October 26, 2020 – How often have you worked out an estimate and presented it, and then been asked to lower your price to get the job?

It can be very tempting when you are not busy to lower your bid. After all, you need to keep your crew working and cover your overhead.

However, a host of problems manifest when you lower your bid to get the work, including:

• Loss of profit.
• Increased overhead because you are absorbing expenses.
• When profitable new jobs come in, you may not have sufficient manpower to work on them.
• When accepting new jobs, you may have to shuffle your crew around, and the best person for the job may be tied up.
• Work on new jobs may be delayed due to manpower shortages, or result in overtime.

Not covering your overhead can cause financial losses throughout your business and, in effect, you are subsidizing your customer’s business at your expense. You are also reducing cashflow, which can impact your ability to bid on new business.

The hazards with underbidding to get the job are significant, and the decision needs to be weighed very carefully.

Let’s get this straight… profit is not a dirty word, and a sale at a loss is not a good sale.

John F. Wiesel is the president of Suderman Estimating Systems Inc., and has been estimating and teaching estimating since the early 1980s. Dan Beresford served as an electrician in the Canadian Navy, then worked in various roles in the electrical sector before joining Suderman. Visit www.sudermanestimating.com.

This column—along with other great content—appears in the October 2020 edition of Electrical Business Magazine.