Is Your 'Bid-Hit' Winning Ratio OK?
Your ‘Bid-Hit’ ratio is the winning rate at which you successfully bid or propose on construction projects. For example, a 5 to 1 Bid-Hit ratio says for every five jobs you bid or propose on, you are awarded one. Do you know what yours is? Do you keep track of it? How do you use it? What should it be?
Whenever I present my "Estimating & Bidding Strategies That Work" program at construction industry conventions, I ask everyone what their Bid-Hit ratio is. Most estimators, sales people, business development managers, and company owners don’t have a clue what their win ratio is. In a survey I conducted of over 2,000 construction companies, less than 6% know and track theirs. To me, this is like driving a race car blindfolded without a clue where you are headed!
Keep Track Of Your Win Rate!
In order to determine how many jobs to bid, what type of jobs to go after, and which customers give you a higher percentage of their work, you must know your Bid-Hit ratio. Track it monthly, quarterly and yearly. Track it for all types of projects you bid on and each customer you bid to. Also track by job type: large versus small, local versus out of town, commercial versus industrial or residential, bid versus negotiated, plans & specifications versus design-build, or new construction versus remodel. Another item to track is the number of competitors you bid against on each project.
As you study your Bid-Hit win ratio trends, you'll find certain customers who give you more work than others. You'll find certain kinds of jobs you do better with. You'll also discover when competing against too many competitors, your success ratio isn’t the best it should be. This simple tracking system will help you determine which jobs and customers to bid to. It will also help you determine when to eliminate a project type or customer from your plate and seek out better opportunities to invest your estimating dollars.
The Right Win Ratio?
I have surveyed over 5,000 construction and subcontracting companies to determine what a good Bid-Hit ratio should be. The results vary from 1.5 bids to 1 job awarded to a worst case of 35 to 1. Which is the best ratio for you? Obviously, the lower the ratio, the better, but, the right win ratio is what works for your company.
Companies who negotiate lots of work tend to have lower Bid-Hit ratios. They also require additional overhead expense, marketing, pre-construction services, customer development, and public relations. Companies which obtain most of their work from public works or bid against a long list of competitors, tend to have higher Bid-Hit ratios. But, they usually have more estimators which offset the fewer marketing dollars needed. The trade-offs usually balance out at the bottom line.
Bid-Hit Ratios Revealed
See how your proposal or bid win rate compares to other construction companies. As the economy moved slower over the last few years, most contractors experienced a significant increase in the number of competitors bidding every project. The smart contractors used their bid-hit ratio tracking system to make good decisions and move out of the too competitive marketplace into less competitive areas where they could maintain a reasonable bid-hit win ratio. The average win rates for contractors typically in a good (not great) economy are as follows:
General Contractors Bid-Hit Ratio
- Public Works 6 : 1 to 10 : 1
- Private Bid Work 4 : 1 to 6 : 1
- Negotiated Work 2 : 1 to 4 : 1
- Design-Build 2 : 1 to 4 : 1
Subcontractors Bid-Hit Ratio
- Public Works 7 : 1 to 11 : 1
- Private Bid Work 4 : 1 to 6 : 1
- Negotiated Work 3 : 1 to 4 : 1
- Design-Build 3 : 1 to 4 : 1
The right Bid-Hit ratio is what works for your operation. 35 to 1 is too high and 2 to 1 is nearly impossible in today's competitive market. The highest reasonable ratio for subcontractors or public works contractors should not exceed 10 or 11 to 1. Higher than 11 to 1 will cost your company too much in estimating expenses and won't provide a reasonable profit on jobs you are the low bidder on. For private work, I recommend to strive for a 4 to 1 ratio or less. This can be accomplished by pre-qualifying your customers before you bid to insure you are on the right bid lists. Plus aggressive marketing and working hard to build loyal customer relationships will improve your win rate and keep it improving. To get a copy of ‘Winning Ways To Win More Work!’ email GH@HardahtPresentations.com.
The key is to track and know your Bid-Hit ratio. With an accurate history of your results, you can determine which road you want to take. Keep your eyes open and headed for your destination, look for ways to improve your Bid-Hit ratio, and hit your target every time.