Dollars and Cents Are What Make a Construction Project Profitable…or NOT

Having a System for Proposals, Is Better Than Just Guessing

It’s week six of learning the Blueprint for Building a Better Proposal system. As time consuming as learning new things is…John is beginning to see the benefits this proposal system will provide.

Just like building a house using a system that repeats routine actions prevents time being spent rethinking and guessing at how to do things. This system will do the same thing when preparing proposals.

As they settle in and begin the meeting, Gene tells John, “Let’s take a quick look back at what we’ve covered so far. We started by asking ourselves some foundational questions. Next, we discussed the common mistakes contractors make when bidding. Then we went over the system and it’s parts. The last couple of weeks we’ve worked on gathering information and turning that info into a Scope of Work. Today we’re going to start working on…

Pricing the Project

In this step we will determine the price for the project. Communicating a clear description of the project took place in the Scope of Work which is important in avoiding misunderstandings. Accurate pricing is equally as important.

Poor communication will cause heartache, poor pricing will cost you money.

Open the Worksheet template. This blank Worksheet is where you will paste the information from the Data Base as it relates to each of the specific tasks of the project.

The Worksheet template has six different options for overhead and profit ranging from 20% overhead and 10% profit to 40% overhead and 20% profit. You can use whichever of the six options works best for you on the specific project you’re working on.

Typically, larger projects, i.e. new construction, large renovations, remodels or large additions will use smaller percentages, while small projects will use bigger ones. You can use whichever works best for you. These percentages can be adjusted after you have finished the pricing if you want them to be increased or decreased. These documents can be modified with custom percentages as well.

Open the Data Base and prepare to copy the appropriate content into the correlating cells of the Worksheet of the project you are working on. Use the previously written Scope of Work, to determine which of the categories, specific to the project need to be used from the Data Base and copied to the Worksheet.

If more than one item for a specific task is needed, for example shingles, synthetic underlayment and metal edging, flashings. These individual items will be entered separately then added together to create one price for roofing.

You can add as many additional rows as you need, just be careful to keep the formulas intact by filling the content of the existing row to the new ones.

How to determine which tasks should be inserted into the Worksheet

Most of the tasks on the Data Base have options; determining which to use, will depend on the specifics of the project. For example, how is the excavation, trenching and landscaping going to be done…with a skid loader, mini excavator or by hand?

Once it’s determined which methods, actions or materials are to be used for a specific project, copy the pertinent cells from the Data Base and paste them to the Worksheet.

After the pertinent information from the Data Base has been placed on the Worksheet it’s time to…

Enter the quantities of the work to be done.

Fill in the quantity needed to do the work for each item on the Worksheet. This may be lineal feet, square feet, square yards, cubic feet, cubic yards or numbers of pieces. Once this is completed for all the categories, you’ll have prices for each task of the Proposal.

This system offers a constant repeatable process for preparing accurate proposals and is the difference between making money or losing money on construction projects.”

Gene looks at John and asks, “Well, what do you think?”

“Well, I thought my head was spinning before today. Now I’m getting dizzy.”, replied John with a grin.

“I know it seems like a lot, but it really isn’t, once you get started using it.” Says Gene reassuringly. “Experiment with it this week. Call if you have any questions. Next week we’ll bring everything you’ve learned together into a proposal ready to be presented to the customer.”

Guessing is not a good way to build a profitable business.

Previous posts in this series –

What is “business clarity” and how do you find it?

Learning How to Get a Construction Project Started Out Right

It’s Time for the First Meeting

Being Aware of the Common Bid Mistakes is the Best Way to Avoid Them

Constructing a Building is Better with a Plan, a Proposal is No Different

A Good Construction Proposal Starts by Asking the Right Questions

What is a Construction Scope of Work and Why Do You Need One?

A Good Construction Proposal Starts by Asking the Right Questions

This Proposal System Helps You to Not Overlook Things You Need to Know

Another week has gone by and John’s looking forward to today’s meeting. As they wrapped up last week’s meeting, Gene indicated that they will “actually” learn the first step in the proposal system today.

As John goes into XYZ Construction Company’s conference room Gene is sitting at his computer with a Power Point on the big TV ready to go. “Good afternoon Gene, are you ready to get started learning the first step for doing better proposals?”

“I’ve been looking forward to it all week long.” says John.

“Okay. There’s oriental takeout there on the counter. Fill a plate and let’s get started.”

As they fill their plates, Gene asks John,

“When you begin talking with a new customer, what’s the first thing you ask?”

John ponders the question as he sets down. “I ask them about their construction project. What is the work they want done? For example, are they wanting to add on a room addition or remodel the kitchen or do they want to replace the windows? You know…

“WHAT is it they want done.”

“This is the typical question asked by most contractors. Without a doubt it’s a question that has to be asked. But, there’s another question that helps you serve your customer better and achieve their construction dream.

The most important question is WHY.

Why does the customer want to do this project? Do they need more space, does something need repaired or replaced, are they looking to make an area more usable, or is it just because they want to? Learning their why early helps determine a clear direction of ’the what’.

As the construction professional, it’s your job to guide the customer through this process. Most customers have very little if any experience doing construction projects. Often, they get ideas from DIY programs on TV or the internet, other people’s projects, etc. and they just want one of “those”, whatever that is.

Every project is as different as the customer. Without blueprints, specs or seeing the existing location the chances of giving the customer the project they want, is almost impossible. Unless they have a full set of blueprints and specifications to bid from, you need to gather the information for the specific project.”

The customer will have a vague image in their mind of what they want. It’s the contractor’s responsibility to guide them to the realization of that dream.

Information that needs to be gathered:

  • Project info (customer name, mailing address, project address if different than mailing, phone number, email address, project overview, budget, project deadline, any other relevant information that you need)
  • Measurements and dimensions, existing and new
  • Building materials, existing and new
  • Pictures of pertinent areas and existing construction
  • Customer’s design ideas and finishes

The important thing is to not overlook something.

“Use whatever way works best for you to gather the information. If you prefer to write on paper, print out a copy of the Bid Sheet template, it has a list of the different construction tasks that might be needed. Use the space next to each task for writing down a brief description, dimensions, specific notes, drawings, etc.

A pre-determined list minimizes the possibility of forgetting something.

If you prefer using an electronic device (tablet, smart phone or laptop) enter the information in the appropriate space on the Bid Sheet template.With most of the electronic devices now, you can either type, write or draw right on the device. Using the electronic form streamlines the process and reduces the chance of something getting overlooked. Be sure to keep a copy of the template for the project you are working on; this will leave a blank template for the next time.

Forgetting to include something in the proposal is a sure way to lose money.

There are over one hundred items listed on the Bid Sheet and it still doesn’t cover every possibility. Construction projects vary a lot. Even small projects can include a lot of different pieces. If you leave one of the pieces out, someone’s going to be disappointed.

If you start with a list, you’re less likely to overlook things.

Here’s an example of finding out the WHY:

When meeting with customer Jane Smith she explained that she wanted to add a laundry/sewing room to her house but didn’t know where to start or what it should include. We asked her WHY. We found that she loved to sew and did a lot of it. Currently she used the table in the main floor dining room for measuring and cutting and did the sewing on a machine in the basement. In addition to this her washer and dryer were in two separate closets in the master bathroom. Both situations were inconvenient for her.

Finding out her why helped us to present solutions for building her dream.

Here’s an example of the information gathered on the Bid Sheet:”

“If you’re serious about doing better proposals and haven’t bought your Blueprint for Building a Better Proposal system yet, I would suggest that you get that done. Then you could use the Bid Sheet this week when you meet with someone wanting a proposal. Bring it with you and we’ll go through it and answer your questions.

Next week we’ll take the information from the Bid Sheet and prepare a Scope of Work for Jane Smith’s project.”

Previous posts in this series –

What is “business clarity” and how do you find it?

Learning How to Get a Construction Project Started Out Right

It’s Time for the First Meeting

Being Aware of the Common Bid Mistakes is the Best Way to Avoid Them

Constructing a Building is Better with a Plan, a Proposal is No Different

Being Aware of the Common Bid Mistakes is the Best Way to Avoid Them

This is the First Step in Building a Better Proposal

Even though John was still overwhelmed and his schedule was packed, he knew the only way to ever get control was to keep his upcoming appointment with Gene.

John had spent a lot of time this past week considering the questions Gene had asked at the first meeting.

Why do you do what you do?

Do you love what you do?

Why do we need to do proposals?

As John was driving to the office of XYZ Construction these questions were still banging around in his head with a wide variety of answers and no real clarity.

Going in John smelled something amazing. He hadn’t realized how hungry he was. Gene was providing lunch this week and the smell made his hunger apparent.

In the conference room Gene was stirring some chili. “Lunch is ready. Grab a bowl and let’s get started.”

As they sat down Gene asked, “Did you come up with answers to the questions?”

John sat there for a minute and said, “I’ve come up with way too many answers. About the time I think I have it figured out; another answer shows up.”

Gene grinned, “That sounds about right.

The important thing is not having every answer to every question, but rather to continually be asking the questions and actively looking for the answers.

I still ask and answer questions every day.”

“A good way to find WHY answers is to figure out things that work and things that don’t. Let’s start with a WHAT question. Gene handed John some papers and said,

“What are the common bid mistakes made by contractors and how can you avoid them?”

#1 Your customers lack clarity – You remember the story I told you last week about that misunderstanding I had with a customer? This is a perfect example of how the lack of customer clarity is a problem. You need to provide a clear detailed description of the work and the materials that you are going to provide. A clear scope of work helps avoid customer confusion. The Blueprint for Building a Better Proposal will provide you a system for giving clarity to your customer.

#2 Production crews lack clarity – The scope of work not only provides customers with clarity, but it also gives the production crews a clear understanding the work to be done. This prevents subcontractors/employees from doing more or less than the project includes. Too much work done means cost overruns. Too little and the customer is unhappy. The Blueprint for Building a Better Proposal will give the production crews a clear description of the work to be done.

#3 No production budget – When the production crews don’t know what dollar amounts have been figured to do the project, they often spend more than expected. These cost overruns mean less profit.

If you take care of the pennies, the dollars will take care of themselves.

Let your production crews know how many pennies they have to spend. This will lead to more dollars of profit. The Blueprint for Building a Better Proposal will provide you with budget numbers automatically.

#4 Unsatisfied customers – Discontented customers are the worst. Not only can they be a drain on company morale, they can become serious problems that can cost you money and hurt your reputation. They’re paying you to have their dream turned into reality. When they don’t have an accurate dollar amount before the work is done, they will not be happy when it’s finished and costs more than they expected. The Blueprint for Building a Better Proposal gives the customer a clear expectation of cost before the work starts so that when it’s done for that price, they will be happy.

#5 Unprofitable projects – One of the biggest problems in construction is Guesstimates. Guessing at the amount of time and material it’s going to take to do a project is a big risk. Different size projects require different overhead and profit margins. The Blueprint for Building a Better Proposal provides predetermined options of overhead and profit when preparing a proposal. Proposals done this way can increase the profitability of your projects.

#6 Trying to do everything yourself – Most small construction companies only have a few people working. The focus is on the physical construction and doesn’t leave time for doing accurate detailed proposals. Most contractors don’t like paperwork. This leads to hasty, inadequate and oversimplified proposals. The Blueprint for Building a Better Proposal is a system that allows you to focus on doing construction while office staff does paperwork.

#7 Your bidding system isn’t customizable – Most construction projects consist of a variety of different areas of construction. You need a system that can include all or one. Because markets and geographic locations are so different, you need a system that you can adjust to your specific requirements and rates wherever you are. The Blueprint for Building a Better Proposal allows you to be able to customize proposals in these ways and more.

Gene could see that John’s eyes were glazing over. “I know this was a lot to take in and doesn’t feel like we’re getting any closer to actually doing proposals, but I assure you…

Getting clear on these mistakes will give you a head start to providing better proposals.

And next week we’ll start working on the first step to Building a Better Proposal.

Previous post in this series:

What is Construction Clarity and How Do You Find It?

Learning How to Get a Construction Project Started Out Right

It’s Time for the First Meeting

What is “Business Clarity” and How Do You Find It?

A Lack of Knowledge and Inexperience Threatens Your Dreams

Once again, John was alone at the office late on a Saturday night working to get at least one more proposal done, before going home. He had promised four different customers their proposals this week. If all goes well, he’ll have this second one finished before midnight.

As John crunches numbers hoping he hasn’t forgotten anything, he asks himself, “Why am I doing this? I could go to work for somebody else and make more money and work less hours. This sure isn’t how I pictured it five years ago when I started the company.”

“I had no idea that running my own business would be this hard!”

John rubs his eyes and stretches his back and thinks, “I must be doing something wrong. When I was working for Gene at XYZ Construction he made things look easy. I wonder what he was doing different.”

John has been working like crazy all week long. Between production help not showing up, materials not being delivered on time, cost overruns and computer issues…projects are behind schedule, he’s losing money and even if he works tomorrow he’s going to have to disappoint at least one of the customers waiting on a proposal.

“How am I ever going to turn this around?”

When John finishes the proposal and looks at the clock, it says 12:40. It’s already Sunday he thinks and he still needs to proofread it, print it and sign it. Something has got to change! “I’ve been leaving home early and getting home late all week. I haven’t even spoken with my wife for days. I’m calling Gene Monday to see how he did things.”

First thing Monday morning John called Gene. After a few minutes of catching up, John asked Gene the question that he couldn’t quit thinking about. “Gene, I’ve been working day and night trying to keep up. When I worked for you it seemed like you had everything figured out. You weren’t stressed and when things didn’t work out as planned. Your customers understood what to expect with their projects and were happy when they were finished. What am I doing wrong?”

That’s the question that almost every business owner asks themselves.

“Know this,” Gene said, “When I started my business, I was just like you. I struggled to keep up, worked too many hours, neglected my family, was mad at myself for letting down my customers, my family and myself. I kept asking myself that same question. What am I doing wrong?”

“By the time you were working for me, I had figured some things out. It’s amazing what you can learn when going to the “school of hard knocks”. Keep in mind this is the most common process but isn’t the most effective.”

“What really turned my business around was when I found out about Solution Building’s, Blueprint for Building a Better Business.”

Think about how much easier and better a construction project goes when you have a plan. The same thing is true for a business. A plan gives you direction, keeps everyone involved working together and improves the odds for a successful outcome.

“John, if this is something you would be interested in, I would recommend starting with the, ‘Blueprint for Building a Better Proposal’. This is the most important and most neglected part of construction communication. If you’d like I would be happy to meet with you and go through the process and answer any questions.”

“If you know of any other construction companies that you think could use some help doing proposals share this information with them and they can meet with us too.”

“There’s a lot more to the ‘Blueprint for Building a Better Business’, but starting out, you should focus on the proposal system. After you get this part implemented, we can discuss which part of the business blueprint system would be best for you next.” After talking with Gene, John thought, “I’m sure glad I made this call. For the first time in a long time I feel like there might be a light at the end of the tunnel that wasn’t an oncoming train.”