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  • Writer's picturePeter Searle

A 3 step process to winning profitable tenders



For contractors and consultants, winning profitable tenders takes discipline. It requires accuracy throughout and consistency of approach so that the sensitivity of the final adjustment is fully appreciated. Profitable tenders, lead to being a profitable contractor, if the price is wrong in the first place, it is virtually impossible to make a profit. There are 3 steps to pricing projects which will be profitable. 


Step 1 – A clean set of accounts suitable for a contractor 


Having a clean set of management accounts, which have not been adjusted to save tax is crucial. Furthermore, the accounts should reflect the project-based nature of contracting. They should show: 


  • Gross profit by type of work carried out 

  • Breakdown of overheads in to recognised functions 

  • The operating profit 

  • Dividends taken in the right place in the accounts 

  • The net profit and 

  • A turnover forecast. 

 

From the accounts, calculations to achieve break-even, margin and mark up should be able to be calculated correctly to get consistency into the pricing. 


Step 2 – Bid-no-bid 


The selection process for choosing which projects to bid requires discipline. It is too easy to bid everything which you are aware of. This wastes resources and it probably puts you in a large pool of bidders where the lowest price will win. The chances of winning are slim, as there are so many bidders. The race to the bottom is assured as you try to secure a win. 


The aim should be to tender projects where there is a limited number of carefully selected bidders. This way you will be bidding against likeminded competitors. There is a process which can be used to identify suitable projects in the sectors which will sustain prices where a sensible profit can be obtained. Having a record of Gross Profit by sector, in the accounts will greatly assist in determining which sectors to pursue or avoid. 


Step 3 – Benchmarking the market 


If you have adhered to a Bid-no-Bid policy, you should be in a position where you can build up the project costs accurately and know that they will be similar to the other carefully selected bidders. By adding the correct markup for overheads obtained from the clean set of accounts you get your breakeven price. The amount of profit which is added to that is a relatively small percentage. If you benchmark the percentage added against wins and losses you will soon be able to determine the maximum profit you can make and not loose a project. With practice, a very small adjustment can be made to secure a project, this method is so sensitive. 


Next steps: 


  • Recast your accounts for internal use 

  • Establish a bid-no-bid policy 

  • Start benchmarking the market with current data. 

Get in touch, for a no-obligation discussion, if you need help with any of these steps. 

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