Estimating for Contractors: Routine task?
Estimating is a management function that contractors must rely on to maintain a successful business. However, it's not always as easy as it seems. According to a recent report in an industry magazine, paint contractors have the highest business failure rate in the construction industry. In fact, for every ten contractors that start a business this year, only three will still be in business two years from now.
Estimating requires as much planning as the actual work. Any successful contractor will tell you how important it is to have a structured estimating program. When estimating, try thinking in terms of a “cost analysis.” This allows you to evaluate a job based on cost, not on how low the estimate needs to be in order to get the job.
“We often try to steer contractors away from 'guesstimating,'” Jerry Howell, director of education and certification for PDCA says. “Precision is such an important part of estimating – and it can be the difference between a successful business and one that fails.”
Another strategy is to view the job as an investment. As a contractor, you invest money and time into performing a service for which you expect a return. Be sure to weigh the risks, the potential profits and the financial impact, as well as your ability to undertake additional projects.
A well-structured estimate can be used several different ways: as a tool when discussing or making a presentation with a client, a basis for ordering materials, billing and monitoring job schedules.
“When you finally find the most effective estimate approach for your business,” says Howell, “it provides a huge comfort zone for you and your crew members.”
Estimating is a powerful tool. When done correctly, it can help your business profit. However, an inaccurate estimate can leave you scrambling to break even on a job. Estimating is not just another routine task—it can be the deciding factor between a business that fails and a business that thrives.
For more information on estimating, please call Jerry Howell at 309.691.2244, or e-mail email@example.com.
According to Jerry Howell, director of education & certification for PDCA, you should keep three things in mind when estimating:
- Know what your overhead costs are. The biggest reason for businesses going under, says Howell, is contractors not understanding their costs.
- Know how much surface area you are going to be working on. Be sure to measure the area you're going to be working on. Don't just guess.
- Use your estimate as a budget. If estimating is done properly, contractors will find that it's an outline for their budget.
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