As a contractor, one of the most important factors determining whether or not you make a profit on a job will be the accuracy of your initial estimate.
If you overprice a project, your chances are instantly reduced, and if you don’t win you’ll never get back that wasted time. On the flip side, if you win the work but underestimate how much it’s going to cost, you might struggle to break even.
There’s no room for costly mistakes in an increasingly competitive market, so tightening up your process when it comes to estimating is a really important step to take. Whatever type of engineering or construction you specialise in, you’ll need to avoid these six dangerous pitfalls to make your quotes as accurate as possible.
#1: Missing something in your takeoff
This is the easiest and most common mistake contractors make. Sometimes it’s almost inevitable when you have several complex drawings to review just to quote for one project. Details are bound to be missed, which obviously makes your estimate too low and can cause major issues further down the line.
The chances that you’ll miss something are even higher when you’re rushing to complete a takeoff with a tight deadline. So how can you take the pressure off while cutting down the risk of a fatal omission? Here are a few ideas…
- Follow a standard process, so you can consistently check off everything instead of jumping between different sections randomly.
- Use on-screen takeoff software to streamline the process and do it digitally. This allows for a more systematic approach and makes mark-ups neater, so you’re less likely to miss things.
- Check and recheck, ideally with someone else reviewing the takeoff to ensure nothing obvious has been missed. A little extra time spent here can save a lot of time later!
#2: Counting something more than once
You might have the opposite problem, where instead of missing something you actually count it twice. This can be easily done if you fail to highlight everything as you go along, either digitally or on paper.
The consequences are similar to what happens if you miss something – the costs won’t add up correctly, you’ll have the wrong materials and your profits are likely to be directly affected. Making accurate notes as you go along and checking thoroughly are the only ways to avoid duplication.
#3: Making assumptions about the site
It might not be possible for you to visit every site before you finalise your estimate (which would be ideal), in which case you need to ensure you have as much information as possible about the place where you’ll eventually be doing the work.
Technical drawings can sometimes be misleading or confusing, so things like the structure or layout of a building may not be apparent at first glance. However, if you make incorrect assumptions at this stage, you might have a nasty shock later.
#4: Being too slow to produce your quote
In many cases, you might be directly competing with rivals to secure a project, which adds more time pressure you could do without. It’s important to strike the right balance here, because rushing to finish your estimate first can lead to the kinds of errors we’ve already mentioned.
However, you do need to bear in mind that clients are often impatient and won’t tend to wait long to decide once they’ve received a complete estimate from someone else. The best solution is not to rush every project, but to spend some time getting the right processes, resources and software in place to help you work faster in the future.
#5: Failing to allow for a healthy profit
It may seem obvious, but none of this matters in the long term if you can’t make enough profit on a job to keep your business going. There are many more costs to account for besides the basic materials and labour costs for any given project, and missing out any of these will eventually eat directly into your profits.
Ideally, the process you use to calculate your estimate should allow you to adjust anything and instantly see how your total profit is affected. This will allow you to tweak your margins and experiment with alternative solutions until you figure out a competitive but profitable quote that works for all parties.
#6: Not learning from your mistakes
One final point to consider is that every quote you produce might not be perfect, but that might be a blessing in disguise. If you can identify why your estimate didn’t win you a project, or why you didn’t make as much money as you hoped, you can incorporate that lesson next time and make improvements.
Systematically making the same mistakes over and over is much more problematic than making a one-off error. With this in mind, make sure you can easily review your past estimates to check for improvement opportunities, and think carefully about why things might have gone wrong so you can do better next time.