How Pricing for Profit Matters More Than a Competitive Bid
How do you avoid a loss when bidding for a project?
Many service-based businesses, like contractors, often focus on competing for bids rather than pricing for profit. They believe getting the job is everything.
Tyler Link, a contractor and CEO, disagrees. He insists that contractors should focus on pricing for profit as a strategy rather than beating the competition.
Follow Tyler Link through his Website: https://www.contractorceo.co/
The Drawbacks of Competitive Bidding
When you bid too low, you risk winning projects that don’t cover your true costs, leading to financial strain. Projects can often take more time and resources than initially estimated, and the contractor is forced to go in the “red” losing money rather than making it..
How to Price for Profit
- Calculate Costs: Include all direct and indirect costs.
- Set Margins: Add a profit margin that sustains and grows your business.
- Adopt Value-Based Pricing: Price according to the value you provide, not just for competing with other bidders.
If you’re going to make a profit on your service business, shift to a profit-focused bidding strategy rather than focusing on being competitive.
Need help setting your prices to profit and still get business? Checkout our Small Business Resource page with videos and advice to surge your business success!
