Too many contractors are losing their butts and their businesses because they do not prepare their construction estimates in a way that almost guarantees that they will make money on each of their jobs! Discover how you can start making money consistently on your jobs
Many contractors will go to estimate a job and look at, for example, a 10 foot wall and say to themselves, and put it on paper, that will take me about a day to do and about $ 150 in materials.
The same contractor, a week or two later, will look at another job with a 15 foot wall and say to himself, and put it on paper, that will take about a day to do and about $ 150 in materials.
What's wrong with this picture? Is he right or wrong on the 10 foot wall? Is he right or wrong on the 15 foot wall? Will he ever know? Actually, he probably will when he finds out that he has no money (or less) in his pocket at the end of the job. Or, he never got the job because his pricing was too high.
Based on talking with thousands of contractors over the years it's very clear that contractors that prepare their estimates based on measurable units are the ones that are making money consistently. Let me explain how it works.
Before I start, let me say that this method works for any kind of construction. I do not care if you're a general contractor, home builder, remodeling contractor, any specialty you can name, the principles are the same.
When you're taking off a wall, for example, your costs should be based on either per linear foot or per square foot of wall. If we're doing a wall, let's say that we think it takes an hour of production per linear foot of wall and we believe materials are going to cost us $ 12.50 per linear foot.
So, for the 10 foot wall we have a labor time of 10 hours and a material cost of $ 125.00. So, here's what's great about this. When the jobs done (on a large job you did measure weekly) you look back and review how long it took and how much it cost. Let's say it only took 8 hours (8 / 10ths of an hour per linear foot), but it cost $ 150 ($ 15 per linear foot of wall) for the materials. We've learned something here that we apply to our future estimates.
For this discussion by the way, I'm going to assume that nothing unusual happened on the job, it was just a normal day on the job.
We use this information when we bid the 15 foot wall to estimate that it will take 12 hours (15 feet times 8 / 10ths of an hour) for the 15 foot wall and cost us $ 225 ($ 15 per foot times 15 feet) for the materials . This estimate will be closer to the real costs than our first estimate.
Based on what you've learned, you make adjustments to your estimating so you're not making the same mistakes over and over again. It's a continuous process that you need to follow to stay on top of your costs.
If you think about it, it's like driving a car or truck. You do not just get in, point it in a direction, lock the steering wheel, and drive. You're continuously making adjustments to the direction you're going. If you do not, you'll run in to a wall or a telephone pole or another car. The same thing is true in estimating. You've got to make adjustments or you'll run into a wall … and it's going to hurt!