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April 26, 2011 7:00 AM CDT

When You Price Work, Do You Estimate or Guesstimate?

Contractor tip of the month

By

We all can agree that it’s tough out there right now. If you do get a job, you better have an accurate bid or risk losing your pants. Oh, we can all wish for the good old days, when estimating was easy and work was abundant. You know what I am talking about: when you could put a material and labor summary together, fatten it up in case you missed something, add in equipment and overhead, throw 20 percent on top of it because you were too busy to do the job anyhow, post the bid and still get the job. Guess what? Those days are gone forever. We cannot survive going forward with a guesstimate. In today’s business climate, you’ve got to estimate, not guesstimate. Here’s how you do it.

Know Your Exact Cost

If you expect to win a job, you must know what your actual costs are for labor, field overhead, equipment and office overhead without guessing. Then, add exactly what profit you expect to earn on the job. And, let’s not forget accountability. When the job is finished, the estimator should be held accountable for the profit being really close to what he put on it bid day.

Never Trust Anyone’s Estimate But Your Own

I had a contractor come to me once for advice on pricing his work as he was struggling to make money on his projects. I asked him how he currently was doing his estimates. He replied, “It’s easy, I have such a good relationship with the GCs that they give me the number and I do the work for that price.” (If you were the GC, wouldn’t you love that relationship too?) The first lesson he got was to never trust anyone’s number but his own, if he wanted to stay in business.

Utilize Technology

If you aren’t using some of the latest estimating/job management computer systems, you already are way behind those who use technology to build their estimates. Before we post any large bid, the estimator shows us a complete 3D rendering of what the job looks like. We compare it to what we see on the prints. As a group, we look at the finished appearance, determine unit prices based on the complexity of the project compared to similar projects we have built in the past, and make sure he isn’t adding too much in or taking too much out, so our odds of getting the job improve. On bid day, up to five of us may be scanning documents and prints to ensure we have an estimate and not a guesstimate. If something was missed, one of us most likely finds it in the final hours before the bid goes in.

Future Bidding

I believe that engineering and estimating technology has become so advanced that, in a few years, owners and GCs will be sending us the take offs with all the unit/pieces already broken out. All we will do is fill in the price per unit of work that needs installed, and that will determine our bid. If that holds true, the only survivors will be those who know exactly what it costs to install every single unit in their scope of work. So, you’d better start intensely measuring jobsite production down to each unit installed.

By truly estimating, rather than guesstimating, you can know when to say “no.” We all know there are times you take a job for less than you would like (or as I call it, bone one) to keep your people busy. When you bone a job, make sure you only cut to the bone, and no deeper. The bone is your actual costs that go into that project. Then, when your customer asks you to do it for less, you can say “no thanks” with confidence as you know your costs.


About the Author

Damian Lang is a mason contractor in southeast Ohio and inventor of many labor saving masonry systems and products. Lang has served as the Marketing Committee Chairman for the Mason Contractors Association of America. He is also author of the book Rewarding and Challenging Employees for Profits in Masonry. To network with Damian on contractor tips or tips you have and would like published, contact him at dlang@langmasonry.com or 740-749-3512.

 

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