Pitfalls of Low Bidding
As I’m sure the vast majority of you are aware, the depressed home construction market has spawned a good deal of low bidding, even going so far as to spurn undercutting between contractors, forcing many qualified contractors out of seemingly solid leads. In such a climate it may be easy to fall into the web of low bidding. Indeed it is often hard to lay blame when considering the desperation that many contractors feel — contractors who were thriving just a few years ago.
Low bidding is not without its pitfalls, however, and it is vital that no contractor bid lower than his or her means allow, especially within the realm of remodeling.
Pitfall #1: Losing Potential
Low bidding can easily lead to taking a loss. A contractor, in the oft mad drive for work, might look at a job — quickly measuring up the job and the homeowner — and feel confident enough to bid lower than normal for the work. The general gamble here is that the job will run smoothly and according to plan, despite experience of the opposite. We often counsel homeowners to be prepared for just about anything when “opening up” their home. In this case, the same advice is useful for remodelers seeking to outbid the next guy — simply having work does not necessarily spell success.
Pitfall #2: Labor and Manpower
Labor is another key issue. You, the contractor, are responsible for paying your employees, whether the job is over budget or not. Low bidding combined with unforeseen circumstances can spell disaster for your job, finances, reputation, and that all-important relationship with employees. Furthermore, should circumstances send the job behind schedule, you won’t have the resource to recruit the manpower to get it done in a reasonable amount of time.
Pitfall #3: Reputation
Reputation. Low bidding is often looked sternly upon by other contractors and trades within the community. It may seem like the short road to ongoing work, but in the long run it can be more damaging than helpful. In tough economic times all contractors are forced to lower their bids, there is no denying that; we all have mouths to feed, and that includes homeowners. But on top of all the other risks involved in low bidding, which can also hurt your reputation, tarnishing the company name is not one to ignore.
Pitfall #4: The Gamble
The basic summation of the pitfalls of low bidding is that it is a gamble, and a risky one. I imagine there are several contractors throughout the construction world for whom this practice has been successful, but I would venture that these are few and far between. I personally have seen low bidding become the downfall of two separate contractors, one to the tune of millions of dollars in losses and owed debts.
Again, at this time we all have to sacrifice, homeowner and contractor alike, but be wary of the pitfalls of low bidding. This, unfortunately, is no 4-bit video game.
Tags: bidding, contractors, dangers, jobs, labor, leads, losing money, losses, low bidding, manpower, marketing, pitfalls, remodelers, reputation, schedule, unforeseen