While the aim of estimating is to ensure you make a profit on every job, not every estimating strategy delivers the desired results. In fact, some approaches could be costing you money. Here’s a look at five of the most common mistakes that estimators make that negatively impact profit margin.
1. Shooting from the hip
A lot of estimators commit the cardinal sin of guesstimating and have no idea they’re doing anything wrong. Process-averse beginners tend to favor the eyeballing method, but some continue it into late professional stages because it’s easy, and it favors a one-estimator crew. If you don’t plan on estimating consistently from job to job, training a new estimator, changing your prices, or looking professional, this method is fine.
Pros follow a process.
2. Calculating with time and materials (T/M) instead of square feet
While charging by T/M is a little more process-oriented than eyeballing it, it’s not always accurate. T/M estimators might still measure a room and account for detailed work and specific materials, but if they’re not applying fine-tuned and exact production rates to the measured area, they’re still guessing at labor hours. A square- and linear-feet-measurement approach segments a project more precisely and feeds into more strategic and consistent profit margins. And when it comes time to raise prices, you’ll be able to see improvements—and opportunities—at the microlevel of profit per foot.
Pros are precise.
3. Not capturing upcharges for changes requested
While it’s understandable that you may not want to say ‘no’ to a customer, you’re not in the business of doing work for free. And if you are, you won’t be in business very long. The key to never saying ‘no’ is having a very clear and consistent change order process. With an established process in hand, you can always say “Yes, absolutely we can do that. Here is the process we use for changes, and here is what the upcharge would be.” The beauty of this approach (beyond ensuring you get paid for the work) is it leaves it up to the customer to say ‘no.’ Additionally, a change order process that captures customer signatures for new work helps avoid disastrous misunderstandings that sabotage the possibility of repeat business.
Pros are positive but clear.
4. Making ad hocem> changes to the process
Everyone has emergencies and special contingencies that may seem to justify a default to using old methods of T/M estimating, incorrectly accounting for hours, or failing to select proper project templates to estimate square feet. Estimators who are proficient at navigating special-case scenarios in ways that stick to the plan will deliver more reliable profits and useful reports. It may take some time to learn to adjust for new situations without changing course, but great estimators don’t go back to the old ways at the first sign of trouble.
Pros stick to the plan.
5. Underpricing your work
Even if your process is exact, consistent and clear, you may still have production rates or pricing that need to be raised to support the growth you want to achieve in your company. Get your customers used to the idea that you pay yourself and your employees a competitive wage that allows you to deliver superior products and services. Devaluing yourself, your team and your services communicates to everyone that you view your work as second-rate.
Pros raise their prices.
While breaking poor habits and making changes to established processes is never easy, the rewards of changing your estimating approach can be appreciated very quickly and have the power to change the future of your company for years to come.
CHRIS SHANK is the education and engagement lead at Estimate Rocket. Estimate Rocket offers growth systems for contractors that power fast estimates and proposals, automated follow-ups, fully integrated scheduling, and invoicing with your numbers at your fingertips.
*This article appeared in Winter 2022/2023 | inPAINT