Winning tenders is good, right? Well, only if you're making money at it. I have a nasty feeling there will be a few that will resonate with the contents as they read this article, but for the rest of you it's gold dust, especially if you're new to tendering!
1. Only Tender For What You Know
The sound of 'stating the bleedin' obvious' klaxons are already blaring into my ears at this point, but this is true!! I've marked tenders where a software company has tendered for servicing Fire Extinguishers!! It's a quick way of going out of business if you get your sums wrong too. Why on earth would you go out of your area of expertise?
2. Check the Penalty Clauses
Some tenders have little or no penalty clauses, while some have eye-watering punishments. I advised one client not to tender on a contract once, and they turned a deaf ear. The penalties were draconian and they ended up losing £32 million. One clause saw them lose almost £80,000 because a lift was out of order and they had to wait 12 days for parts.
3. Get Your Prices Right
Every company is different and each has their own pricing strategy. The skill is knowing how much to charge and what profit to aim for. Get this wrong and you're working for free, get it right and you're quids in. I've seen many contractors and suppliers back out of a contract or 'sacked' for poor performance, when the real reason is that there's no profit in the job. I've yet to meet a supplier that is happy to work for no profit.
Staffing is key. Hire the right staff and it underpins growth, whereas hiring the wrong staff or those without experience is like throwing the anchor overboard on your plans, it'll keep you pinned back. You'll also have poor performance and get slammed in penalties, possibly losing parts of contracts. Make sure you have key staff already in place to run the contract. That way they know your business and can run with the baton early on. If you have to set up and train new staff on day 1, then you're on the back foot.
The dark world of sub-contracting can be a good way of facilitating growth. Part of the skill when you sub-contract work is having the relationship and knowing them. Employ a poor performing subbie and it's a license for chaos. There are no prizes here for guessing who will take it on the chin when performance drops, satisfaction spirals and problems escalate. It's you. Carefully plan on how the contract will be resourced, build in stages of growth if necessary, and above all, be in control!!
6. Read the Specification
Ok, you did read that correctly, and its still a problem with companies regularly tendering. They don't fully read the spec! Instead they assume its the same 'run of the mill' job as everything else they do, until the panic hits and they realise that the client has specified gold plated widgets deep within the 99 pages of words. Suddenly the focus has shifted from 'how do we provide a decent job' to 'how can we do the work and still earn a profit'. It links with item 3 above but is caused from sheer ignorance.
7. Risk Base
By this, I'm referring to 'all your eggs in one basket'. I see it often, and when I went into business suffered from it myself. One good contractor I know had over 50% of his work with a long term client, and everything went swimmingly; until that client decided to retender and they lost. It caused no amount of angst and worry, until they eventually righted themselves by spreading the risk across many clients.
If you recognise any of the above, please do something about it before it comes back to haunt you. This might mean developing a tendering strategy or a growth plan to enable you to develop safely without the risk.
This article was written by Robert Harris, Managing Director of Harris Associates. Harris Associates has are experts in business growth and tendering. Robert can be contacted direct at Robert@HarrisAssociates.Biz or by calling 079 386 23444.