The Real Reason To Bid Commercials Correctly

Discussion in 'Lawn Mowing' started by MMLawn, Jan 17, 2006.

  1. MMLawn

    MMLawn LawnSite Gold Member
    Posts: 3,569

    I just posted this in another thread. But I am so sure that so many folks make this mistake, in an attempt to help them see why I am also strating it as a thread. Enjoy and I hope it helps guys open their eyes and make more money!

    Okay, Schools in :laugh:

    I'm going to leave my ruff image for a few minutes and try and help you new or younger guys understand why not to bid to low.

    Lets use my example of a $50K Job.

    Okay, this is a "low bid" contract award that includes just basic cutting, trimming, fert 2X a year and overseeding 1X per year only.

    Bidders A,B,C are knowleadgeable LCO's, Bidder D is a new or unknowledgable bidder. The bids are opened and Bidder D has bid $15K. Bidder A bids $50K on the low end, Bidder B bid $53K and Bidder C $55K on the high end. Bidder D wins award of bid.

    So you say hey, he did good. His first job and he's going make a decent salary, ESP since HIS cost of doing business is LESS, because he is a small Solo and A,B,C are bigger companies with several employees and lots of overhead. Right? I mean that's gotta be right cause I've heard guy after guy on LS say this. But are they REALLY correct?

    NO, and heres why.

    Bidder D will do the labor himself solo. It will take him one entire 10 hour day. because he is small, so he has 10 hours of labor on this job. Bidders A,B,C would have used 2 employees that would have had it done in 4 hours, which equals only 8 manhours, 2 less than D. Now, chances are very great, no very probable that he is paying way more for fert and seed than the others because he buys way less than they do. His fert cost is say $16 a bag and theirs $13.25 a bag. He is paying $60 a bag for seed and they are paying $40 a bag. They are probably getting equipment at a better deal because they are buying more of it. Same goes or parts, he pays $7 for an oil filter and they pay $4 because they buy in bulk. He pays $2 a quart for oil, they pay $1.50.....YEAH, I know what you are thinking..."but wait they are also going through MORE of this stuff you say".....are they? NO, not job for job. As a matter of fact on this bid because as said they are using 2 employees working only 4 hours total vs. his solo self working 10 hours they are actually putting LESS time on the equipment based on this same site and less time on this bid. Gas and insurance and licensing, etc will be about the same cost for them all, EXCEPT the larger ones have more jobs to spread that cost out over, so the cost on this one job would have actually percentage wise have been LESS for them than it is for Bidder D. So, in real numbers their overhead is NOT more on this job than D's is, it is LESS.

    So, what has he done wrong you ask? He WON the bid and is making money.

    YES, he did, BUT Remember this, Commercial Clients KNOW about what the job should cost, either because they have/had their own employees doing it, they have researched it or it has been under contract before. They know this price and EXPECT TO SPEND THAT AMOUNT IF NEED BE. So, in bidding and winning this contract but not really knowing the proper way to bid, he could have bid $49K and STILL have won. So by him not being knowledeable and "thinking" he had a lower cost to do business, he may have won, but in doing so he also LEFT $34K sitting on the table, while all the time the client laughed taking his $34K that he was prepared to spend back to the bank.

    Schools out.
     
  2. MarcSmith

    MarcSmith LawnSite Fanatic
    Posts: 7,157

    Good Solid Math and reasoning....
     
  3. scholzee

    scholzee LawnSite Member
    from NY
    Posts: 130

    The only part I do not understand is why he has 10 hours on the job and the other company has 2 guys at 4 for a total of 8, and why the equipment would have less hours. He starts, loads unloads one mower, they start load/unload 2 mowers, edgers trimmers etc. 4 hours mowing with 2 mowers equals 8 hours with one mower. I agree with what you say except for it takes 1 guy 10 hour / 2 guys 8 hours and there is still the same hours on equipment but it is spread over more machines.
     
  4. MMLawn

    MMLawn LawnSite Gold Member
    Posts: 3,569

    Ah, see I never said they were using two mowers. In most bids as this one would be trimming and blowing while one is mowing. It takes them less time because of course 2 can get the same amount of work done faster than 1 can and they will not tire as easily and will not have to take as many breaks. Thus why the 8 man hours vs. the 10.

    But even if it takes them 9 hours and him 10 hhours, the point is they are still on site for less man hours, and even if they did use 2 machines, you still said it. That still means less hours on each machine, so still no more service time than he will incur.
     
  5. GreenMonster

    GreenMonster LawnSite Silver Member
    from NH
    Posts: 2,702

    Schools In, Schools Out..... Mike, you're like a Southern version of Gedd :D
     
  6. MMLawn

    MMLawn LawnSite Gold Member
    Posts: 3,569


    Oh, no....:eek:
     
  7. GreenMonster

    GreenMonster LawnSite Silver Member
    from NH
    Posts: 2,702

    ding, ding, ding, ding, ding, EFFING DING!

    This is the kind of real world stuff that annoys the crap out of me. Guys that are doing this in the real world are whoring out the industry and will ultimately make it more and more difficult to make money. Plus, they think they did great cuz they were awarded the contract :rolleyes:
     
  8. Precision

    Precision LawnSite Silver Member
    Posts: 2,995


    and whoring is a very nice word to use there.

    the stupidity of others only bothers me when it affects me. And Low bidding so next year they expect the $15k bid is what really drives me nuts.
     
  9. DynaMow

    DynaMow LawnSite Senior Member
    Posts: 570

    I get your point, but come on a $50,000 job and someone bids $15,000, think that is a little far fetched.
     
  10. MMLawn

    MMLawn LawnSite Gold Member
    Posts: 3,569

    You say that's because you are thinking in the right terms as a businessman and LCO, but also means that you probably haven't bid very many commercial jobs if you haven't experienced it yet, cause it happens everywhere around the country everyday....and I promise you there are others on here than bid commercials that will back that statement up.
     

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