Don’t Underestimate Your Estimating System’s Potential
Knowing what to charge clients for the work you do is often the difference between long term success and eventual failure for the business. Many contractors look at estimating simply as a way to determine the cost of a project. In the traditional design-bid model of project delivery, this simplistic approach may work, assuming your sell price generates enough gross profit to cover your overhead and profit requirements. However, if you’re doing design/build, and your current estimating system is limited to only producing the number you charge clients for a project, you may be missing out on many other possible benefits.
Your Estimating System Should Support Your Business in Several Ways
If you think of Design/Build as a way of doing business, your estimating system must become a tool that facilitates how you do business, not just a way to get to the price. Here are several ways a Design/Builder or a remodeler can maximize the potential of the method and system used to do estimating:
- A design/builder’s estimating system should be fast and easy to use.
- A computerized system should be used that allows the estimator to concentrate on estimating, not adding up numbers.
- All estimating cost assumptions for labor must be accurate in terms of time per task.
- The system used for estimating should have the ability to use your company’s actual burdened labor cost per hour to determine total labor cost per task.
- The system should also allow for on the spot “what-if” adjustments to quickly estimate the effects of any changes or suggested alternatives to the project during design.
- To increase accuracy, estimating should be done so it is comparable to the company’s job costing system and job costing categories.
- Information within the estimate, and job costing, should be broken down to a level of detail that allows the insight you need to make future estimating adjustments.
- The estimate should also help you or your lead carpenter produce an accurate materials list, not just a materials cost allowance.
Below is screen shot of a simple estimating spreadsheet template used to estimate a deck project.