Estimating

E472: Material Pricing Strategies

Create a strategy for material pricing during the estimating process.

 

  1. How do you handle material pricing for estimates?
    1. Use historical numbers from your database?
    2. Get pricing from suppliers? Some items? All items?
    3. Do you work with select suppliers or the market?
  2. Establish best practices for your organization
    1. Determine the strategy that works for you
    2. You should always price major supplies
    3. Check the market to stay competitive
    4. Let suppliers know what you expect and get the right pricing
  3. Consider negotiating some strategic relationships
    1. This can be beneficial depending on the quantities you buy
    2. Select some key suppliers and negotiate some annual programs
    3. Keep tabs on the industry to keep you relationship in check

E462: Good Project Planning Starts In Estimating

A solid project planning process starts with the estimating team.

 

  1. Start developing project plans during the estimating process
    1. Estimating plans the entire project while developing the pricing
    2. They already determine key aspects like manpower, resources, productivity – start writing it down
    3. If they don’t develop a plan they can miss something
  2. Get operations involved as well
    1. When estimating a project get input from the operations side
    2. They should review the estimating project plan
    3. Any input helps build a better estimate
  3. Create the project plan in stages
    1. I realize that this requires some effort but it creates better estimates – bid less and bid better
    2. To conserve efforts, develop the plan in 2 stages
      1. First stage is a high-level overview creating during estimating
      2. Second stage is after you win the job – a more detailed plan
    3. The estimating team should start the formal project plan and turn over to operations
      1. Have a debriefing meeting to discuss the plan

E447: Know When To Adjust Your Margins

Use your key metrics for making proper adjustments to your margins.

Had some technical difficulties uploading the Coachcast. You can listen here.

 

This week I will be talking about the key metrics discussed in Monday’s Coachcast and how we use them in different aspects of our business. Today we are talking about how to use those metrics in our sales, marketing and estimating efforts.

 

  1. 3 key metrics relate to the sales, marketing and estimating efforts
    1. Projected billings – we need to know how much we want to bill to know how much work we need
    2. Backlog – we need to know how much work we have to know how to adjust the bidding
    3. Sales cycle – knowing how long lets us plan the bidding process and adjust the margins
  2. Don’t stop the efforts
    1. Too many people stop selling when they have enough work – don’t stop, just adjust
    2. Keep the sales process live at all times, just be more selective
    3. We want to keep bidding projects, just make adjustments to cover any added burden
  3. Make adjustments based on your key metrics
    1. Adjust your profit margins, add loan costs, include overtime if necessary
      1. Make sure you cover the added cost of overtime on other projects too
    2. Knowing the metrics will allow you to know when you can be more selective
    3. You may win more work but at higher margins that cover the added cost
    4. The reverse is also true – these metrics will let you know when it’s time to get competitive

E432: Establish A Solid Estimating Process

The estimating process can make or break our business so be sure to start with sound practices.

 

  1. There are many ways to estimate and the right one is the one that works for you
    1. Estimating ranges from Wild Ass Guesses to counting screws
    2. Companies use unit pricing, crew based estimates, and other ways
    3. All come down to determining the cost of work plus overhead and profit
  2. We want to establish systems to generate good estimates – what is a good estimate
    1. One that wins the job
    2. Identifies the costs with reasonable certainty
    3. Doesn’t take too long to complete
    4. Follows a repeatable system
  3. Setting up a good system takes
    1. Historical data and good job costing for comparison
    2. A method for determining costs that works for your company
    3. An outlined process on how to handle the estimating
      1. Take-offs – how detailed, what to take-off, etc.
      2. Sub-bids and vendor quotes
      3. Contract review and overhead
    4. A review process once complete