The profitability of your construction business rests on the accuracy of your estimating. If your estimates and the final project costs differ, you’re cutting into your margins. It’s frustrating for those working in the building industry. There are so many variables it can be difficult to see where the problems arise. Labour and material costs have lots of room for mistakes. The productivity of your employees is also a consideration of many overlooks.
Plus, few business owners think about factoring in items like risk contingencies. It can feel like a gamble. Put your bid is too low, and you won’t make a profit. Put it in too high, and you make lose out on the work. So how do you arrive at the right rate?
The team of Ground Plan has broken down the issue to see where you could be making mistakes that are throwing your numbers out. Follow these ‘rules’ and it’ll soon all fit in place.
#1 Inspect the site in person
Most bidding opportunities will give you the chance to attend a pre-bid meeting and visit the job site. This is an important step. You need to check out all the site conditions that could cause issues and unexpected costs. It’s a good idea that
your potential subcontractors do the same. Here are some things you need to do on-site:
- take accurate measurements
- inspect the topography
- take some soil bore samples
- look at road access and traffic to the site
- calculate how much space there is for staging, equipment and materials delivery and storage
- investigate what environmental protections will be needed.
#2 Ensure your takeoffs are accurate
Accurate takeoffs determine the quantities needed for all your materials and supplies and labor and equipment needs. Your takeoffs underpin your estimates and mistakes can throw out your numbers out so easily. They are also needed to determine your labor and equipment needs. Takeoff software offered by companies like GroundPlanhelps you get accurate measurements for your estimates. Your accuracy will be spot on, and the tools in the software also help save time and boost productivity.
#3 Calculate Labor Costs
Labor costs are the hardest to estimate and are also one of the most expensive project costs. No two employees are the same, even though they may be tasked with the same project. Their experience level, rate of pay, and productivity differ.
So, while you may be paying a higher salary to an individual, their experience will mean they can perform tasks quicker and with more accuracy. One way to eliminate this issue is to keep accurate data on labor costs so you can refer back to them when you’re putting together a bid.
Prices for materials can vary dramatically from the time you start an estimate to the time that construction begins. One way to overcome this problem is to build a good relationship with your product manufacturers. This enables you to negotiate better prices or to agree on stable prices when you put together an estimate. Also, ensure you give them the correct quantities, so you know they have the products to fulfill your order when the job finally kicks off.
#4 Make room for contingencies
The first step is to do a risk assessment on the job you have been invited to bid on. If you deem it too risky, pass on the opportunity. If you want to proceed the risk assessment will alert you to areas where you need to make contingencies in
#5 Stop making uneducated guesses
You may feel you have the experience to put down the numbers you’ve worked with before. Your perception may be different from reality. If you track your job costs on every project, you’ll be able to refer back to them to ensure your estimates are as accurate as possible.
Don’t forget to factor in overhead costs and fees for permitting and inspections and rent for equipment if you will need to add to your current items.
#6 Double-check your work
Small estimating mistakes in maths and measurements can throw your numbers out considerably. Take the time to carefully review your work or ask a team member to do so. Also, review the bid estimates and proposals of your subcontractors.