Create systems to organize your estimating and avoid errors.
- Estimating is a complex effort and it’s easy to miss some details
- There are many aspects to every estimate
- General Requirements
- Project Management
- Work Scope/Tasks
- Closeout & Warranty
- We can miss things and scope gaps erode profits
- Create a system to help avoid omissions
- There are many aspects to every estimate
- Guides and templates help cover the details
- Many of you already use templates – add guides to help the process
- A guide will help the estimator check on common issues / costs
- Break your guide into parts as outlined above
- Create the estimating playbook
- A series of guides and templates to help the estimator check the details
- The guides can be a simple as a series of questions and checklists
- Create one for each group and individual ones for each scope/task section
- Contract: what are pay terms? Schedule? Insurance? Bonds?
- General Requirements: Trash removal? Testing? LEED? Reporting? Software?
- Project Management: Onsite Staffing? Temp Facilities? Oversight?
- Work Scope/Tasks: Create a guide for each scope with questions related to the scope – Concrete Mix Design? Winter Protection?
- Closeout / Warranty: Special closeout requirements? Warranty? Warranty bond?
Review your quotes before submitting your proposal.
- Part of our estimate includes quotes
- Supplier quotes
- Subcontractor quotes
- Equipment quotes
- During estimating we reach out to vendors for quotes
- We typically provide them with the information
- Some review that information and some don’t
- They provide us quotes and sometimes for the wrong thing
- Protect you estimate by qualifying your quotes
- Qualify each quote you plan to plug into the estimate
- Call the vendor to review and ask questions
- Have them revise and quote what is correct
Bid strategically to win more work.
- What’s your bidding approach?
- Bid a lot of jobs in hopes to win some
- Bid strategic jobs knowing you will win
- The best approach is to bid less
- Bid fewer jobs so you can win more of your bids
- In racing they say slow down to go faster – the same applies here
- If you bid too many projects at a time then the numbers are not accurate
- You often win when you make a mistake
- Take your time and bid fewer projects to have more accurate estimates
- Start winning more of your bids
- Bid on the right projects with the right clients
- Invest the time in each estimate to be accurate and realistic
- Be strategic about what bids you entertain
Dropping prices to win over a new client can be a good strategy.
- Buying a job is a common strategy
- We target a client and give them a low price in order to start a relationship
- We get in with them in hopes of future work at our normal pricing
- Does it really work?
- My successes and failures
- A developer – we did a job at their typical pricing in hopes of showing them they should pay us more – it worked
- An industrial plant – took a low price job in order to get in and later found that everything was based on lowest price regardless of value provided
- A city – took a project to get in and put the wrong team in place, didn’t provide value – never got shortlisted again
- This strategy can work but takes some careful research and understanding
- Know the customer – are they right for you?
- Know the projects – does value matter over price?
- Make sure you have value to add – if not they will never pay more for your services on the next project
- This is the key part – you must be bale to prove the values you offer in order to get the pricing you want in the future
The estimating process can make or break our business so be sure to start with sound practices.
- There are many ways to estimate and the right one is the one that works for you
- Estimating ranges from Wild Ass Guesses to counting screws
- Companies use unit pricing, crew based estimates, and other ways
- All come down to determining the cost of work plus overhead and profit
- We want to establish systems to generate good estimates – what is a good estimate
- One that wins the job
- Identifies the costs with reasonable certainty
- Doesn’t take too long to complete
- Follows a repeatable system
- Setting up a good system takes
- Historical data and good job costing for comparison
- A method for determining costs that works for your company
- An outlined process on how to handle the estimating
- Take-offs – how detailed, what to take-off, etc.
- Sub-bids and vendor quotes
- Contract review and overhead
- A review process once complete
Not making enough money on your projects? Is your estimate right?
Q: When I look at my financials I am not making the money I should be. How do I know if my estimate is wrong or something else is wrong?
A: There can be many things that cause us to lose profitability. The 3 key areas to look at first are productivity, overhead and market conditions.
In today’s Coachcast I am making the assumption that the overall estimating practice is sound and done based on crew production, not a plug and play unit price number.
- Your estimate should be based on productivity – that is a crew should complete so many units per hour
- Track your projects to determine if you are getting the same or better production then you bid
- Be careful of using best case productivity for your estimates
- If you are not getting the productivity then find out why and if you can correct it
- Are you making money on the projects only to lose money in the business?
- Make sure you have accurate overhead mark-ups
- Can you lower overhead, cna you increase mark-ups and still win
- Market Conditions
- Is your pricing being controlled by market conditions – you wouldn’t win if you raised your price
- Make sure that is the truth – many people say that then find out they actually win more with higher pricing
- If you cannot raise your prices then you have two choices
- Lower costs by increasing productivity and cutting expenses
- Find a new market
In today’s episode we review the importance of maintaining a company resource schedule and comparing that to our estimating efforts to be sure we are bidding on the right projects at the right time.