Page 197 - Budgeting for Managers

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Budgeting for Managers
B
E
D
G
F
H
C
A
Hourly rate
Dollars
customer
Dollars
charges Customer retains Vendor receives Vendor retains Vendor pays staff
per
per
clients Percent Dollars Dollars Percent Dollars hour week
$125 35% $43.75 $81.25 40% $32.50 $48.75 $1,950
$150 35% $52.50 $97.50 40% $39.00 $58.50 $2,340
Table 11-1. Calculating bid profit and expenses
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