Creating estimates is one of the most difficult parts of working as a general contractor or home service provider. Submit an inaccurate estimate and you might lose a job—or worse, win a job that fails to turn a profit. And with significant cost increases on materials and unpredictable supply chain issues, creating accurate estimates is only becoming more challenging.
There’s nothing fun about working long hours on a project just to break even after paying for supplies and labor. This is why accurate estimating is essential to the long-term viability of your contracting business. To improve your estimating process, check out these tips from Zitrod.
Know Your Labor Costs
If you want to create realistic estimates, you must know your labor costs. According to Botkeeper, labor typically accounts for 20% to 40% of total construction costs. Labor costs are more than the hourly rates of your employees or subcontractors! To fully understand your labor costs, you must also consider the productivity of your crew. Everyone works at a different speed. What’s more, contractors who can use materials more efficiently can help you reduce your material costs. Knowing your team and estimating project productivity based on previous jobs will help you create better estimates.
Use Landscape Designer Software
This estimating also comes into play as you manage projects like landscaping. Using software like landscape design software is the easiest way to enhance the estimating process of this type of project overnight. Specialized software for construction estimating will allow you to easily add up material and labor costs, include local taxes, and create customized templates that reflect your business branding. Look for software that includes a CRM app so you can track all your leads in one place, allowing you to bid on every opportunity that comes your way, such as with this landscape designer software.
Account for Risks
Construction projects come with several risk factors. Blackridge Research & Consulting lists a few factors, including labor shortages, productivity issues, health and safety hazards, change orders, and defaulting subcontractors. All of these issues can hurt the accuracy of your estimates and create new, unexpected project costs. Risk assessments should be part of your estimating process. This will ensure you can mitigate risks, recoup costs, or pass on projects that you deem are too risky for your company.
Track Industry Price Fluctuations
The fluctuating cost of materials has always made construction estimating a challenge. Now, when construction material costs are the most volatile they’ve ever been, it’s more important than ever to keep a close watch on industry trends. There are several ways to track material costs, some more efficient than others. You can manually check material costs for every project and keep a running spreadsheet of your latest prices, but this can become confusing and time-consuming as your business grows. Alternatively, you can use software that automatically updates material cost information based on the latest prices for items in your market.
Learn From Your Competitors
Studying your competitors is another great way to improve your estimating process. Find out what technology they’re using to create estimates, what services they include, and how they price their deliverables. You could even contact your competitors to ask about partnerships and other business relationships that help them get a discounted rate on materials. Consider also reaching out to your competitors’ customers to find out how their project went and whether the final cost exceeded the original estimate.
General contractors rely on accurate estimates to win bids and generate profits. The key is to submit estimates that are both profitable to you and reasonable to the client. With the right tools, resources, and research, you can improve your estimating process and enhance the accuracy of your project quotes!
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