When is better to lose a quote?

When is it better not to win? When the entire business case, along with its potential future add-ons, proves to be unprofitable. If we have to sell something to one customer at a loss and at the same time we will not benefit from it in the future, there is no point in doing that. The business theory states that each sale should be a win-win situation for both parties. But then, logically, the customer cannot be surprised that if he expects to be the sole beneficiary while putting us on the losing side, we won't volunteer to engage in such a contest.

But how to define that our offer is disadvantageous for us? We must calculate all the expenses and evaluate all the risks.
Naturally, the cost includes the purchase of products that we offer to the customer. However, there are other expenditures to consider, such as:

  1. cost of a salesman who negotiated the quote
  2. cost of an employee who created it
  3. cost of other personnel - project designer, financial department, receptionist, cleaning lady, etc.
  4. company overhead costs

An ideal step is to calculate your total hourly cost. It will simplify your further estimates.
Here's an example of a total hourly cost breakdown:
Monthly cost of employees: $15,000.00 Office rental: $1,500.00 Car park: $2,300.00 Accounting: $600.00 Miscellaneous: $1,000.00 Our monthly expenses are $20,400.00

We have 5 full-time employees working 8 hours a day, during which they produce a combined 40 hours of daily expenses. Beware, this is expenses, not work! You can count that between 50% to 70%!

If we count the average number of working days in a month as 21, we know that the employees produce 40 x 21 = 840 hrs. of total hourly costs.

A single total hourly cost would be $20,400.00 / 840 = $24.29. If an employee spends 2 hours making a price quote, we have invested 48.58 USD regardless of the success rate.

Never forget this sum. If you include not only the purchase prices of products but also cost items in your quotes (both, of course, hidden from the customer), you will be able to evaluate more precisely when a won bid truly becomes a victory.

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