Bidding on Contracts

By on April 30, 2014

Many business owners are comfortable with the single sale, meeting the needs of a single customer for a single job. However, in growing your business, you should look at expanding your range of services to provide contracted services over a long period of time. While you may be able to solicit business from other small small businesses through face to face meetings, you may be required to bid on a contract with a larger business.

When putting together your bid package, there are several steps that you should take when creating the package, from interactions with the potential client to properly formatting your bid numbers. Since most bids are done in a sealed format, you only get one chance to do it right.

5 Steps In Bidding on a Contract

1 – Meet with the Information Gatherer

Though this may not be possible in large scale bid requests, meeting with the information gatherer gives you the opportunity to present the best image possible of the company. In addition to getting the required information, you can get a feel for the future or intangible needs of the company. It also allows you to begin to create a working relationship with the company so that you are on the short list for future bid requests, even if your bid is not chosen for the current job.

Also, it can give you the opportunity to show the quality of your product in relation to other providers. If you manufacture kitchen cabinets, show the quality of construction at the same time that you provide the information gatherer with consumer reports or industry awards.

2 – Do the Research

Read up on the what the entire order will need from you over the length of the contract. Then, take the time to do some research on what the client has used or needed in the past. If the contract is for 50,000 gallons of a chemical per year, do they typically go through that much each year, or is that an estimate? Talk with a business consultant or other expert in the field to determine if that is a likely number.

When you do the research, you need to look at three things related to that number. First, is the client going to purchase the entire amount, or are you going to be stuck with the holding cost if their timetable is delayed or if they can not follow through on the purchase order. Second, can you actually provide the amount they need without reasonable disruption to other clients. Third, can you scale up to meet additional demands from the client if the situation changes. If any of these conditions are something that your company can not absorb, then you should pass on the bid.

3 -Figure Out Your Own Costs

When you bid on a contract, it is not the same as doing a single job multiple times. If you charge $50 for an item to a regular customer, because $50 is what you need to make reasonable profit on one sale, that same price will not be accepted in a contract bid. You will need to stretch your profits over a larger order. Instead of making $10 on that $50 sale, you may only now be making $1 on that sale, but you may be making 10 times as many sales as a part of the contract. This means that you make the same amount, but spread out.

Related to this, be sure that your company can meet the increased demand and the costs that accompany it. Costs such as more equipment or more people will change the amount of cost your company will incur in meeting the contract. Plan all of this out with your management team or a business consultant so you can meet the needs of the contract without losing money from the company.

4 – Get Your Vendors Involved in the Bid

One of the best ways to increase your chances of success is to negotiate a better deal with your vendors. Reach out to the vendor representative or contract manager that you work with to negotiate a better deal. If you make or install a product, get your materials suppliers to reduce your costs so that you can reduce that cost in your bid. Keep these relationship active and healthy, because it can mean additional successful bids in the future.

5 – Provide All of the Information Requested

Bids are requested for the entire job, and should be presented in as transparent a form as possible. If you’re bidding on the job of creating and printing all of the forms for the local hospital, then be sure to include the entire cost, broken down through all the costs to the client. You do not need to include things like ink, but make sure that the costs are appropriate to the job.

Also, make sure that all your charts and tables are clear. If you are doing a scaling cost structure for created items, such as printing forms, make sure that it is clear what levels are required for each one and what the time scales are.

Most often, bids are done sealed, where you will submit your bid for the job and no one will see it until the decision team is ready to select a winner. If they are working with the information gatherer to gain their input, that positive relationship can add points to your chances of success. By providing the best possible product at the lowest price, you have the best chances for winning the bid and adding additional financial growth to your company.

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About Charles Wazig

FSN Business Columnist - Charles Wazig has been a business consultant for the past 10 years and has aided small and medium sized enterprises start and grow in almost every industry. Understanding markets and financial forecasting can be a daunting task, and Charles strives to make it easier for the common person to be fully prepared for creating and running their business. You can find Charles on !

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