As we grew our commercial general contracting company, we became known in the market for providing timely and accurate conceptual estimates for anyone thinking about renovating, improving, re-purposing, remodeling, or building a building. Local commercial developers and real estate brokers would constantly call and ask us to provide cost estimates to build new industrial or manufacturing buildings, remodel or add office improvements to existing projects, or upgrade their business parks.
These constant requests were all great opportunities for us to work with lots of potential customers. As time went on, we got busier and busier doing these ‘free’ estimates for potential clients. And as we got busier providing potential project budgets, we added two additional estimators to handle the workload, which also reduced our bottom-line.
Providing free construction estimates is a good marketing and sales tool that seems to attract lots of potential contracts. But eventually we realized providing free conceptual estimates for almost anyone who called for any type of project was not a good use of our time or money and produced a low return on investment. Our proposal-win ratio for these potential projects was less than 5% as most never came to fruition or got built.
Why? Lots of people kick the tires and think about buying, remodeling or constructing buildings without the funds, resources or commitment to make it happen. And when optimistic real estate brokers encourage their clients to consider building or remodeling, potential construction customers also get optimistic and seek help determining costs for potential projects from contractors willing to work for free without compensation or firm commitments.
Determine how you want to do business
To solve this problem, estimate less jobs, win more work, and improve our proposal-win ratio, we made some big changes in how we do business. We held a strategic business planning meeting with a professional construction business coach to work thru and determine the customer, project, and contract types we wanted to go after, target and focus on going forward.
We also decided to stop offering free conceptual estimates for any customers who asked without firm commitments for projects we want to build that have good chances to really get built by us as the contractor.
In order to get firm commitments from potential customers, we insisted we always must meet with decision makers to review their project needs and review our qualifications and proposed contract terms before we agreed to do any work preparing estimates for them. This decision reduced our estimating workload and eliminated wasting time on dead-end projects. We also decided to always demand letter of intents from project owners to be their contractor, which outlined our pre-construction services and fees for helping them through the design process and then building the project.
To win more work, reduce your estimating workload, increase your proposal-win ratio on potential projects, and get a higher return on our estimating budget, start by developing your step by step plan to win more contracts.
1. Determine your project targets
First you must determine and write out your business development marketing and sales targets. Decide what type of projects you want to focus your marketing, sales and estimating efforts on to get the highest return. When you say yes to any type of project, it’s nearly impossible to become known as an expert in a specific type of work.
Customers seek out the best contractors for their projects who are experts in the type of work they need done. When your website or brochure says you do all kinds of projects, anywhere, for anyone, you’ll never be perceived as the right choice for their special project.
Strategically decide how you want to do business and what you want to focus on and become known for.
- Niches, expertise and specialties we target
- Project types we target
2. Determine your customers targets
Next, to increase your focus you must determine the type of customers and specific customer targets you want to go after and market to. It’s difficult to market to every potential customer in your area. But if you choose a specific customer type or industry, you can develop a plan to penetrate that market and become the recognized best choice contractor in your area of expertise.
For example, by deciding to become an expert in building food manufacturing facilities, it’s easy to locate potential customers and become known in that industry as the preferred provider of construction services. Also determine how you want to do business, what type of customers you want to market to, and what type of contracts you want. List out your targets:
Customer types we target:
- One time customers
- Repeat customer potential
- Loyal customer relationships with little or no competition
- Hire low bidder against unlimited competition
- Only hire qualified select list with expertise
- Value performance and added services
- Value technical or engineering requirements
- Value performance, safety and quality control
- Private customers
- Public and Government
- Institutional and utilities
Contract types we target:
- Lump Sum
- T & M / Cost Plus / Unit Price
- Negotiated / G-Max
Industries or markets we target:
Specific customers we target:
3. Get customers to commitment
In order to win more work plus improve your proposal-win ratio and bottom-line, you’ve got to always ask for the order rather than offer another free estimate or a lower price. Too often contractors don’t clearly and specifically tell customers they want the job. They, therefore, wait for customers to call them with the results.
Read next: Win Big at the Project Interview
When you don’t ask, the answer is ‘no’ unless you’re the lowest low bidder. Getting customers to commit to hiring your company involves a pro-active aggressive strategy to inform customers you want them to commit to hiring your company as the contractor for every project. By providing free estimating services, you’re hoping your helpful attitude and fast service will be enough to win contracts.
You must insist on meeting with decision makers early in the process in order to present your company and get firm commitments from them. When meeting with customers, make a convincing case why they should hire your company, and then ‘call for the question!’
The question is: ‘What will it take for you to hire us now to be your contractor for this project?’ If they can’t or won’t answer this question, they’re likely planning to get lots of other bids from competitors, will award the contract based on the lowest price, or aren’t sure they want to commit to spending any money at this time. All of these hesitations are bad for your company.
When you meet with potential customers regarding a specific project, ask them:
- Will you negotiate?
- What other contractors are you talking to?
- Who have they used as their contractor previously?
- What are the odds you’ll actually build this project?
- What’s the most important criteria you have in selecting a contractor?
- If all else is equal, what are the chances we have to be awarded the contract?
And the most important question, "Will you sign a letter of intent to hire us as your contractor if you’re satisfied with our pre-construction services and help you meet your budget?"
Present them with a simple one page letter of intent to hire your company as their contractor. In consideration of your commitment and time investment estimating, attending meetings and providing pre-construction services, you’re asking them to also commit to working with your company to build the project.
Explain if they aren’t fully satisfied with your services they can cancel their commitment for any reason including if the project final bid estimate doesn’t meet their budget. Many contractors also ask for a small pre-construction services fee if you feel it is warranted or the project is cancelled.
By getting focused on how you want to do business and asking for the order in a convincing manner, you can improve your proposal-win rate, reduce your time estimating projects you’ll never get and improve your bottom-line.
George Hedley CPBC is a certified professional construction BIZCOACH and popular speaker. He helps contractors build better businesses, grow, increase profits, develop management teams, improve field production, and get their companies to work. He is the best-selling author of “Get Your Construction Business To Always Make A Profit!” available on Amazon.com. To get his free e-newsletter, start a personalized BIZCOACH program, attend a BIZ-BUILDER Action Plan Boot Camp, or get a discount at www.HardhatBIZSCHOOL.com online university for contractors, E-mail GH@HardhatPresentations.com.