Tips for Better Estimating

Accurately estimating construction costs lies at the heart of a remodeler’s long-term success. If an estimate is too low, you may win the contract but lose money on the job. And if it’s too high, the work might go to a competitor. To avoid either of these situations, being precise on your estimates is a science that one can perfect over time.

For Rob Mathews, CGR, president of Curb Appeal Renovations, Keller, Texas, “estimating was a thorn in my side for quite some time until I took others’ suggestions and applied them into my company.”

Like many remodelers new to the business or even those who have spent years in it, Mathews was in such a hurry to get proposals out to the clients to impress them on how responsive he was to their project, he found himself somewhat “guessing” what he thought was a fair price or what he would want to pay for a certain phase.

After several projects came in with only 1 to 3 percent profit, Mathews went back and performed job autopsies to find their shortcomings.
“One after one the cause kept pointing back to me and my quick and impressive estimating techniques,” says Mathews. “I finally had to change my ways fast and made some drastic changes overnight.”

As Mathews soon learned, each remodeler has to determine for themselves which type of estimating best suits their business model. Some choose to do fixed-price estimates while others choose approximate estimating. Either way, all estimates must consider labor, equipment, material, subcontracts or other direct costs, as well as indirect costs, such as insurance, permits and taxes. Omitted or incomplete items will result in inaccurate bids. In this article, we gather the advice of some longtime remodelers who have spent their careers perfecting the estimate.

1. Fixed pricing with subcontractors

Since many remodeling projects consists of more than one player, typically involving a few trade contractors and possibly even an architect, getting your trades involved with preparing the estimate can be beneficial. Vice president of Custom Design & Construction in Los Angeles, Randy Ricciotti, CGR, CAPS, says that taking the guesswork out of estimating is key to improving your margins.

“We are a design/build company and unlike many, we subcontract everything out,” says Ricciotti. “In this process, we are able to get a fixed pricing on each project from our subs. This eliminates any of the guesswork — it is not a bid or an estimate; it is a fixed price.”

Custom Design & Construction submits a complete scope of work, complete with construction designs to its subcontractors. From here, subs have full access and are encouraged to visit the project site and speak with the designer(s) on the job. With this information, the subcontractors send a fixed price for that specific project that Custom Design & Construction can enter into their final estimate. “If the scope of the project does not change, the price does not change,” explains Ricciotti. “If something does change from the original agreement, we only accept signed change orders.”

2. Order accurate amounts of material — including waste

When working on estimates that are done in detail and not catalog or unit cost versions, paying attention to ordering the most accurate amount for waste material can prove to save quite a bit of money for you and the homeowner. Mike Weiss, CGR, CAPS, GMB, says, “Waste is often a misused item and can sometimes be the reason for not getting a job.” One thing to help aid in this planning is to always ask a trade contractor or vendor who is furnishing materials to state the amount of waste that is included. For example, if a brick supplier furnishes 25,000 bricks for a big remodel including waste, three percent would be plenty. If you don’t know if he included any and you normally use 10 percent because of smaller jobs. Now you have included 3,250 extra bricks, which is way too much.