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Snow Business: Bid vs. Proposal
By John Allin
Recently, while reading through some threads on the various discussion forums for snow contractors, I read about someone saying they were “outbid” on a snow project for last winter. As I read more and more of that particular discussion, I became agitated about the whining that was happening about being “outbid.” Unfortunately, in the snow industry (and in most service oriented industries) the “bid” mentality seems to come to the forefront much more than it should.
To me and many others – especially those on the “other side,” the word “bid” is property manager-speak for “low price.” In my opinion “bid” has nothing to do with quality at a fair price. “Bid” is all about “cheap. Bad form from my point of view. “Cheap” means “low profit.” It also can mean “su bstandard service” in order to achieve a viable margin. This does not benefit the customer or the contractor. This is true in the tree care industry, the landscape industry and the snow industry as well.
As snow and tree care professionals, we should be providing “proposals” or “quotations” for services rendered. Rarely do we see some larger organization (except for a governmental entity) have a Request for Bid. On the other hand, Requests for Proposal (RFP) or Requests for Quotation (RFQ) happen all the time. If you figure out how to accomplish the project for much less cost than the competition by utilizing advanced methodology, or updated technology – OK, you might have the lowest end-user cost if you are quoting “cost plus margin,” assuming your margins are viable and can sustain your overhead and necessary profit. But, to bid a project just to get work is a fast track to the poorhouse.
One organization holds classes on how to “build a bid.” Sounds like a class to learn how to “quote cheap.” Is that how you want to be known in your chosen profession – the “cheap guy?” Going to a class to learn how to bid a project (i.e. give out a low number) seems like a giant waste of money when few in attendance at such classes advertise “LOWEST PRICE CONTRACTOR IN THE MARKET.” I once ran into a “competitor” who advertised just that – and, from experience, we figured out he actually showed up 70 percent of the time, too ! Great average in baseball – but for a snow contractor, not so much.
When prospective customers used to call me asking for a bid on a snow contract, my response was always, “Why did you call me?” After hearing how they knew of us by name and reputation, my next question was “why are you looking for pricing?” If they came back and said that the incumbent provided lousy service – I would respond with, “tell me what you were paying.” Often, the price they were paying justified lousy service.
I would explain that we provide outstanding service and outstanding service does not come cheap. If they responded that they were instructed to “bid it out,” I would ask if they were happy with the guy from last year. If so – I would ask what price they were paying last year, and tell them I would quote higher so they could keep the incumbent. (Really – I did this a lot.) Lowering the price to take the business away from someone they were happy with seemed counter productive to me. What would make the customer think we could provide outstanding service at a cheaper price?
If the customer would respond to my original question about why they were soliciting proposals (notice I didn’t say “bid”) with “last years contractor went out of business” – I would ask what price they paid. Surely they didn’t think we would quote lower and stay in business, did they? Look what happened to the incumbent.
Also, bidding work for the sake of throwing a wide net to see what new business you can garner is dangerous. Target marketing your services to a specific clientele will allow for a better overall customer base. Bidding work requires no sales effort – just a sharp pencil.
The contractor who said he was “outbid” actually was “out sold.” Sales effort can make a difference, if handled appropriately. There are only two reasons not to close a sale – 1) you cannot do what the customer wants, or 2) you got outsold. That’s it. Only two.
Of course, if the customer wants you to do a $500 per push plowing project for $100 – you cannot do what the customer wants. However, if you lost the project over 5 percent or 10 percent – you were outsold. Some would kid themselves in justifying failure by saying, “the other guy quoted a lower price.” No property manager wants the lowest price if it mean s the contractor only shows up “most of the time.” Property managers lose their jobs hiring contractors like that. However, we need to convince the prospective customer that we are worth the additional expense they will pay by hiring us.
One way is the three-option, two-choice rule. Every customer has three options in the process of hiring a snow contractor: Good, fast and cheap. The customer can pick two. It makes a difference. They cannot have all three. It isn’t possible to achieve all three and keep a customer happy.
If you look long, hard and honestly at your previous sales opportunities, you will see these insights are true of almost every proposal outcome, whether for or against you, whether in tree care or snow plowing.
True snow professionals should lose the word “bid” from their vocabulary. In fact, those snow contractor clients who hire me as a consultant know that I ban the use of the word in their organizations altogether. There are ways around the dreaded “bid” scenario. And, at all costs – contractors should avoid “bidding” work. It is an unfair term that is not indicative of snow professionals’ market position – unless, of course – you don’t care about your position in your marketplace.
John Allin, CSP, CLP, is a consultant to snow professionals and author of the book Managing Snow & Ice. He has 30-plus years’ experience in the snow industry and has worked with snow professionals in 36 countries around the world. Sign up for his September 16 webinar “Expanding Your Profit Centers into Snow Removal” at tcia.org/webinars. His blog can be seen at johnallin.com.
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