Keeping Your Focus: Estimating

We are already one quarter of the way through the New Year and, hopefully, you have gotten a handle on some of the things that we covered which can spell more $$$ for your business and streamline your operation. We’ve looked at inventory management and communications as things that can be better controlled to give you better results.

Bringing it in the Door

Estimating, for any project or job, is another area that needs to be looked at. If you are a small shop and do the estimating yourself, or of you are a mid-size to large shop and have estimator(s) on staff, tightening up your bids is a really good way to improve not only your bottom line, but also to increase the amount of work you bring in the door.

On the small scale, estimating repair work and residential remodels can be challenging, especially when you have one or two people other than yourself who are doing the work. I recently read an article by a guy who couldn’t understand why his bids on jobs were constantly coming in over budget. He finally figured out that he had been estimating the work on what he could do, not what his employee could do. That is a significant realization, and one which we should take a moment to dissect.

Who is Doing the Job?

If you started your company as a one man show, and worked at it for any length of time, you probably had your estimating tasks incorporated into your sales pitch. That is, you bid a project on the spot or on the fly using rough figures that approximated your costs and your labor, profit and overhead. You sometimes made a lot of money and sometimes you didn’t. Hopefully, you didn’t lose too much money in the process.

Over time, you learned a little bit more about business in general, your business in particular, and your own estimating ability. You became a better estimator based upon past experience, and your estimates began to get sharper.

Fast forward to your first hired journeyman. You bid a small residential project and figure all of your material costs and labor. The labor figure you use (unless you are using a flat rate manual, which usually requires local or regional adjustments) are based upon how long it would take you to do the job not, necessarily, on how long the job should take. Your hired guy takes a day longer than you estimated and you are left trying to figure out why.

In a perfect world, you’d talk to your guy, realize your mistake and make adjustments. In the real world it takes a bit longer, but the idea finally hits home and you make the appropriate changes to your estimating. The real result of the issue is that you realize (or you should) that nobody takes care of your business the way you do. Since labor is the most fluid component in estimating, getting it under control should be your primary concern.

Now, Who Will Figure Material?

Once you have a good bead on the labor estimating, focus hard on your material costs. We all know that there are many different ways to build a project, and you want to install the systems in the most economical fashion possible, material and labor-wise.

In small residential and commercial remodel projects, it is often difficult to estimate material costs with great accuracy due simply to the nature of working with existing systems and structures. Putting together an accurate material list for such a job might seem like a daunting task, but it is one that you need to do if you want to maximize your profit and minimize your material costs.

In large commercial projects, one usually has complete blueprints to use in doing material takeoffs. In that case, field personnel will use the same blueprints to do the installation, so the need for extensive feedback and explanations to your people is lessened somewhat, but not completely eliminated.

Back to Communication

Conveying your estimate to your employees is another area that you could tighten up (see last month’s column on communications). If you figured the piping to run a certain way and your people install it a different way that uses 20% more pipe plus hangers and fittings, you’ve got a problem. You must share your estimate and estimating style with the people who are going to do the installing, if for no other reason than that you can tell them, in a face-to-face meeting, exactly how you saw the project and how you want it done.

Don’t be pedantic, either. If your foreman or field superintendent see the job a different way, by all means discuss the differences. You might learn something and even save a buck or two.

By taking the time to do a good, accurate, material estimate and using realistic labor figures based upon your known people AND going over the estimating strategy with those people, you will have a much greater opportunity to increase your bottom line and make every asset count. Focusing on tight estimating and getting your labor force moving in the same direction is invaluable in improving your bottom line while eliminating unnecessary headaches and costly errors.