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Six Steps for Estimating Construction Jobs

For building contractors, proper estimating is one of the most critical factors for success. Reason: If you estimate too high, you can lose out to the competition. Estimate too low and you might not make enough profit, if any. In either event, you come out on the short end of the stick.

To ensure that your estimates are complete, organized and accurate, use the following six-step procedure.

1. Collect the data. The most important source of data for estimating comes from the clients themselves. Use a client contact form to provide a systematic method for obtaining the information without a lot of back and forth. As you go through the form, address any unrealistic expectations.

2. Take off all the quantities and measurements that will go into the estimate. Be consistent in the way that you take off measurements. For example, you might use the outside dimensions of walls and round to the nearest whole foot. Reminder: This is an estimate.

3. Every estimate should be organized according to a systematic category breakdown. These categories become the basis of your job-cost accounting. Make sure that categories are complete and account for all costs. You may use one of the well-known systems or develop your own.

4. Know your unit costs for each category. These unit costs can be based on the linear foot, square foot, square yard, cubic yard, hour or month. Because unit costs are multiplied many times to arrive at the category estimate, these costs must be accurate. A computer program may allow you to adjust costs in a material category across all categories

5. Do the math. Once you have figured out the unit take-offs and costs for each category, multiply the take-off amounts by the unit cost. Then add all the category costs for the final cost estimate. Develop a methodology for each category based on factors such as unit costs, allowances and a constant or relative value.

6. Make the necessary adjustments. After you have completed your basic estimate, you need to make final adjustments for certain costs of doing business that have not been factored into the estimate for the particular project. Normally, miscellaneous costs will comprise about 1--5% of the total estimate. Miscellaneous costs may include estimating errors, unanticipated price escalations, and loss due to theft or damage. Also, consider indirect overhead costs such as taxes and insurance.

Carve out an estimated profit portion after you have been paid commensurate wages. Remember that most business expenses are eligible for tax deductions. Your tax advisers can provide assistance.

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