a price and then print thou- sands of price tags and expect the price not to change for a year.When you advertise, you can advertise a price as being “for a limited time only.”
If you sell more than you produce, raise your price. If you don’t sell enough, offer a sale and then, eventu- ally, lower your price. Ultimately, the only way to learn the best price is to try a price and see what happens.You know you’ve got the right price when you sell what you’ve got, but you couldn’t sell any more.
My company is the vendor, so the important column for me to evaluate is Column F, the money I will retain for work done.
My staff looks at columns G and H to see how much they will make per hour and per week. If my staff and I are satisfied with what we will receive, then the bid is worth it to us. If the cus- tomer is willing to accept the value in Column C, then they will be open to accepting my company’s bid.
There are different types of competitive bids. Sometimes, either by law or by the customer’s policy, the lowest bid is the one that will be taken. Other times, all bids will be considered and the one that offers the highest value for cost will be taken, even if it doesn’t have the lowest price tag. What would make a customer consider a bid that’s not the lowest cost?
• Proven reliability. If the customer is more confident that you can deliver the service than that the lowest bidder can, the customer may prefer your proposal, even at higher cost.
• Higher quality.If you can show that you add some quali- ty—a more reliable product, better customization, better training, or something similar—then your proposal is more likely to be accepted.
• Added value.Some specific item that you include in your proposal that benefits the customer’s company may make the higher price worthwhile.
When you write a proposal and a bid, make sure the two fit Budgeting for Managers
180
$125
Customer retains Hourly rate
customer charges
clients Percent Dollars
Vendor receives
Dollars
Vendor retains
Percent Dollars
Vendor pays staff
Dollars per hour
Dollars per week
$150
35%
35%
$43.75
$52.50
$81.25
$97.50
40%
40%
$32.50
$39.00
$48.75
$58.50
$1,950
$2,340
A B C D E F G H
Table 11-1. Calculating bid profit and expenses
well together. Here are some things you can do to make a clear bid proposal:
• Make a numbered list of the products and services and features you will provide. Include a line-item budget that matches those products, services and features.
• Make a clear statement about all expenses, such as trav- el, per-diem rates, or items you purchase for the client. If you know the exact cost when writing the bid, include it. If not, make a two-part bid proposal, one part with fixed costs and a subtotal, and another part with estimates of variable costs and a subtotal.
• If you’re offering special rates or a discount, make sure you put that in writing and also include it in the budget.
• Be sure to include a date past which the bid is no longer valid. If the customer does not decide by that date, you may change the price.
For example, if a client asked my company for a two-day seminar plus a day of consulting about their organizational structure, this would be an excerpt from my proposal:
Two-day advanced management seminar for 15 executives,
$8,000. This seminar will provide executives everything they
Know Your Customer’s Approach
When preparing a bid, you want to know the ground rules and the customer’s concerns. Most customers will be glad to
answer your questions in advance—it helps them get a better propos- al. Be sure to ask these questions:
• Will the lowest-cost bid be chosen? If not, what are the criteria?
• Who will make the decision?
• What are that person’s and the company’s biggest concerns about the job—time, cost, quality, reliability? Please be specific.
• Is there a format for the proposal? If not, what material is available?
• What is the timetable? Will there be a process of discussion and bid revision? A process of negotiation? What date will the choice be made? When will the job start?
need to oversee departmental budgets, save money, and increase productivity.
Strategic planning meeting. A meeting with senior manage- ment based on a prepared agenda. We will identify the compa- ny’s strengths and weaknesses and also the opportunities and threats the company faces due to technological change and competition in the marketplace.
Preparation of agenda.Six hours of telephone meetings and preparatory work for the consulting services.
Report and recommendations.A complete, written report of all issues, decisions, and recommendations based on the strategic planning meeting.
Travel arrangementswill be made by the client.
This proposal would include Table 11-2. Note how each line in the proposal matches a line in the budget and how the budg- et presents the bid proposal cost to be paid to the vendor ($17,400) as well as the total cost, including expenses handled directly by the customer ($19,350). Over the years, I have found that clients deeply appreciate this straightforward approach with no hidden costs.