Bid Budget Calculator

Use this calculator to work out the limit to how much you should spend on bidding for a contract. After all, there’s not a lot of point winning work if the cost of winning ate all your potential profits.

In using the calculator consider the full term of the contract but do not include the extension options. For example, if the term is 3 years plus two 1 year extension options, then for the purpose of this calculator use 3. If the contract you are bidding for is not a term contract, but for a project or works, then insert the percentage of one year. For example, if the works will take 18 months, then use 1.5 for the term.

The profit margin is the percent of sales remaining after the deduction of cost of goods sold and all expenses other than income tax and depreciation. In other words, the net profit margin.

When considering how strategically important this tender is, consider the non-financial benefits of winning. For example, it may position you better with the company for future work you know is coming up, it may give you the demonstrated experience you badly need to win larger contracts, or it may improve your marketing efforts.

When considering the percentage of the expected profit you are willing to invest, be realistic. Less than 20% is typical, however more may be linked to how strategically important this tender is.

The risks to the company relate to the risks of winning the contract. For example, you may have cut your pricing really fine, the company has a poor reputation, or the requirements/specification is really loose yet a fixed price was required. 

The resultant budget includes internal costs (salaries) as well as the external costs of hiring specialists (for example, bid writer, lawyer, logistics specialist etc).