To win bids and make money you need to be accurate with estimating your costs. The first step to achieving that, is to get your quantities as accurate as possible. Accurate Quantities will not only help you with your material costs but are also an important part of estimating labor. But more on that later.
Do not break what works. Start Measuring.
Record the waste on the current job(s) you are executing. Dig out your estimate and compare quantities. Calculate the percentage difference in quantity. Do this for each item. Record it. What is the percentage difference in dollar costs? Record it as well. Get one single number for the total difference in Actual vs. Estimate.
The key here is to convert everything into percentage difference in dollar terms. Get one number for every job and record it in a list. Do not throw away your calculations though. You will need them as well to understand how to fix your estimates.
Pinpoint your problem items
Ideally, you will find very little difference in your estimate and actual use of items. Also, the estimate should never be less than your actual use. However, things are usually a bit more complicated in the real world.
Make a list of items and record their average error difference. Important: Do not add negative and positive quantities while making an average. Convert all negative differences into positive ones. This ensures you do not get a perfect score for underestimating one job and overestimating another. Both are errors and should be added together. Start with the item with the highest average error and try to improve your method of estimating. Instead of starting with some general advice, first I have listed an example.
Understand why your estimate is off: An Example
Say, your estimates for Lumber walls (studs) is off by a 10 – 25% margin. Let us look at one possible way you may be estimating. You may measure the Linear Feet (or Linear Meters) of your walls and simply add an error margin to take care of junctions and additional opening studs (Jack/King) required. While this may be the time saving approach, it leaves a lot of scope for error.
A better approach would be to count Openings and Junctions as well. And add the additional studs required for these. If this is too time consuming at least assign a complication factor. For example if you add on 15% to LF for every job, add 10% for simple jobs, 15% for typical and 20% for more complicated jobs with lots of openings, junctions and sloping walls.
Understand why your estimate is off: General Advice
The above example may not fit your situation. However, you can easily work out a situation for yourself. Think about how you actually use the product. And see where your estimating is trying to approximate and not actually measuring the usage process.
Of course you may already know this, but not have the time or resources. In such cases I suggest trying to work out a complication factor as in the above example and varying your waste. Maybe you can do some rough measurements or full measurements on one floor which at least gets you closer to a correct estimate. Always err on the side of caution while making rough estimates or you will be losing money on a successful bid.
Avoid Overkill and Consider Estimating Costs as well
Always consider the dollar amount you gain by improving accuracy. Will improving accuracy on this item help you win more bids. Or will it directly save you significant money on bids you are winning. If yes, then seriously think about generating time or money (or both) to improve your takeoff methodology.
Even if you estimate jobs yourself, put a dollar value on your time. No time is free. If you are not sure if a change is worth it compare your estimating cost to potential benefits. The answer in most cases would be an easy for or against.
Make a template or automate repetitive tasks
Make use of templates in your estimating software. Make an excel spreadsheet fitted with formulas that makes your job easier and quicker. Think deeply about how approach every takeoff. Do you rush into it or do you first develop a strategy? Investing a little time upfront can you save you a lot on every job. Use that time to improve your accuracy and grow your business.
Hopefully I have given you something to ponder in this article. Please feel free to contact us with any questions you may have. I will be happy to respond.