Tracking job costs: A guide for construction contractors
Did you know that 83% of contractors say their top
An estimate is a rough outline of how much it would cost and how long it would take to get a job done.
As the seller of a product or service, estimates help both you and your potential client. An estimate provides a clear breakdown of a project so that potential clients understand how much the job could cost them.
Estimates are also used by potential clients to compare companies and their services. That’s why it is important you know how to sell your company through one.
Writing the perfect estimate can be the difference between you winning a job and losing one. It can take a while to find the right way to write an estimate for your business.
To get you started, here are five simple things to do before you write the perfect estimate. You can also learn how to build an estimate for clients with your detailed guide.
When you’re ready to send an estimate to clients, download and customize one of our free estimate templates. You can also try our estimate and invoice generator for free.
Learn more about financial estimates: fastercapital.com
Tip 1: Examine the project
Before you begin writing an estimate, you need to establish some clarity about the project at hand. To do that, you need to know what your clients are looking for and clearly explain the services you provide.
Every client is different. Almost 90% of the battle of writing a really good estimate comes down to knowing what they want.
The first thing you should do is listen carefully to what the client is saying. If you’re confused at any point, ask the client to clarify what they want from an ideal seller. Asking questions will stop you from making assumptions that might prevent you from winning the project.
Ask your client questions around a project such as:
- What services are you (the client) looking for and what can be excluded
- What is the expected outcome of the project?
- When does the project need to be completed by?
During your first call with a client, listen carefully to what factors they are stressing.
Do they repeatedly refer to costs and minimising their budget? Are they looking for a high-quality product or service?
For some clients, all they want is a low-cost yet reliable product or service. In these cases, you would want to price your service competitively.
Other clients might not be too concerned about budget and are willing to spend more for a higher-quality service or product. For these clients, you would want to provide them with an estimate that matches the high-quality product/service you are selling.
The second thing you should do is examine the site of the project. If you’re onsite, you should carefully examine an area and identify any potential problems.
If you find any problems that can affect the project during your examination, mention these and discuss suggestions and alternatives around it.
By doing this, you not only show that you are skilled at your job but you also establish a better and more honest relationship with the client. Transparency in client jobs may help you get rehired for other jobs.
Learn more about expected value: corporatefinancialinstitute.com
Tip 2: Estimate the time
Once you have established project details, you’ll need to estimate how long the job will take you. If you have completed a similar job, you can use the timeframe of that job to estimate the time the new job will take.
Another technique you can try is splitting the tasks into smaller parts. Estimate how long each area would take and then calculate the sum to get the final time estimate. Read our more comprehensive guide on estimation techniques and how to write clear estimates.
When estimating the time for a project to be completed, be realistic. The time that you estimate will be associated with the costs written. If you are new to your field, overestimate and give yourself enough time rather than too little.
Don’t forget to take into consideration any factors that might delay the project. These can be travel time, weather, legal approvals, conflicting engagements, etc.
Once you have estimated the time, you may find that the job is too much to handle in the timeframe your client desires or it could clash with another project you have planned. In this case, you may need to consider calculating the cost of hiring additional staff to finish the project in the time that works for both you and your client.
Tip 3: Calculate the cost of additional staff
There are many reasons why you may need to hire additional staff.
The job might be too difficult to handle on your own. The client may need the job done quicker than what you are able to do by yourself. Sometimes, the job simply requires additional people to complete i.e moving heavy furniture.
In any of these cases, you will need to hire additional staff to help you get the job done and this will need to be factored into the estimate.
It’s important to have a realistic view of the job and your capabilities so that you don’t end up losing your good standing with your clients for a job you could not finish.
Tip 4: Calculate the cost of materials
For any occupation, it’s important to familiarise yourself with the cost of materials and equipment.
Our suggestion is to do some research on the current market and write down a list of the costs for materials used in your field. Use this costs list as a reference for estimating how much materials will cost you for various projects. Keep in mind that the cost of materials may change depending on the season, current demand, or inflation and therefore should be updated accordingly.
Keeping a list of the costs is also beneficial for training any new staff members on how to estimate.
Additionally, if you have any items that will be used over a number of different projects, you can deduct these as a business expense on your taxes instead of charging your clients.
Tip 5: Research your competitors
If you’re just starting out and are stumped on what to charge your clients, do some research on your competitors. Look up competitors that are similar to your level of time in the market, type of service, and target market.
The cost you decide on needs to be reflective of the level of your service. Be aware that if you charge too little, your service may look cheap and unreliable. However, your pricing should be competitive. Also, if you price it high you need to have a basis for that claim on quality.
Although an estimate is a rough outline, it is better to be as close to the final price as possible. It may be challenging in the beginning but with experience and practice, you will be an estimating pro in no time.
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