Improve your Profits by Avoiding these Estimating Errors

improve your profitability

A projects price may change throughout the build from the beginning estimate. By removing this variability you will be able to deliver consistent profits and a stable estimate for your client, which should be your main goal for your business.

When profits are lost, a common misconception is that it was done after the project has started, but that’s not the case. In reality, it’s when contractors lose money and often it is a result of mistakes in the estimation process.

We want you to know these mistakes that people often make, so you don’t make them yourselves!

Here are some of the most common estimating mistakes…

No transparency

Include as much information as you can in all your estimates. This way you are covered, as both you and your client are fully aware of what’s included in the estimate, giving no reason for any disputes. Adding details will help all stakeholders understand the process for determining cost, regardless of their levels of experience, for example, if you put down just the materials, it’s unclear why they are needed. Just giving simple bullet points for what the material will be used for, will clear up possible questions. This is relevant for trade businesses where the person estimating the project can differ from the tradespeople doing the work.

Underestimating labour costs

Labour costs are difficult to estimate as they aren’t as simple as just applying an hourly rate on each of your employees. You could consider other factors, such as experience and if you need subcontractors. When you are starting to put together your estimate, make sure, as we have stated before, to include as much detail about the project in each factor as possible. This will be incredibly beneficial for you further down the line, and you will have a record of the work set out and refer back to it if changes need to occur later on. Another top tip is to refer back to similar projects you have completed and compare the cost per square metre.

Juggling too many projects

It’s very tempting to take on as many jobs as you can to keep your whole business busy, but eventually, time management between different projects may overrun resulting in other projects falling behind and ultimately losing money. This isn’t to say you should only bid on projects perfectly aligned with your business – just that you should know the real costs and timescales of each project before you begin another.

Not learning from past mistakes

To determine risks and minimise uncertainty always remember to analyse what went wrong on previous projects, so you don’t just keep repeating the same mistakes. 

As sometimes it may not have been the materials or your team that slowed down the project or raised the price. It might have been to do with…not accounting for the environment your project surrounds in (country roads/ built-up areas) as this makes your project more challenging and more time-consuming than you or your client expected.

We hope you have learnt a bit more about estimations that you will bring forward into your work! And if you analyse your mistakes or have more than one set of eyes on the project errors won’t occur!

Let us know if you followed any of these tips or did something we haven’t mentioned below, we would love to hear from you! 

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