Improving Your Estimating Ability
Did you ever blow a big estimate? Make a big math error? Forgot to add that library paneling? Miss a couple of rooms?
You're not alone if this has happened at your shop. Estimating projects is often done in a hurry on the fly, usually by the owner, while overseeing production, putting out fires and generally trying to run the business.
So, here's the place to start only estimate when you must. Pricing custom work is time consuming and expensive, and usually takes experienced and well-paid people to do it. So, maybe your first rule before you agree to estimate a job should be that you have a really good chance of getting the work.
A key point here is to ask lots of questions before you spend that precious, pricey time doing any kind of take-off. Questions to ask may include:
- What are the chances of getting this work?
- Which other shops are pricing this project?
- Is the work the kind your shop does well?
- Has a working budget been established?
- How developed are the plans?
- What is the shop drawing process?
- Are there a lot of builders bidding the job?
- Can your shop successfully negotiate the work?
Develop your list of questions to figure out whether there are any red lights flashing before you spend the time figuring out a price. Maybe you'll be bidding against another shop that's known for low balling work, then making it up in change orders. Perhaps the price will be a lot more than the owner wants to spend, and you'll be wasting your time especially if you're not getting paid for the estimate.
At our shop, we've found that pre-qualifying the job is more important than estimating the actual work. Be sure it's the right work for your shop, that it falls at the right time and it's priced right!
KNOW YOUR COSTS
Costs are usually a four-part deal materials, suppliers/subs, labor and overhead/markup. And, if you're new to estimating, this is probably the easiest way to break the whole thing down. Even if you're an old hand, this way is basic and much more reliable than linear footage, formulas, percentages etc.
The materials are often the easiest to figure out but always check to see that the material specifications in the plans match what you're bidding. If not, highlight that discrepancy in your proposal.
Your subs and suppliers can be brought in for the complex pieces of the work if you don't feel comfortable pricing their part of the work simply fax that custom sycamore crown profile over to your molding company, and ask your installer to look at the job site work.
The labor hours are inevitably more difficult to figure out although you can be accurate here, too, with a little help from history. Job costs on previous similar work may be able to tell you how long it takes to make 40 linear feet of paint grade base cabinet.
Physically timing hinge and hide door work can help you price it on future work. You may want to take a good look at various activities like this in your work making drawers, hanging doors, assembling carcasses, making up face frames, whatever seems hard to estimate.
What about all the weird, non-standard stuff? Go ask your foreman if you're not sure yourself two brains are better than one here. And sometimes, a shop floor person will be more realistic regarding how much time things really take.
Many shops average out labor hours costs, and have one shop rate, both for estimating and for billing. Others use different rates for different activities depending on which people are working on the job with higher costs for complex machining and handwork, and lower for basic assembly and the rough mill parts of the project.
Then, of course comes the trickier part how much should you add to your costs to cover your overhead? This varies, as it can be affected by many things how difficult the owner is, how much other work you have going on, and so on. You can keep track of your financial information on a quarterly and annual basis and use the overhead percentages to add to your costs. Don't forget the things that don't really appear in statements that "leakage and slippage" stuff sick days, holidays, waste etc.
The standard things can be simple to price, but the weird items are easy to underestimate. Examples: center-balanced veneer work, or curved doors with applied bolection moldings. If you don't have the right suppliers, you may want to exclude these parts of the work. It may require an experienced journeyman working carefully on specialty machines.
Incomplete drawings can mean a rough road ahead much more shop drawing time, long Requests For Information (RFIs), more project management than you're prepared for. Look for detailed sectional details, and if they're not there, perhaps in your proposal, you can specify your own shop's details.
Here's another red light what's the owner like? We all know how much energy and money a difficult client can suck out of you. If there's a chance you can meet or find out about the owner before you have to estimate the project, it may help your process. You may even want to push for a shop visit arranging a face-to-face can help you price the work!.
And the schedule, too, can affect your costs. Can you find out whether the timing is realistic? How well is the job being run out in the field? On the bigger jobs that are already underway, you may want to talk to other subcontractors already doing work on the job.
Sounds negative, huh? Well, that's why many shop do try to negotiate their work, even doing larger projects on a "Time and Material" basis, where you do get paid for all that you do, and you can concentrate on doing a good job.
Most shops that have been in business for a while tend to err on the high side when they're estimating fixed price work. They'll "pad" the hours, put in some extra materials into the take-off somewhere, knowing that Murphy's Law often prevails in the shop world. Maybe that's the real lesson behind estimating that the work will often take longer than you may have originally thought.