Are you a project manager or electrical estimator in charge of bidding on projects?
It’s no easy task. You put a lot of work into producing accurate, timely bids, but that still doesn’t mean you’re going to win the project. For many, it’s one of the most frustrating parts of the job.
There is a brighter spot, though. Assuming you have an effective bidding strategy and that your company has the skills and experience to back up the project, the law of averages could be on your side...
What is the law of averages?
The law of averages is based on the law of large numbers. It says that any deviations in the expected probability will average or even out after numerous trials. In other words, for your project bids, the more you put in the more wins you should get.
It’s not a perfect rule because obviously you may be bidding against a different number of competitors with each new project. Rather than leaving things to luck your bid will need to:
- Follow the specifications
- Be accurate and competitively priced
- Account for all aspects of the project
- Be formatted as the company or organisation has requested
- Be for projects that your company is well-qualified for
- Be submitted on time.
The law of averages doesn’t pretend to be easy. Here's how it would work in a sales scenario:
- If a Salesperson calls 100 cold leads, roughly 80/100 of those leads will reject the offer
- A much smaller percentage will give them the sale, but only if they work hard for it
- An even smaller percentage will give them what's considered an "easy sell", as they were likely waiting for the solution
This is exactly why the idiom "try, try again" actually makes sense. Thanks to the law of averages, it really is a bit of a numbers game.
So if we take bidding on electrical projects as an example, the law of averages suggests that if you are persistent, a ratio will appear. If you bid on ten projects and get one of them, your ratio is 1:10. Out of 100 bids, you would roughly win 10. Based on that math, you’d need to bid on about 10 projects for every one you win. It’s a simple way to help plan out your work and figure out how many projects you may be able to win over a period of time.
A winning mindset
It can be discouraging to lose out on a project you were hoping for. The bidding process probably required a lot of work on your part and there’s often a feeling of wasted time when it leads to rejection. Morale can take a hit - no one is happy when they feel their hard work isn’t getting them anywhere.
The good news with the law of averages is you can use that for a mindset shift. While you always put forward your best work, you expect that you won’t win them all. So instead of thinking “we’re losing every project,” the new way of thinking becomes “by the law of averages, we’re close to winning a new project.”
A fixed mindset sees obstacles (such as rejections) as threats, while a growth mindset sees those obstacles as an opportunity to grow. A growth mindset will see you learning from any rejections and using that information to move forward and improve next time. (And by the law of averages, your bids will improve).
How to find your ratio
How can you make the law of averages work for you to figure out how many projects you’ll win this year? First of all, you need to know what your current ratio is.
Finding it is easy. Over a fixed period, look at the total number of projects you’ve bid on against the total number you won. You now have a ratio as a starting point.
Do you think you can do better? Perhaps you can boost your winning rate from 1:10 to 1:5? Most can do something about improving their win rate, or at least improving their chances of winning more projects…
How to win more projects
Admittedly, if your ratio is 1:10, it’s difficult to pick up your momentum and bid on more projects. There’s a time cost: the average manually-counted estimates can take a day and a half to two days to complete. Then there’s the time spent on writing up your proposal. So in a week where you were really pushing to get more bids out, you might complete five.
Working at this rate might involve long hours and a risk to your accuracy and completeness of your bid. A common reason for bids to get rejected is because they have parts missing or they haven’t followed the specification. If this happens, you might find your win ratio gets even lower.
So how can you pick up your ratio? Or, how can you win more projects? We see two ways: 1) improve the quality of your bids and 2) increase the number of bids you put out.
We’ve already talked a bit about bid quality, so let’s look at the possibility of increasing the number of bids you make. This is how you can harness the law of averages, whether you’re able to improve your win ratio or not.
Bid on more projects
If you’re already working at maximum capacity using your current method of preparing bids, you could look for ways to improve that capacity. That might involve taking on another estimator or bid manager, or, it might involve changing something about your methodology.
A move from manual counting to automatic takeoffs can help. In fact, we’ve found that Countfire saves businesses an average of five days per month. Using our earlier example, that means you’d be able to bid on five more projects per month using the time that was saved. Right there, you’re able to use the law of averages and win more projects.
Countfire provides truly automated takeoffs that help you to improve accuracy as well as the speed with which you can turn over a bid. “Price more tenders, win more work” is one of our cornerstone principles from which we have worked to develop our software.
The law of averages is a real concept that has been used in sales for a long time. It’s equally applicable to electrical estimating and to many other areas of life.
The more projects you’re able to bid on, the more you should win (with quality work, of course!). It can be a bit daunting when you look at the extensive estimating and bidding process, but Countfire’s automated takeoff software can help you to put through more bids, more accurately.
To get started with a free trial of Countfire head here.