Estimating Accurately Will Make You More Profitable - Here's How - 5/24/2004 - Mortgage Loan Refinance Debt Equity

Estimating Accurately Will Make You More Profitable: Here's How

Estimating, where do you start? I believe it starts with your company’s marketing plan.

Are you going to market your company as the lowest price guy in town? Or do you want to be the “go to” guy when the job needs to be done right the first time? How you position your company will affect how you estimate jobs.

Now that you have established your marketing plan, focus on your ability to sell yourself and your company as the answer to home owners’ dreams of the perfect remodeling project.

I will assume that you do a fair job and can do an accurate take-off. Let’s move to the more difficult aspects of estimating — putting costs to the materials and figuring the labor costs and how long it will take to build the project.

If you have done similar jobs before and you track your work, knowing how much labor to calculate is relatively simple. Go back and review a similar job, see if you allowed enough time and adjust the new estimate accordingly.

But what can you do if you are relatively new to the business-end of your construction company or if you seem to be selling your jobs short? By selling your job shorts, I don’t just mean under-estimating the materials needed. I mean miscalculating your labor, overhead and profit margin, too.

Get Your Labor and Materials Costs Right

Before you can begin commanding higher prices for your services, you need to get the basic labor and materials costs right. Books and computer software are available through various sources that can help you with your calculations.

If you have never done a particular job before, you’ll probably find that your labor will be the hardest to calculate. Books on construction costs that focus solely on labor productivity are available at BuilderBooks.com.

You might want to consider purchasing software programs that can break down production time. The good programs are based not on how fast you can do the job, but on how long it takes the average employee. These programs help take the guesswork out of productivity questions and enable you to develop a template and make estimates in a shorter time.

I would recommend, however, that whatever product you choose, check how it prices materials and be prepared to make changes. I find that I almost always have to make changes on materials — usually for windows or doors.

Purchasing estimating software was without a doubt the best $50 I ever spent. I got better at estimating and I was able to ask for bigger numbers and get them. Do I work less today? Yes. Do I make less money? No. Do a comparison for yourself on your next estimate.

Frank E. Malpere, Jr., CGR, CAPS is the president of Quality Building & Remodeling, Inc. in Effort, PA. He is a member of the NAHB Remodelors™ Council Membership & Council Development and Public Affairs Committees. He was named the 2002 Remodelor of the Year by his home builders association. For more information, contact Malpere via e-mail.