An accurate estimate sets the tone for the project and ensures that there are no financial or logistical hurdles along the way. With an accurate estimate, contractors can avoid over- or under-buying materials and hire necessary labor. Additionally, having a reliable estimation process means contractors can confidently quote costs to clients and never charge them more in the future. This helps to develop strong client relationships leading to repeat business. For contractors looking to learn the best ways for creating project estimates, this article has you covered.
Obtain a Detailed Scope of the Project
Clients often solicit multiple bids from various contractors to receive the best estimate for their project, as reported by One-Pull Solutions. While quoting a lower price than competitors can help you land clients, if it is not accurate, you may end up paying out of pocket to cover project costs.
Rather than focusing on providing the lowest price, your goal needs to be quoting an accurate price in line with project expectations. This can be easier with new home construction, where the scope of the overall project is relatively small. Larger projects are comparatively more challenging to estimate.
The best way to accurately understand the scope of the project is to meet clients in person. Reviewing the property/site in person will provide a clear idea regarding the amount of material and labor required for the project. Additionally, you can factor in any extra costs associated with transportation, local taxes, etc.
Speaking with clients face-to-face also provides the chance to ask questions and discuss special requests they may have. Moreover, if you ascertain a specialist is required for the project, request to bring them along for a follow-up visit. Only once you have collected ample details regarding the project should you start working on the estimate.
Maintain Your Margins
As a contractor, your goal needs to be to make a profit on all projects. But this is easier said than done. With the competitive nature of the industry, you sometimes may need to provide discounts to make offers attractive to clients, however, the amount of discount will depend on the financial health of the business.
Using cloud construction accounting software will provide a clear picture of your business's financial standing. For instance, within a few clicks on the software, you can create a cash-flow statement, which can be reviewed to understand the rate of inflow and outflow of cash from the business. A negative cash flow will require you to cut costs, improve collections and reduce discounts on projects. Conversely, when the business is healthy, you can be more competitive, afford to bid for numerous projects, and have greater price leeway with clients.
Use an Estimating Software
An estimate needs to include all important aspects of the project such as cost of labor, type and quantity of raw materials, tax calculations, and much more. The best way to tackle this cumbersome task is to use cost estimating software. This kind of software can be useful both during the consultation phase and the construction phase of a project. Based on the type of project, you’ll be able to choose from an array of templates that can be customized depending on your labor and material requirements. Additionally, the software will automatically calculate the various types of taxes you’ll incur and provide a final figure which can then be shared with clients.
Additionally, as reported by Building Advisor, if a payment schedule has been decided with the client, you can include that with the estimate as well for approval. During the course of the project, the software will share automated invoices to ensure that you receive payments on time.
Moreover, you can expect minor modifications to be requested either by you or the client while work is ongoing. Using the software, you can seamlessly make tweaks to the estimate and share a fresh copy with the client for approval. This ensures that all parties are on the same page at all times.
When it comes to consistently creating accurate estimates for projects, using technology will be key. Tools such as accounting software and cost estimating software simplify the process of handling complex calculations, make accepting payments easy and allow you to outperform competitors. Additionally, you can make changes on the fly with little to no disruption in work and ensure that projects are always completed on time and within budget.
Here are a few other great resources for entrepreneurs in the general contracting business:
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