Considerations you need to make when deciding which tender to bid on.
When there are so many tenders out in the market, it is easy to get carried away.
We actually had 1 client who won that much work through LiveLead in 3 months he ended up putting his business in jeopardy! He did this by winning 150% of his previous annual turnover all at once.
This meant that he was unable to satisfy all of his existing customers and became dissatisfied with his service.
He was like a kid in a sweet shop!
So what things should you consider when looking at tenders and deciding which ones to bid for?
Size of Contract
As a general rule of thumb, public sector buyers won’t award you a contract that is more than half your annual turnover unless it is a long multi-term contract. This is designed to try and safeguard you against overstretching yourself and then failing to deliver the contract which is not good for either party.
Location of Contract
Although a contract could seem ideal for you, always ensure you take the location and all travelling requirements into consideration as this can often erode your profit to a point where the contract is no longer viable.
Always ensure you take note of any requirements for experience. More often than not, they will require you to provide 3 examples of similar jobs to test this. If you can’t provide similar jobs in the same type of environment, think about what risks there might be in the environment in question and provide examples to suit these risks.
For example, if the contract is in a school, they will be looking for someone who has worked in an environment where there may be children or vulnerable adults, you should also be DBS checked.
So it’s easy for us to think we can tackle anything, but what if it goes wrong? What long term effect will that have on your business? It’s much easier and safer to start with contracts that are easily within your capability and build your reputation with that and other clients by exceeding their expectations.
Always ensure you have the capacity in all areas to deliver the contract. Think about what can go wrong and make sure you have enough resources to deal with it (COVID-19 Anybody?)
Your Business Strategy
Are you trying to break into another geographical area? Do you concentrate on a specific area and is this contract in it? Are you willing to go in at a very low margin to get your foot in the door? Think about your strategy.
Your target market
Who are your target market? Is your experience working with one type of client such as the NHS, Colleges, Local Authorities, Housing Associations etc? Will your experience transfer to this type of client/sector easily as in my example above or are you starting from scratch?
What level of margin would make this a viable project for you? What is the lowest price you can/will go to, to still make a profit? How do your costs compare with your competitors as this will affect your profitability compared to your competitors?
Reason to bid (Profit or Strategy?)
What makes you want to bid for this particular contract? Is it strategic or purely based on making a profit?
Who else is likely to bid for this contract? Are there potential bidders who you are unlikely to come out on top of? What sets you apart from competitors and how can you demonstrate this to the buyer?
The reputation of the Client.
It’s always worth considering the client and whether you would want to work for them? What’s their track record look like? Do they pay on time? How strong is their business currently? What are the payment terms?
This is just a selection of questions you should ask yourself when evaluating whether to bid on a particular tender and you should always carry out your own due diligence. There is an abundance of opportunity out there so there should be no rush to bid for contracts that only partially suit your business and it’s current position.