Bidding mistakes can cripple a construction contractor company’s growth and limit its profits. Many contractors, however, are unaware that they’re making these mistakes. At Mobilization Funding, we’ve reviewed thousands of contracts—and the bids that won them. Here are the top bidding mistakes we see and how to avoid them.
Bidding to Win, Not to Profit
Whether you’re just starting out or running a multi-million-dollar company, bidding to win, not to profit, can destroy your cash flow and stall your growth. Winning bids is critical for every contractor—but bidding the work isn’t just about landing the project. Too many contractors price jobs based on what they think the GC or client will accept. They are bidding from a sense of vulnerability, believing the GC to have more power in this situation than themselves.
How to Fix It: Start bidding from a sense of confidence. You are the skilled expert in your field—your bid should reflect that level of expertise. Underbidding just to win cheapens your value and kills long-term sustainability. Your bid should be an accurate representation of the actual cost to complete the work to your specified level of quality, safety, and reliability. If a GC chooses someone cheaper, that doesn’t mean you failed—it means they chose a different level of execution. And always keep in mind that the jobs you “win” by underpricing are often the ones that cost you the most. They drain resources, create stress, and leave you without profit—or worse, in debt.
Bidding with confidence protects your team, your profitability, and your growth.
Confusing Margin with Markup
If you have trouble estimating the necessary markup to cover job costs and still turn a profit, you’re not alone. A lot of contractors use a blanket markup, without estimating how job costs plus their operational overhead will affect the end profit margin. Growth brings complexity—more people, more overhead, more risk. Understanding the difference between margin and markup is critical for contractors and business owners. That knowledge can strengthen your bidding process, resulting in more profit and less risk.
Markup is adding a percentage on top of direct costs (e.g., 20% markup on $100K = $120K). Margin is how much profit you keep after all costs—including overhead—are paid. Contractors often believe a 30% markup means a 30% profit—but once overhead and retainage are factored in, it’s often far less.
Research from Autodesk indicates that:
“The average net profit margin (accounting for overhead, taxes, and other expenses), in the construction industry is approximately 6%. However, some businesses may have a much higher margin (upwards to 10%) or significantly less (2-3%) depending on many project factors from overhead to regional labor costs.” Autodesk
How to Fix It: Calculate the actual job cost plus your operational overhead. Determine the margin your company needs to earn to make the job profitable and your growth trajectory on track.
Tip: Even perfectly priced jobs can strain working capital if the cash isn’t available when you need it. Mobilization Funding can help smooth out cash flow gaps if a job’s initial costs are high. We also have free resources to learn more about margin_vs_markup and what you need to know about bidding.
Ignoring Overhead
Your overhead—insurance, equipment, administration, and even your own salary—is real, and it needs to be accounted for. Failing to include it in bids makes a project look cheaper than it really is. Every job should carry a portion of overhead so your business doesn’t lose money doing the work.
How to Fix It:
- Calculate overhead per project as a percentage of total costs. (See Mistake #1)
- Include it in every bid, even on smaller jobs
Underestimating Labor and Material Costs
Material prices fluctuate, labor costs vary, and unforeseen complications often arise. Underestimating any of these can turn a profitable bid into a financial headache.
How to Fix It:
- Get current quotes from suppliers and include contingencies for price changes.
- Factor in overtime and potential delays.
- Add up total annual overhead costs, estimate total revenue for the year, divide to get the overhead allocation percentage, and include that in every bid before applying the margin.
Tip: Mobilization Funding can provide project-specific financing to cover labor and material costs upfront, so you’re not forced to use your own capital or risk delaying work. We also offer a Project Cash Flow Calculator so you can easily track, manage, and predict all of your expenses for each project you are working on.
As highlighted by ConstructConnect, “The key to winning more bids is being able to accurately estimate all costs required to complete the job while factoring in a reasonable profit for your company.”
Chasing Every Job
Busy is not the same as productive. Contractors who say Yes to every job can lead to overextending your resources — talent, equipment, and cash flow.
When determining a job’s viability, consider:
- Your company’s core capabilities
- Your team’s capacity
- Your company’s ability to support the necessary mobilization costs that come at the start of a project
- And the expected gain from the job
Your gain should be profit, always, but you might also take on an ambitious project to work with a coveted GC, or to expand into a new market.
By aligning project selection with your company’s goals and your company’s present capabilities, you can make informed decisions that support sustainable growth and profitability.
How to Fix It:
- Qualify jobs before bidding: do you have the capacity, skills, and financial flexibility to execute well?
- Focus on projects where you can deliver high value and strong margins
Tip: Ensure you have a trusted financial partner to review your cash flow and help you understand which projects are feasible without overextending your resources.
Failing to Plan for Payment Timing
Even a perfectly priced project can create cash flow stress if payments are delayed or structured poorly. Waiting weeks or months for payments can strain your operations. According to our 2025 Construction Delays and Payment Report, “One in four pros (25%) listed late payments as a major cause of delays. Pros said 76% of projects hit by late payments lose at least a week, with 38% saying late payments typically add more than three weeks to their timelines.”
The other payment planning slip-up is counting your retainage as profit. Retainage is not available cash—it’s held back until the end of the project (or even months after). Treating it as spendable profit during the job creates a false sense of financial security.
You can’t pay payroll, suppliers, or insurance with retainage. If you’re relying on retainage to cover today’s expenses, you’re already upside down.
Your project must be cash flow positive without touching retainage to be truly profitable.
“Retainage is not available cash—it’s held back until the end of the project. Treating it as spendable profit during the job creates a false sense of financial security. You can’t pay payroll, suppliers, or insurance with retainage. Your project must be cash flow positive without touching retainage to be truly profitable.” – Scott Peper, CEO, Mobilization Funding
How to Fix It:
- Think of retainage as a bonus or “gravy”—not the meat of the profit.
- Build payment timing into your bid and plan for gaps.
- Consider phased payments, deposits, or retainers to improve cash flow.
Take Control of Your Bids—and Your Cash Flow
Avoiding these top contractor bidding mistakes doesn’t just protect your profit—it positions you to take on bigger, more strategic projects with confidence. By combining smart bidding practices with a trusted financial partner like Mobilization Funding, you can:
- Smooth cash flow for every project
- Access funding to cover labor, materials, and overhead
- Work with experts to plan bids and payments effectively
“You don’t need more jobs—you need more profitable jobs. Profit isn’t selfish—it’s how you pay your team, grow your business, and survive tough seasons. Confidence isn’t arrogance—it’s clarity. Price your work like a professional who does great work and performs – that’s who people want to hire anyway.” – Scott Peper, CEO, Mobilization Funding
For more fantastic tips on the Top Bidding Mistakes a Construction Contractor can make, check out this Mobilization Mindset podcast
Stop letting small bidding mistakes cost your business. Connect with a Mobilization Funding cash flow expert today and make sure every bid you win works for your bottom line. Apply for a Loan – Mobilization Funding