No Bigger Challenge Than Pricing
In all his years working with construction contractors, Steve Ball, CPA, CVA, CCIFP, has rarely seen a challenge bigger than pricing.
If you’re like most contractors, you often find yourself bidding against competitors who do not have a good grasp of their cost structure. Those competitors typically bid on jobs from which they probably can’t profit.
When you go up against low ballers, you often don’t stand a chance to win. Unfortunately, it can take a long time for these low-balling companies to be weeded out of the market, but in the meantime they sure can wreak havoc with your profit margins.
Pricing Case Study – How Low Can I Go?
One of Steve's construction clients, a residential exterior home improvement contractor, asked him, “What flexibility do I have in bidding work?”
They were entering the winter months, which are typically a slow time for them because of the nature of their work and with fewer opportunities comes increased pressure to lower prices to obtain work.
Even when this particular contractor took steps to lower overhead during slow times, pricing challenges remained. If you want to keep good people around during downtimes, perhaps the real question is, “What is the lowest I can bid on a particular job?” The contractor was slashing off-season bids by as much as one-third to obtain contracts.