setting your MV is both science and art. The reality is that you need to price work to get the work. However, if you are pricing work just to stay busy then you will find it very difficult at some point to make any money. Don't be price foolish, but determine your historical MVs and what your market will accept and then price accordingly. «
Brad Humphrey is President of Pinnacle Development Group, a management consulting firm to the construction industry. Brad has written several books for business owners and leaders and has begun to put many of his writings onto CD. For more information about Brad and his company, visit www.pinnacledg.com.