Well, just like that a new year is here, and with it comes the question – ‘What are you doing to ensure you are more successful this year than last?’ Here we share some important tips for estimating jobs that will save you time and money, and ensure your business thrives in 2020.
Misquoting clients can put you on the back foot before you even reach for the tool kit, so having a consistent estimation procedure in place is just good business.
Estimating or quoting is fundamental for any plumbing business to be successful, as potential clients will almost certainly request a quote from you prior to awarding a project. If the job has been priced correctly then it is fair to say you’ll make a decent profit. Get it wrong and you may lose money and, in some cases, much more.
When considering your estimating process for a new year you should carefully analyse your previous year of estimating. The following five questions are just some that should be considered:
- How many jobs did you estimate? Did you pick up everything you could lay your hands on or were you selective in picking only the jobs that would suit your company and expertise?
- What type of jobs did you estimate? Were you selective in the type of jobs for which you have the people, the expertise and the plant and equipment to successfully complete it on time?
- What size were the successful jobs? What are your limitations on the size regarding your financial circumstances, number of employees, plant and equipment and location?
- Did you do a risk assessment? Have you evaluated potential problems ahead of time to develop strategies to limit them (see more below) and set weighting criteria?
- How many successes did you have? Are you winning an exceptionally high number of tenders because you are pricing below the industry average? Or are you one of the few experts in this type of work and have limited opposition?
Choose an estimating system that works for you.
Implementing a comprehensive estimating system that you have confidence in is vital, especially if you aim to achieve accurate quotes on a consistent basis.
Consistency can only be achieved through experience, practice and prolific record taking. It’s like anything else in life, ‘practice makes perfect’ and estimating is no exception.
It is very important that you give careful consideration when deciding which method of pricing is suitable for your business. Here are six key features a good system should include:
- Accuracy: have confidence in the submitted price.
- Efficiency: the system should be quick to use.
- User friendly: anyone with minimal plumbing and/or computer skills can use it.
- Flexibility: can modify a rate to suit each project.
- Good reporting: complete specific project break down.
- Transparency: see how each cost has been calculated.
Manual vs electronic estimating.
There are many software packages on the market. The most sophisticated will help generate accurate and financially feasible estimates, offering historical databases and updated prices for materials and labour. They also include a ‘what-if’ analysis and the ability to download digital plans and use them to generate take-offs. At the other end of the scale there are basic spreadsheets that take the drudgery out of mathematical calculations.
The choice of estimating technique should be guided by what you are most comfortable with. The fully manual approach using a pencil and calculator makes the task more difficult for these reasons:
- Time to complete the estimate;
- Increased potential for mathematical errors; and
- Stress from late alternatives and changes.
Using a basic computer program involves the same procedures as the manual system, but the computer can perform calculations at the speed of light. The advantages:
- Decreased estimating time;
- Extensions, additions and transfers to the final selling price with minimum errors; and
- Coping with last minute changes.
- Limited computer skills causing errors;
- Blind reliance on an unfamiliar database; and
- Limited knowledge of price updates.
Even after you have completed your estimated count and measure, priced the materials, included the subbies’ costs and your company’s overheads and profit, the job is still not complete. The question needs to be asked: ‘What do we need to consider to reduce the possibility of a financial loss?’
Prior to starting the take-off, it is important to study the plans and specification of the project, to determine whether the job fits your company’s requirements. Having a risk assessment plan will considerably reduce the possibility of a loss.
This assessment should be done to verify that the cost estimate follows standard estimating guidelines for the department. This would include a review to verify that the company’s standard estimating procedures were followed regarding estimate format, costing, presentation and documentation. This would include items such as the following.
- Verify that the estimating methods used match the plans and specification.
- Using the correct techniques to overcome possible variances in the engineering documents.
- Ensuring the values on the summary sheet matches the detail pages.
- Confirming that all information on the estimate detail pages be tracked to the source documents.
- Making sure that all allowances, fees and factors are appropriate and consistent with comparable past projects.
- Confirming all nominated sums (e.g. prime cost, provisional and contingency) are included.
There are quite a few construction risk probability software programs available on the market that offer suggested percentages as to the chances a particular event may occur under certain circumstances. These programs offer a chart of the probability a risk will occur and the impact on the job.
Regardless of whether you are using a computer-based program or a manually determined assessment, the cost of the risk needs to be calculated. Whether it is lost time, lost money, lost quality or a combination of all, it will have an impact on the final selling price.
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