Many entrepreneurs ask, “How should I price my tender?” And here’s the truth: There’s no formula, no magic wand. Each tender is unique, whether you’re delivering office furniture or catering a government event. But while there’s no one-size-fits-all approach, there are principles that guide winning bids.
Here’s where we break it down:
1. Price is King, but Strategy is Emperor
Yes, pricing low increases your chances, but it’s not about sacrificing profit. It’s about being competitive and sustainable. If you bid too low, you risk cutting into your margins or worse, delivering poor quality. Be careful: underpricing might win you the tender, but you’ll lose money in the long run.
2. Know Your True Costs
Underestimating costs is a one-way ticket to failure. Factor in everything from labor to delivery, from admin fees to last-minute supplier price hikes. Overlook even one detail, and it’s your bottom line that suffers.
3. Supplier prices are constantly changing
Fuel prices, currency fluctuations things can change overnight. Ask your supplier for price validity period and include that when submitting the tender. The price you thought was locked in might not be tomorrow.
4. Mind the Minimum wages
Some industries like cleaning have minimum wages that are set by law. Cutting costs by underpaying workers? That’s not just bad ethics, it’s illegal. Build in compliance from the get-go.
5. Avoid the Extremes
In the tendering field, nothing escapes sharp scrutiny. Bid too low, and you’ll be labeled unfeasible. Bid too high, and you’ll be dismissed as overpriced. The sweet spot? It’s where your bid looks competitive and reliable. Aim there.
6. Strategic Margins
If your usual markup is 25%, consider a 20% markup for tenders. Remember, in government tenders, price weighs heavily on the final score, sometimes accounting for up to 90 out of 100 points. The lowest price often wins.
7. Don’t Forget VAT
Government tenders typically require VAT-inclusive pricing. Make sure you add that 15%.
For South African small business owners, tendering offers incredible opportunities, don’t miss out just because of pricing mistakes. Play the long game, tendering isn’t a quick win it’s a strategy. Each bid you submit is a step towards building credibility and trust. Don’t think short-term. Bid smart, bid fair, and bid with sustainability in mind.
Ready to master the art of tender pricing and boost your chances of winning? Don’t miss out on our upcoming Tender Masterclass! Register now to gain expert insights and strategies tailored for South African small business owners like you. Click here to check it out.