SEVEN BIDS TO WIN ONE. WHO'S PAYING FOR THE SIX?
Estimating costs money and nobody prices it. If your hit ratio is fifteen percent you produce roughly seven bids to win one job, and the six you lose were paid for out of the margin on the one you won. That's the arithmetic that makes pursuit a finance question. Three things follow from it. Compute what a bid costs you to produce, because until you do, chasing more work looks free. Choose customers by how they pay and not only by what they pay, because a general contractor at ninety days is charging you for the privilege of working for him. And decide in advance what you'll decline, because a company with no no-bid rule takes whatever comes and calls it a pipeline.
A healthy hit ratio runs twenty to thirty five percent measured in dollars across twelve months. Above forty percent usually means you're the cheap number, which is a pricing problem wearing a win-rate disguise. Below twenty and you're funding an estimating department out of too few jobs. Either end tells you something about pursuit that the win itself never does.
WHAT IT MEANS.
Finding the work is the first of the five things a construction company has to do, before winning work, performing it, funding it and protecting it, and treating it as a sales activity is what makes it expensive: the decision about which customers to pursue is a financial decision, because it sets your collection cycle, your concentration risk and your estimating cost for the next two years.
This is pillar one of five: find the work, win it, perform it, fund it, protect it. Most contractors are competent at three of the five and lose money on the two nobody assigned to anybody. Finding the work is usually the first orphan, because it feels like the owner's instinct and because there's no report that says it went badly. A lost bid produces no journal entry.
What makes it a CFO subject and not a marketing one is that every pursuit decision commits money later. The customer you chase determines when you get paid. The market you enter determines what your working capital has to carry. And the volume you bid determines how much estimating overhead you're recovering across how few wins.
FOUR DECISIONS, ALL OF THEM MADE BY DEFAULT.
Nobody knows what a bid costs to produce
Estimator hours, takeoff software, the walk, the addenda, the follow-up. On a commercial subcontractor that's a real cost per bid, and because it sits in overhead it's invisible per pursuit. So the company can't answer the only question that decides whether to chase something: does the expected value of this bid exceed what it costs to produce. Without that figure, more bidding always looks like more opportunity, and an estimating department becomes the largest unmeasured cost in the business without anybody deciding it should.
Customers get chosen by what they pay and never by when
Two general contractors offer the same margin. One pays at forty five days and one at ninety. The second is borrowing from you at whatever your line of credit costs, for the length of every job, and the margin on the bid says nothing about it. Ninety days is weak, forty five is the target and thirty is strong. A pursuit decision that ignores payment behaviour is a financing decision made by somebody who doesn't know he's making one, and it's the most common way a profitable subcontractor ends up on a revolver.
Concentration builds up without anybody choosing it
Work comes from the people who called last time, so a good relationship becomes a large share of revenue with no decision anywhere. Top three customer concentration above about sixty five percent means one relationship ending is an event the company may not survive, and it also removes your ability to say no, which is the only leverage a subcontractor has on terms. The dangerous part is that concentration feels like success right up to the week it doesn't.
There's no rule for what to decline
Without a written no-bid rule a company bids what turns up, and the work that turns up is disproportionately the work other people passed on. Three or four conditions are usually enough: a general contractor whose payment history you can't verify, a scope outside what your crews do well, a schedule that needs capacity you haven't got, and terms that move risk onto you at a price you can't set. Every one of those is a finance judgement, and writing them down in advance is what stops them being argued about at four o'clock on the day the bid is due.
WHAT IT LOOKS LIKE IN DOLLARS.
Total the dollar value of everything you bid over twelve months and the dollar value of what you won. That percentage, and not the count of bids, is your hit ratio. Twenty to thirty five percent is healthy. Above forty, look at your pricing before you celebrate. Below twenty, you're carrying an estimating department on too few jobs.
Take a quarter's estimating cost, fully burdened, plus takeoff software and the time anybody else spent on pursuits, and divide by the number of bids submitted. That's your cost per bid. Multiply by the bids you produce per win and you have the pursuit cost carried by every job you take.
Rank your general contractors by actual days to pay over the last year, from your own AR history and not from their contract terms. The spread between best and worst is usually thirty days or more, and it's the single most useful sheet of paper in a pursuit conversation.
Revenue from your top three customers as a percentage of total. Over about sixty five percent and you're one relationship away from a crisis, and you've also lost the ability to decline anything they offer you.
THREE HABITS, AND ONE OF THEM IS SAYING NO.
Every pursuit, the customer, the value, the outcome, and where you finished if you lost. Without it nobody can tell you whether you're losing by two percent or twenty, and those are opposite problems: two percent is a pricing decision and twenty means you were never the right bidder. A bid log costs one spreadsheet and it's the only document that makes pursuit reviewable at all.
Days to pay, retention practice, how they handle a change order, and whether the pay application cut-off is one your office can hit. Put it beside the margin on the pursuit sheet. A job at eighteen percent from a forty five day payer is worth more than twenty two percent from a ninety day payer once you carry the financing cost, and until both numbers are on the same page nobody makes that comparison.
Three or four conditions, agreed when nothing is urgent, so a no-bid becomes a rule being followed and not a fight being had. Bidding less isn't the goal. It's to stop paying to produce bids you were never going to win at a price you could live with, which is where most of a hit ratio below twenty percent goes.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
FREQUENTLY ASKED.
