6 Ways to Combat Undercutters
- Analyze why you've a lost a job to a low bidder.
- Commit to reducing job time and operating expense.
- Perform a time study that measures everything in the operation.
- Instruct crew leaders to train crews on saving time and increasing productivity.
- Measure every minute, hour and expense.
- Be the best low-cost operator.
One lament I often hear from contractors is, "I just lost another job to a low bidder." It's a regular occurrence in the business these days.
Sometimes the low bidder is looking to increase business and knows their bid is too low to profitably operate long term. Also, they figure what they're missing with the bid they'll recover selling enhancements. Other times, the low bidder is operating more efficiently with higher productivity and can still make an acceptable profit (to them, at least) at the low-bid pricing.
Knowing which of these scenarios cost you the business is vital information. You may discover that you need to review your operations to be sure the low bidder is not a better, more-productive operator. If that's the case, and you don't act, expect to lose more jobs.
Measure, measure, measure
A good friend and mentor of mine, George Morrell, founder of the Morrell Group in Georgia, once told me, "You can't manage what you can't measure." His point is that you can't expect to sustain and grow business if you can't measure what you're doing in terms of service and what you're getting in return. Continually measuring everything of importance in your company keeps you on the road of continuous improvement, he says. Morrell's success as a business owner is all the proof I need that he's right.
NASCAR drivers know seconds count, inches determine winners, and the car in last place may only be one minute behind the winner, but still finish last. Maintenance contractors have similar operating models, so what makes one company more competitive than another? Efficient operations that save time, and more productive employees accomplishing more work can make a company more competitive and profitable.
Review your work processes, starting with how your people arrive for work, leave for job sites, and what they do when they arrive on the job site. None of these actions create revenue, but each can cost you time, and time is money. Successful contractors establish processes for crews to follow that get them on and off their jobs sooner.
Successful management requires finding minutes, hours and dollars in every department and job action you do. You can't expect employees to just work harder, but you can set up procedures that help them work smarter. Perform a time study of your work procedures beginning when crews arrive for work through the time they actually arrive on the first job site. There's time to be saved by measuring every action. I know contractors that have added extra jobs and reduced costs by performing time studies.
Are your vehicles and equipment ready and refueled for your crews before they arrive? Is there a traffic jam happening as they leave the yard? And, my least favorite time-waster, how often does a crew return during the day because of equipment breakdown?
Once crews reach the first job site, the action that starts the job should be the same every time. The crew leader should manage the job and not be the hardest worker on the job. The crew leader should be the job director in charge of making the entire crew more productive. Determine if more emphasis on crew leader training is in order.
Engage your team
Owners and managers have to start the process of measuring time on each activity. Then they should work with middle managers and crew leaders to find ways to do simple tasks more efficiently, saving time so the company can perform more jobs and increase revenues. You won't be undercut by a low bidder if you complete the job faster and at a lower cost.
Make a promise to yourself and the business that you're not going to lose jobs because you can't find ways to be more productive. By increasing productivity you'll create more revenue, become more profitable, and stop losing customers to low bidders - at least those that have a productive advantage over your firm.
Customers like doing business with contractors that operate efficiently and at lower cost. Become the best low-cost operator in your market.
Rick Cuddihe is president of Lafayette Consulting Co., a PLANET Trailblazer, and he works with landscape contractors to improve their businesses. Contact him at firstname.lastname@example.org.