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Proposal/Contract Close Ratio

 
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Old 09-18-2013, 10:51 PM   #1
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Proposal/Contract Close Ratio


What is the percentage of estimates that you complete that lead to a signed contract?

I知 using this information to help me with my own results. I知 using a demand curve (The downward-sloping line relating to price and quantity demanded.) and a supply curve (The curve relating price and quantity supplied.) to determine my market equilibrium (The situation in which the market price has reached the level at which quantity supplied equals quantity demanded.). I知 just getting started in bidding my own jobs. MasterFormat prices in my area are too high. So, I took a small percentage off of MasterFormat prices in my area (10%) for larger jobs (The larger the job, the smaller amount of discount that I apply) and a large percentage off of MasterFormat prices in my area (50%) for smaller jobs (This applies in reverse: The smaller the job, the larger amount of discount that I apply to help determine the right price.). I致e been increasing/decreasing these prices in 5% increments and documenting the results I致e been doing a lot of small jobs. I figure that somehow a closing ratio will help me understand my numbers further.

Also curious to find out which form of advertising led to a better close ratio for you.

Also, what are your average sales per lead?

Thanks in advance for any informative answers.
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Old 09-18-2013, 10:54 PM   #2
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Re: Proposal/Contract Close Ratio


I haven't been tracking that completely, but it seems like around 25%. Can be hard to judge though, sometimes they call me back six months later telling me they decided they want it done.

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Old 09-18-2013, 11:06 PM   #3
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Re: Proposal/Contract Close Ratio


Quote:
Originally Posted by SmartConstruct
What is the percentage of estimates that you complete that lead to a signed contract? I’m using this information to help me with my own results. I’m using a demand curve (The downward-sloping line relating to price and quantity demanded.) and a supply curve (The curve relating price and quantity supplied.) to determine my market equilibrium (The situation in which the market price has reached the level at which quantity supplied equals quantity demanded.). I’m just getting started in bidding my own jobs. MasterFormat prices in my area are too high. So, I took a small percentage off of MasterFormat prices in my area (10%) for larger jobs (The larger the job, the smaller amount of discount that I apply) and a large percentage off of MasterFormat prices in my area (50%) for smaller jobs (This applies in reverse: The smaller the job, the larger amount of discount that I apply to help determine the right price.). I’ve been increasing/decreasing these prices in 5% increments and documenting the results… I’ve been doing a lot of small jobs. I figure that somehow a closing ratio will help me understand my numbers further. Also curious to find out which form of advertising led to a better close ratio for you. Also, what are your average sales per lead? Thanks in advance for any informative answers.
The busier I am the higher my prices. But there is an absolute minimum I will work for. It took years of experience to find this. I probably do about 7or 8 bids a week and land about three. If I'm slow I will lower my prices until I pick back up again. What's great about this method for me is if I get a job when I'm very busy, it's going to pay well.

As far as an algorithm for this, I don't have one, It's mainly just an insight. I don't loose money on jobs. I no what things cost and the time it takes to do them and then put in safeguards to cover my ass.

The way you are describing your method of bidding doesn't really work IMO unless all your jobs are exactly the same SOW. In other words if all you do is install garage doors for example it's easy to find the perfect price, not so easy if your doing remodel work where no two jobs are the same.
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Old 09-18-2013, 11:17 PM   #4
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Re: Proposal/Contract Close Ratio


I get a headache with all this bidding mumbo jumbo....

All it boils down to is to have money left over when you are done...

Pretty simple concept.

You arrive at this with this formula, it NEVER changes:

Labor + Materials + Overhead + Profit + PITA = Cost

The variables easily changed are Profit, how much do you want/need/can make on a given job.

The second is the PITA factor and just how much are you willing to tolerate at what, if any cost?

Some understand this concept quickly while others toil with it for years and never succeed.

At some point you must also evaluate the type of jobs you are willing to bid.

What are you realistically capable of and what do you aspire to be?
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Old 09-18-2013, 11:31 PM   #5
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Re: Proposal/Contract Close Ratio


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Originally Posted by griz View Post
I get a headache with all this bidding mumbo jumbo....

All it boils down to is to have money left over when you are done...

....what do you aspire to be?
Sounds to me like he is an economist.
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Old 09-19-2013, 12:42 AM   #6
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Re: Proposal/Contract Close Ratio


Quote:
Originally Posted by SmartConstruct View Post
...I took a ... large percentage off of MasterFormat prices in my area (50%) for smaller jobs ... I致e been doing a lot of small jobs.
You discount more for smaller jobs? Why?
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Old 09-19-2013, 01:03 AM   #7
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Re: Proposal/Contract Close Ratio


Quote:
Originally Posted by CarpenterSFO
You discount more for smaller jobs? Why?
Shouldn't it be the other way around?

Last edited by Calidecks; 09-19-2013 at 01:31 AM.
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Old 09-19-2013, 01:41 AM   #8
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Re: Proposal/Contract Close Ratio


Everyone likes to negotiate and get a "better deal." I suppose it depends on where you set your pricing in the beginning.

I broke into the business 25 years ago, selling for one of those national remodeling companies that had HUGE mark ups in their pricing structure, then trained you to "negotiate" a series of "discounts" with the single goal of a one call close. As a salesman, if you didn't close the sale on the first call, and the HO called the next day or at anytime later, you didn't make a dime in commission on the sale. The company kept it.

I prefer to keep my pricing consistent across the board without extra mark ups, just to be able to give a "bigger" discount. I'm willing to negotiate a bit, but I just don't like the perception of presenting a price to a potential customer, only to turn around and end up giving them 25% - 40% off. To me, that just says if I was willing to take such a drastically lower price, I was too high to begin with.

I set my margins where I want to be, which are always a little higher than I absolutely NEED to be. Which allows me a little wiggle room for those HO's who love to "deal." But, IMHO, the 40% off stuff is for the end of season coat sale or something that's discontinued.

In the end, I don't allow discounting to drive my closing percentage. Right now, my closing percentage is right at, or a tick below 50%. Would I like to close more? Sure, but for me, discounting isn't the avenue to get there. I'm always striving to become a better listener, asking the right questions, and tailoring a more appropriate solution to meet a customers expectations as a means to a better closing rate.
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Old 09-19-2013, 08:22 AM   #9
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Re: Proposal/Contract Close Ratio


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Originally Posted by CompleteW&D View Post
Everyone likes to negotiate and get a "better deal." I suppose it depends on where you set your pricing in the beginning.

I broke into the business 25 years ago, selling for one of those national remodeling companies that had HUGE mark ups in their pricing structure, then trained you to "negotiate" a series of "discounts" with the single goal of a one call close. As a salesman, if you didn't close the sale on the first call, and the HO called the next day or at anytime later, you didn't make a dime in commission on the sale. The company kept it.

I prefer to keep my pricing consistent across the board without extra mark ups, just to be able to give a "bigger" discount. I'm willing to negotiate a bit, but I just don't like the perception of presenting a price to a potential customer, only to turn around and end up giving them 25% - 40% off. To me, that just says if I was willing to take such a drastically lower price, I was too high to begin with.

I set my margins where I want to be, which are always a little higher than I absolutely NEED to be. Which allows me a little wiggle room for those HO's who love to "deal." But, IMHO, the 40% off stuff is for the end of season coat sale or something that's discontinued.

In the end, I don't allow discounting to drive my closing percentage. Right now, my closing percentage is right at, or a tick below 50%. Would I like to close more? Sure, but for me, discounting isn't the avenue to get there. I'm always striving to become a better listener, asking the right questions, and tailoring a more appropriate solution to meet a customers expectations as a means to a better closing rate.

Exactly!! I've been on the other side of that too, and I always think "so if I had just blindly said 'ok go for it', you would have REALLY been stickin' it in my azz then eh?" "So how much are you STILL too high??"
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Old 09-19-2013, 05:05 PM   #10
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Re: Proposal/Contract Close Ratio


Quote:
Originally Posted by Californiadecks View Post
The way you are describing your method of bidding doesn't really work IMO unless all your jobs are exactly the same SOW. In other words if all you do is install garage doors for example it's easy to find the perfect price, not so easy if your doing remodel work where no two jobs are the same.
I wasn't using the traditional bidding method. I was using the estimating method where you base the costs on hard numbers--Construction Standards Industry Masterformat. I've only been in the trades for 5 years, so it's tough for me to figure out all the information that I need, to calculate direct costs, to figure overhead, and to figure profit. I'd have a tough time walking in a client's home and telling them an exact price off the top of my head.
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Old 09-19-2013, 05:12 PM   #11
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Re: Proposal/Contract Close Ratio


Quote:
Originally Posted by griz View Post
I get a headache with all this bidding mumbo jumbo....

All it boils down to is to have money left over when you are done...

Pretty simple concept.

You arrive at this with this formula, it NEVER changes:

Labor + Materials + Overhead + Profit + PITA = Cost

The variables easily changed are Profit, how much do you want/need/can make on a given job.

The second is the PITA factor and just how much are you willing to tolerate at what, if any cost?

Some understand this concept quickly while others toil with it for years and never succeed.

At some point you must also evaluate the type of jobs you are willing to bid.

What are you realistically capable of and what do you aspire to be?
Am I the only one on here that uses RSMeans? ...or at least know what it is?
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Old 09-19-2013, 05:13 PM   #12
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Re: Proposal/Contract Close Ratio


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Sounds to me like he is an economist.
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Old 09-19-2013, 05:19 PM   #13
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Re: Proposal/Contract Close Ratio


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Originally Posted by CarpenterSFO View Post
You discount more for smaller jobs? Why?
I know. It sounds @$$-backwards. I'm trying to find the right price. My theory is that I can do small jobs all by myself and quickly, so clients won't tolerate the wait time as much. So, I could start at a low price and raise the price as I get swamped with work until I receive a good closing ratio (seems like 37% is a good number). With bigger jobs, like basements, I have to hire 3-4 guys, because the homeowner won't tolerate 1 guy working on the job forever. If I lower the price too much, then I'll lose money on the job as it will cut into labor costs. So, I'm doing the opposite with bigger jobs... starting with the standard Masterformat price and then lowering it until I get the optimum closing ratio (which seems like 37%).
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Old 09-19-2013, 06:04 PM   #14
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Re: Proposal/Contract Close Ratio


If I close more than 1 in 8 I raise my numbers until I don't, and I'm a pretty decent sales guy..
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Old 09-19-2013, 06:13 PM   #15
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Re: Proposal/Contract Close Ratio


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If I close more than 1 in 8 I raise my numbers until I don't, and I'm a pretty decent sales guy..
Yeah, but Matt.... you do a lot of really big ticket jobs. For a smaller company like us who traditionally has a lower average per job sales number, I NEED to be closing better than 1 in 8.
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Old 09-19-2013, 07:50 PM   #16
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Re: Proposal/Contract Close Ratio


If you just started the bidding learning curve I'd invest in a Dixon Ticonderoga #2 pencil and a pad of paper. Work up a simple formula and stick to it. Come hell or high water stick to it. Then focus on selling it. Selling is what closing is all about. A great brand makes selling easy.

A bunch of us had breakfast the other day. Out of 6 people 1 of them uses software. All are successful. Before I would entertain the idea of using software I would try the cordless billing routine first. It will help you understand the process as well as the costs.

As dar as little one man jobs vs 4 man jobs? Well, I'd stick to the formula and not change a thing. Be consistent and sell it. Simply taking a software program and dropping prices is a real gamble in my opinion. What does that really mean? What does it really represent?

I looked at a basement finish a while back and met with the contractor and home owner. I shot him a price in under 2 minutes and within 5 minutes he gave the HO a ballpark number, not exact but ballpark. Then he spent time selling himself which was easy because everybody loves this guy. He landed the job. I'm not saying you should do that but there's no way in hell Rich would go home and play with software. He knows the price of poker, as do most seasoned contractors, and focuses on selling........which he is master of. His closing rates are ridiculously high......and he is pricy. But people like HIM.

The closing rate vs cost is often times a myth.
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Old 09-19-2013, 08:13 PM   #17
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Re: Proposal/Contract Close Ratio


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Originally Posted by SmartConstruct View Post
Am I the only one on here that uses RSMeans? ...or at least know what it is?
Probably not & No.....

Quote:
Originally Posted by ohiohomedoctor View Post
...If I close more than 1 in 8 I raise my numbers until I don't, and I'm a pretty decent sales guy..
1 in 8, what a waste of fvcking time...

Quote:
Originally Posted by CompleteW&D View Post
Yeah, but Matt.... you do a lot of really big ticket jobs. For a smaller company like us who traditionally has a lower average per job sales number, I NEED to be closing better than 1 in 8.
One had better be closing better than 1 in 8....

I have better things to do besides attending worthless meetings & churning quotes ....

Quote:
Originally Posted by Oconomowoc View Post
...The closing rate vs cost is often times a myth....
Fvcking a twitty it is...

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Old 09-19-2013, 08:17 PM   #18
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Re: Proposal/Contract Close Ratio


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Old 09-19-2013, 08:20 PM   #19
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Old 09-19-2013, 08:20 PM   #20
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Re: Proposal/Contract Close Ratio


Don't try to reinvent the wheel, there are a lot of successful contractors in here essentially telling you to forget the book, I'd forget the book.

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