Sometimes thing just don’t work out. Everything looked good when you bid the job, it all started well, but over a few days to a few weeks or months for one reason or another, you find that you are spending too much money to get the work done properly and keep the customer happy.

The most common cause is a failure to accurately bid the work, you missed something, didn’t ask the right questions, overlooked a detail or two of the specifications, didn’t realize how difficult the customer was going to be to keep happy or you made an error in your calculations or maybe the client gave you incorrect information upon which you based your bid. This can happen with a onetime service or it can be the result of changes that have taken place at an account due to more staff, overtime, construction, weather, or higher demands from the customer.

Regardless of the reason, the bottom line is that you are losing money on the job. Now the question becomes, not only why is this happening, but what are you going to do about it. You have several options.

1. Suck it up, and take the beating. Live with it and learn from it, and don’t make the same mistake again. This is easier to do, when you are talking about a small or short term financial loss, if it’s big dollars, it could put you out of business, in which case immediate action is needed.
2. If the customer gave you incorrect information, you’ve got a good reason to explain the situation and ask for more money. Doesn’t mean that you’ll get it, but you are on pretty firm ground to ask for and expect some adjustment in the pricing.
3. Go back to the customer, explain the situation and ask for an increase that will allow you to provide the level of service they expect and deserve. Ask for the customers understanding and help finding a way to solve the problem as you can’t afford to continue to lose money on the account.
4. Make adjustments in the way the work is done to reduce costs so you can at least break even or make a small profit on the job. This is all internal; you don’t need to involve the customer in the process unless you are contractually obligated to provide a set number of employees or hours on the job. As long as the work is acceptable to the customer, you should be ok.
5. Walk away. Not a good option as your reputation with this customer will suffer. If you have a formal contact to provide specific services, walking away may result in threats of legal action or an actual lawsuit. One thing you can pretty much count on, you’ll never get any work from that customer again. If the customer is well connected or you live in a small community, the word will get around, so be prepared to answer questions from potential customers, as to why you walked away from the account.

Tips to prevent losing money on future jobs

1. Double and triple check you numbers before submitting a bid. It’s always a good idea to have someone else read your proposal and double check your numbers. Sometimes, you are just too close to see an error, your mind sees what you want to say or write, not what you actually wrote.
2. Compare the bid and job to other accounts you’ve bid and done in the past, does it make sense, what’s different in the accounts that would drive the cost up or down. If something doesn’t look right or you can’t figure it out, go back into the details and find what’s making the difference in the price. Look closely at the labor hours as this is where the majority of your costs will be, at the same time, don’t overlook supply and equipment costs, overhead and profit.
3. Realize that large, complex and work you aren’t familiar with are the most risky to bid accurately. If you are not sure, get help from a consultant or friendly competitor. Chances are if you don’t know how to bid a job, you probably aren’t qualified to do the work. Stick with what you know and grow slow.
4. Track you costs and profit on every job. If you don’t monitor your costs and profit, you are bidding blind and there is no way you can build a successful, stable, profitable business without accurate financial information upon which to base your decisions and bids.

Best of luck, Keep it clean out there.

Filed under: Bidding and Estimating, Self Employment by William Griffin
Originally Published: CMM March 2016