If you want positive cash flow in your construction business, you need to create accurate estimates of your jobs. If you forget to include the cost of insulation on the job, you’ll be paying for that insulation out of your own pocket. If you estimate too low, you’ll pay for part of the job out of your own pocket. That hurts your cash flow.
Estimating is a skill, and skills can’t be acquired in a day. They take practice. But you certainly can improve your estimating ability and knowledge by establishing a procedure, following it, and reviewing actual costs after the job to see what you’re doing right and what you’re doing wrong.
Good estimating is a system, a particular method that if employed the same way every time, will provide estimated amounts that are equal to actual costs. The problem is that most estimators are in a big hurry to get some numbers together and throw them at the customer. “How cheap can I do this job”, “how low can I get my numbers so the customer will buy me” is not the right attitude.
Instead, you review the job, taking pictures or videos. You decide what specialty contractors or suppliers need to see the job and you make those arrangements. You provide your customers a list of selections necessary for you to complete your estimate. You then estimate those items you know, and you do all of this the same way every single time.
It’s not a race. You need to be timely, you can’t take weeks to get back in front of the customer, but you need to be accurate. Our 6th Cardinal Rule is that you will get written quotes on all items on your estimates that exceed $300.
Estimating is not about the numbers. Good estimating takes discipline. Learn to estimate and develop the discipline. When the bills you receive for a job match your estimate, you’ll be able to keep your bills paid and make a profit.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations as needed.
Additional Resources: Profitable Estimating training