Yes, Part 4. I can talk for weeks on estimating and still not cover it all. This is still only a portion of what’s covered in my online class, Profitable Estimating Training.
Today is a collection of different issues, starting with mistakes. Have you ever missed something on a job? I think most of us have at one time or another.
Because it happens, compensate for those errors with an error factor. If you’re costing jobs after the fact, which means comparing your actual job costs to your estimated costs, you can calculate your error factor for labor, materials, subcontractors and other costs. If you have an error factor of 5.85% on labor, on your next three jobs you should add 6% to your total labor estimate. Using an error factor should get your labor costs within 1% on your jobs.
As you continue to improve your labor estimates, you should start seeing your actual labor costs come in closer to the estimate (before the error factor). Now you can start adjusting that error factor. I wouldn’t make any changes until I had at least 3 jobs in a row where my estimate was improved. And if I was quoting a new type of job, one that I wasn’t as experienced on, I’d keep the error factor until I was comfortable in my ability to estimate that type of job.
Don’t try to be superman and believe you can get jobs built faster than anyone else. When you’re estimating labor, it it doesn’t matter how fast you can do a particular job, it matters whether or not you estimated it correctly. So if your estimated labor numbers are too low, then add in your additional labor percent (error factor). There is no pill for the Superman complex. That’s an ego thing. Put the ego away, learn from your mistakes and build accurate estimates.
Some contractors have told me they can’t be accurate in their estimates when they don’t know what’s behind a wall, in the attic or under the floor. That’s not an excuse. If part of the work area is concealed, get a Demolition and Discovery agreement signed so you have the ability to open things up and get an accurate picture of what needs to be done.
There is a copy of that agreement in our book, Markup and Profit; A Contractor’s Guide, Revisited, and it’s also available with the book Profitable Sales as well. If this agreement is presented and explained correctly to your prospective client, they seldom have a problem with it. If they do, simply tell them that until you know what all the conditions are, you’ll only be able to provide an approximate quote for their work. Let them decide how they want to proceed from there so you aren’t the bad guy.
Trash! If you have a messy or trashy jobsite, your clients will think you have a messy or trashy work ethic. It pays to keep your jobs clean and you must include that time in your estimates as well. It should be standard practice that after any drill-out, stop and sweep up. No stories, no excuses, clean it up.
This also applies to your subs. Make sure your subs include cleanup in their quotes. Your crews should pickup trash just before lunch and just before quitting time in the evening. Preferably, it should be put in a drop box. If you have a pile, keep that pile behind the building or behind some kind of barrier so those passing by can’t see it.
If you’re doing a large framing job, the scraps should be piled out of sight twice a day. Your clients, existing or potential, won’t understand why you’re wasting so much material on the job. You probably aren’t wasting material, but when they see a lot of scraps hanging around, they’ll wander away with the assumption that you’re wasteful and messy. That isn’t a good way to maintain a good relationship or to get jobs with the neighbors.
If you do have a job that’s generating a lot of trash, hire someone to haul it off to the dump for you on a regular basis. It’s not that expensive and that, too, should be on the estimate. There are guys who don’t mind doing that type of work. I hated hauling away the trash when I was working as a mechanic. I’d trained a lot of years learning to do my job and the last thing I wanted to do was spend time cleaning up. Yes, it was a bad attitude on my part.
Hazardous waste is different. Here you need to deal with all the OSHA and RRP rules and Hoo Rah. Some of it must be containerized before you head for the dump. You need to know and understand what needs to be done with the waste materials because this stuff can be expensive to get rid of. Guess where that money comes from if you don’t put it on your estimate sheet?
Estimating jobs accurately is a skill that can be learned. It takes practice and it’s not the most exciting activity. But accurate estimates lead to accurate prices, and those lead to profitable jobs. And that’s the goal.
“Nothing can stop the man with the right mental attitude from achieving his goal; nothing on earth can help the man with the wrong mental attitude.” – Thomas Jefferson