Talk to your employees about manipulation, get clear on your mission, and invest in marketing to transform your business from low-bid to negotiated work.
In the architecture, engineering, and construction industry, there’s a huge difference between low-bid and negotiated work. Low-bid is a race to the bottom, hard to win, and makes you want to pull your hair out. You’ll rarely get respect from your low-bid clients. On the other hand, negotiated work is collaborative, focused on value creation, and more enjoyable from start to finish. Your clients will respect your skills and show gratitude. You’ll be happier and more fulfilled along the way.
So, whether your company chases negotiated work or not, you should understand how to win it. Over the last six years, I have bid on hundreds of projects – both low-bid and negotiated – and have identified the three Ms of winning negotiated work that I want to share with you today.
The point of the “three Ms” is to give you more awareness about low-bid and negotiated work so you can increase your chances of chasing and winning negotiated work in the future. Here they are:
Manipulation. Low-bid work is a trap. I figured this out the hard way. I bid on tons of low-bid projects and never realized the trap I was getting into. Maybe you’re doing the same right now. But once you are aware of the trap, you can get yourself out of it.
The trap is called manipulation – and it’s a pricing strategy as old as time. It sounds good in principle – “we’ll just drop our numbers lower than our competition and get the customers!” – but it quickly devolves into a race to the bottom.
What does that mean?
If your main focus is manipulating your price to be cheaper than your competition, then you won’t make industry-best profits, which means you can’t hire industry-best people, which means you won’t get industry-best results. This is the low-bid trap. This is the race to the bottom.
Here’s an example: Company A charges a 5 percent design fee, so Company B decides to charge a 4.75 percent design fee. The result? Company B gets the business – until Company A decides to charge 4.65 percent. So Company B drops their number again and again and again. On and on the race to the bottom goes…
This is not sustainable.
The first thing you need to do to win negotiated work is to stop using manipulation as your main pricing strategy. Instead, you need to prioritize partnership and value creation. You are going to be so much happier when you do – so let’s talk about how to do that.
Mission. Now that you’re aware of the low-bid trap, you need to start building partners who will negotiate with you. You need to show them who you are and what you believe in. You need to give them a reason to negotiate with you. This starts with your company’s mission.
All things being equal, people do business with people and companies they like. Think about Apple. Is the iPhone objectively the best cell phone on the market? Maybe to some people, but from a technological standpoint, Samsung probably has them beat. They have better cameras, better features, and more flexibility on maintenance. But to someone who loves Apple, does any of that matter?
Not one bit.
They want the iPhone because Apple believes in what they believe in. They stand for being different. For being an individual. For being a creative. If you believe in those things, then of course you’re going to want the iPhone, even if logically it’s not the best phone!
So how do you win negotiated work? You create and cultivate a clear mission in your organization. You find partners who have the same mission. You focus less on having a cheap number and more on accomplishing something together that you never would be able to accomplish alone. You combine your missions and achieve incredible results.
Here are some good examples of AEC mission statements for you to learn from:
- HITT Contracting: “Elevating the business of building by delivering incredible construction experiences.”
- BIG: “BIG has grown organically over the last two decades from a founder, to a family, to a force of 700. Our latest transformation is the BIG LEAP: Bjarke Ingles Group of Landscape, Engineering, Architecture, Planning, and Products. A plethora of in-house perspectives allow us to see what none of us would be able to see on our own. The sum of our individual talents becomes our collective creative genius. A small step for each of us becomes a BIG LEAP for all of us.”
Marketing. Once you have your mission, now you need to talk about it. How else will your clients know what you believe in? How else will they know you have similar missions? How else will they know you exist and want to negotiate work together? It comes down to marketing.
Marketing seems to be a bad word in AEC, but I don’t understand why. The point of marketing is simple: You want clients to think of you when they get a project, instead of sending it out to nine companies and awarding the low-bidder.
Marketing is awareness. Negotiated work is only possible if your clients are aware of your mission, your value proposition, and your expertise. Marketing yourself through LinkedIn, Instagram, industry publications, trade events, webinars, and newsletters is a cheap price to pay for the amount of work it drives.
Talk to your employees about manipulation, set up some meetings to get clear on your mission, and then get involved with marketing – whether internally or through a consultant – to transform your business from low-bid to negotiated work. Once you do, let me know the results. I hope you’ll be making more money before 2023 is over.
Matt Verderamo, MS is a consultant at Well Built Construction Consulting. Connect with him on LinkedIn.