- PlanHub
Calculating the ROI of a Bid Management Software
Key Takeaways
- An effective digital bid management software optimizes processes from finding bids to creating accurate takeoffs and estimations.
- To calculate the ROI of your bidding process, subtract the labor costs from the value of the bids that you win.
- Bidding management software can help you increase your return on investment by both reducing the resources needed to submit bids and helping you win more bids.
- Calculate bidding improvements by comparing your baseline labor costs, bids submitted, and overall win rate to your prospective results after adopting a new software that can streamline your processes.
Introduction: The Financial Imperative of Modern Bidding
Bidding is a crucial part of your business model. You need to be submitting bids consistently in order to find quality work and keep jobs coming through. However, when your process for finding bids becomes more costly than the revenue you’re bringing in from won bids, a change is needed.
Manual bids can take considerable time from your team, causing you to limit the number of bids you can apply for and holding you back from potential revenue. Lost time is lost money, and a close analysis of your ROI empowers you to make the adjustments necessary to ensure your efforts are translating into work you’ve won.
A bid management software can tip the scales in your favor, streamlining your bidding process, saving resources, and increasing win rates. Between resources like a construction bid board and collaborative tools for creating bids, software can bring your bidding process to the next level.
Understanding Bid Management ROI
Your return on investment is the resources you’ve spent on submitting bids subtracted from the funds you’ve earned from winning bids. For the sustainability of your business, it’s crucial that you understand how the costs you spend on preparing proposals compares against the revenue you generate from the bids you win.
For example, if you are currently spending $3,000 per bid to push out 10 bids, that’s $30,000 in time and labor. If you are winning 2 in 10 bids, at about $50,000 per project your ROI translates to $70,000, or about 142%, leaving you with a thin profit margin after factoring in costs for labor and materials.
Having a firm understanding of your bid management process ROI empowers you to understand what refinements you can make. When you’re making money, it can be easy to overlook excess spending that occurs due to inefficiencies. Winning projects is great, but if you’re spending the majority of those earnings on finding the projects in the first place, you could be missing out on valuable revenue. Calculating your bid management ROI helps you identify any leaky faucets so you can spend less on your initial proposals and ultimately take home greater returns.
The Shift from Manual to Digital
Shifting from manual bid management to digital presents several advantages, centralizing collaboration, streamlining material and pricing calculations, and improving access for your entire team. Digital tools allow your entire team to collaborate in one space, easily able to see a centralized construction bid board and contribute to plans in one space.
Rather than having to pass along the same set of plans, verify that everyone is working from the same version, and ensure that you manually transfer numbers and values without mistake, digital platforms help you stay on top of it all. Digital tools help you eliminate redundancy and stay more organized, empowering you to be more efficient and spend that energy on creating higher quality bids and finding the best projects to bid on.
Why ROI Matters
ROI is crucial for understanding how well your efforts translate into outcomes, tying into the health and sustainability of your business. If you find that your team is putting considerable energy into crafting bids and not seeing strong results, there’s room to tighten up, both for the sake of saving you money and for preventing burnout amongst your team.
While efficiency is a great metric to track, ROI directly proves financial value to your executive teams and stakeholders. By calculating ROI, you are able to understand whether the resources you spend are driving returns, obtaining a clear picture of profit and loss.
The Baseline: Quantifying the “Cost of Inaction” (The Current State)
Your baseline is your current operating procedures and the returns they’re bringing from work you win. Consider your areas of inefficiency and potential improvement and how these factor in. The cost of inaction is the lost returns you may be seeing compared to what you could achieve by implementing a strong bid management software.
Direct Labor & Time Drain
Spending considerable time on bids alone can quickly stifle progress for any construction business, with your team’s energy spent directly on finding work more than actually doing the work. Time spent on less-productive tasks like searching for bids and correcting past errors leaves your team spinning its wheels rather than propelling forward. For example, if your team spends 40 hours for a single bid, and your estimators spend 30% of their time on less productive tasks, like making corrections, cutting these inefficiencies could be monumental.
The Price of Accuracy
Accuracy is a necessary habit for any successful subcontractor, and it can be difficult to sustain with manual takeoff and estimation processes. Errors made during manual bidding and estimation lead to cost overruns, project delays, and rework.
If you are running into errors consistently, then sticking with the same old processes could be costing you long-term. Not only do the occasional errors contribute to profit fade in rework and delays, but too many over time can erode trust with potential clients and contractors, harming connections for future work.
Mistakes happen, but if they become consistent, you likely need a better solution. Construction estimating software often helps minimize errors by assisting you with calculations, providing accurate material cost estimation values, and allowing team collaboration on the same set of plans.
Opportunity Cost
Your opportunity cost is the revenue you’re losing to your limited bid capacity. The logic is simple—if you’re restricted in your ability to put out more bids, then you’re restricted in your ability to pull in more business. Sticking to the status quo when the opportunity to expand is right there could hinder you in your potential revenue gains.
If your manual bids take up twice as long as they need to, you could stand to gain significant opportunity from tightening this timeline up. Digital bid management software helps to maximize your opportunity, trimming your time needed to complete a bid and freeing up time to bid on more opportunities.
The Collaboration Tax
Collaboration is a crucial aspect of your construction bidding, and it becomes tougher in a manual setup with a lot of moving parts. Miscommunication or crossed wires in writing and editing bids leads to future estimating-driven change orders, faulty plans, and ultimately costly rework. Polishing up these lines of communication brings better results.
Manually sifting through bid boards to find the right project fits often takes excess time. A digital software that highlights clear bidding opportunities and allows for collaboration to complete them prevents disjointed communication and errors within your team. Streamlining these processes by taking action with a bid management software can cut losses in time spent creating and correcting bids while also boosting your revenue.
The Gain: Quantifying “Hard” ROI (The Financial Return)
“Hard” ROI is the tangible monetary value you see from taking action and adopting a bid management software. Pivoting from a manual approach to bid management software can offer all the following tangible financial benefits.
Operational Efficiency (Labor Savings)
Operational efficiency leads to tangible results, saving you labor costs that can be redistributed into more valuable tasks. Excess time spent on bids is excess money; being able to invest that money into other areas of your business empowers you to bring home greater returns.
Automated bid management software may be able to cut bid preparation time by as much as 75%. The increased operational efficiency means less time bottled into each bid, more time spent on other tasks, and the ability to submit more bids for more won work.
Revenue Growth (Win Rates & Capacity)
Bid management software fosters revenue growth by improving your team’s efficiency and access to more bids. Doubling your bid capacity without having to add to your team provides a clear financial advantage. Tools like PlanHub can help you assess your winnability scoring through predictive insights to assist you in seeing what the payoff and return will be before you even get back.
Our bid management software not only connects you to a wider board of bids but also helps you better understand which bids are worth pursuing, giving you an extra advantage by allowing you to spend your valuable time as wisely as possible. For example, Executive Concrete Polishing Solutions increased their revenue by 15% by submitting just 10 bids per month.
See How Your Bids Can Pay for Themselves
PlanHub’s ROI calculator can help you identify your potential earnings by using our platform to expand the number of bids you’re putting out and increase your win rate.
Risk Mitigation (Cost Avoidance)
Bid management software mitigates risk, reducing estimation errors by 90%, preventing profit fade later on down the project pipeline. Avoiding these excess costs allows you to take home the money you expect to earn, rather than funneling it into correcting errors or buying new materials.
Good software offers features like automated anomaly detection, which can help flag aspects like zero quantities or missing markups. The reality of manual bidding is that human errors happen, and they can be difficult to catch—the rise of bid management software has made it easier for teams to fix errors before bids ever leave your team.
The Strategic Value: Measuring “Soft” ROI
Soft ROI considers the strategic value that you gain from improved, streamlined operations, which is a bit more difficult to track but makes your bidding process better.
Strategic Agility
Transferring menial tasks like price estimation and material cost calculations to a bid management tool not only makes your calculations accurate, but allows you to put more energy into other crucial aspects of your strategy. Digital bid management increases efficiency in entering data and covering the simple tasks so you can focus on less visible, but also important, aspects of your bidding process.
Less energy spent on tedious entry tasks can convert to strategizing more deeply into which projects you’re bidding on and how to spotlight the overall value your team will provide. By being able to shift your focus from the basic data entry and estimation tasks in bids, you can think more deeply about refining your goals and emphasizing the value you offer beyond just the numbers.
Enhanced Decision Making
Being able to gather centralized data from your bidding software empowers you to recognize your most fruitful opportunities and direct your energy toward reaching them. Intelligent bid management software allows you to more closely identify projects that you’ve won in the past and sort through who’s worth targeting in the future.
Enhanced decision-making may not be as measurable of a tactic, but having a clear direction for future decisions will save you time and allow for more focused bidding efforts that will eventually translate into measurable, successful outcomes, like higher win rates and increased responses.
Brand & Professionalism
While the direct returns may not be easy to calculate, it’s undeniable that your brand image and reputation of professionalism have direct impacts on your ability to pull in more work. Trust, responsiveness, estimation accuracy and follow-through are all valuable qualities to construction contractors and clients. Though these qualities may not be able to measure in quantifiable numbers, they absolutely win you more work in the future.
Having a bid management software that helps you strengthen and refine your processes for trust and confidence in your business comes with tremendous payoff. By being able to meet client needs and streamlining your estimating process to cut errors or excess project delays, you’re able to retain high potential clients and keep those bridges strong.
The Investment: Calculating Total Cost of Ownership (TCO)
To calculate the total cost of ownership of a bid management software you must consider all the time, money, and energy you invest. You’ll have to understand the full scope of spending that you do on the software you choose, both from the direct money you spend on the technology itself to the resources you spend on setup and maintenance.
Implementation & Setup
The time it takes to implement and set up a technology counts as an important consideration in your new technology adoption costs. The time you’re taking to understand and adopt a given technology is time you’re taking away from other tasks, so it’s important that this time is worthwhile. Consider these costs over the initial set up period as well as over a few years using the technology. The best bet is a tool that balances a simple and streamlined set up with an expansive list of features in a convenient user interface.
Subscription & Maintenance
Subscription and maintenance of a new platform should contribute to your ROI calculation. Most have some level of monthly or yearly subscriptions to find and bid on projects.
However, it’s important to consider the cost compared to value. Spending $0 by not having a platform isn’t saving money if your processes are outdated and leading to errors and inefficiencies. For example, while PlanHub starts at $1,999 per year, it often pays for itself in as little as a month by empowering users to expand their number of bids per month and put out quality bids that increase win rates.
The Human Investment
For the most realistic and successful adoption of your software, you’ll need to consider the costs of the human investment, pushing you to weigh time spent on training and adoption against the efficiency you’ll gain over time. While there may be initial costs and energy diverted toward ensuring your team is up to speed on any new software you adopt, you’ll need to consider how this measures up to your long-term gains in efficiency and output.
Ideally you’re able to find a software that balances being simple enough to train during adoption and future employee onboarding but also successfully drives efficiency later on down the road. For example, PlanHub users are usually up and running same-day with the chance to schedule a free training session with our team. If subcontractors find just three bids through the platform, they can already make their money back.
The Framework: Building Your ROI Business Case
Building your case of implementing a bid management software is crucial. You can calculate your prospective ROI by using the following steps.
Step 1: Establish the Baseline
Your baseline ROI is your current labor costs compared to your current win rates. For example, your labor costs might be spending $2,000 per bid to pay two team members their hourly rate to complete each. At this rate, you’re spending about $10,000 to complete five total bids. If you win 1 of 5 for a return of a $25,000 project, you can consider the effectiveness of your process. Understanding your current baseline is crucial for having a frame of reference to understand your potential for growth and improvement in ROI after adopting new technologies.
Step 2: Project the Improvements
Consider the improvements you’ll see upon implementation, with clear and common improvements include time savings in bid creation and error reduction. For example, PlanHub subcontractors, like New South Specialty, experienced the ability to cut bid creation time by hours, leading to a significant increase in bidding capacity, with others able to submit an additional two bids per week at minimum. Accounting for your ability to increase your bid output and increase win rates builds a strong case for the implementation of a new software.
Step 3: Calculate Net ROI & Payback Period
You can directly calculate your ROI and payback by considering how much you’ve spent on your bids and how much you expect to earn back after your bid management platform over time. Using a bid management platform can drastically cut the total cost of submitting a bid, making the process faster and allowing you to win more bids sooner, ultimately resulting in shorter payback periods.
The formula for Net ROI is as follows:
(Total Savings + Increased Revenue) – Total Cost of Submitting a Bid = ROI
Step 4: Presenting to Leadership
After identifying the potential value in adopting a bid management software, prepare your pitch to your internal team. Using the calculations you’ve gathered, you can more easily develop a narrative to take back to your team, highlighting increased profitability and scalability as key outcomes from increased efficiency. Be sure to highlight the competitive advantage you gain from being able to find bids that are the best match for your company and cut inefficiencies in being able to apply for them.
Conclusion: Making the Data-Backed Decision
Embracing a bid management software can help you spike your efficiency in submitting new bids and improve your win rates, ultimately jumpstarting your ROI. A tool like PlanHub can instantly pay for itself after you win just one project through the platform, connecting you with quality work opportunities and giving you the tools to win bids over your competition.
PlanHub users see as much as a 50% increase in gross revenue after winning just three projects through the platform, often earning their money back in won bids in less than a month. Our subcontractor bid management platform empowers subcontractors to not just find better bids and have the capacity to submit more bids. Subcontractors who use the PlanHub platform experience real improvements in efficiency and tangible success that translates to better return on investment.
Book a demo with PlanHub today.
Real ROI Results from PlanHub Customers
- Adas Renovations Group
- Projected a 30% to 50% increase in gross revenue by winning just three projects through the platform.
- Alliance Group
- Anticipates a 10% to 20% increase in sales due to the volume of bid work received.
- Estimates that winning just 2 or 3 out of every 10 bids sent would push profit margins up by 20%.
- Commercial Acoustics
- Achieved a near 40% increase in revenue in a single year (2022) by using the platform.
- NTX Commercial Floors
- Attributed a 30% increase in revenue (roughly $350,000 to $400,000) to the transformative effect of the software.
- Dynamite Demolition LLC
- Targets a 30% to 40% growth projection, aiming to generate an additional $250,000 to $500,000 in revenue within a year.
- MilliCare
- Calculated that securing just 5 additional jobs would increase business by 70% and nearly double their total volume.
- Stripe It Rite
- Successfully increased revenue by 10% to 15% in less than one year.+1
- Executive Concrete Polishing Solutions
- Increased revenue by 15% by submitting an average of 10 bids per month.
- New South Specialty
- Reduced the time needed to scale drawings from hours of searching to 30 seconds or less.
- CCAC Building Solutions
- Increased bidding output by submitting two extra bids per week within the first few months of use.
