Estimating is the foundation of every profitable construction business. By measuring your takeoffs, labor, and overhead, you should have an accurate total for the project. But if you’re submitting bids without analyzing past project data, how will you guarantee profitability for the future?
More bids won do not guarantee more profitability. Without referencing your estimate history and analyzing project performance, aka your actual cost of the job, you are going blindly into every future job. Using guesstimates accelerates failure rates. So, how will you measure success and meet your profit target? We’ll walk you through the difference between estimates and actuals, what happens when you don’t analyze estimating performance, steps to building a rock-solid estimating strategy, and how STACK’s Takeoff & Estimating platform provides the critical resources you need to stay profitable.
Estimate vs Actual, Explained
An estimate is the total of direct costs (materials, productivity wages, etc.) and indirect costs (overhead, equipment depreciation, etc.) associated with a construction project. It is a prediction and should be an accurate one.
The final project cost of a job is the actual cost. We’re talking final, final. The punch lists are complete, the certificate of occupancy is in hand, the job has been handed over to the GC or owner. Every last screw was purchased, every last productivity hour was paid. This is reality, and hopefully a profitable one.
What Happens When You Fail To Analyze Your Estimate Data?
If you’re churning out bids without referencing past project data, you’re increasing your chances of being the one in five contractors who fail within the first five years of business.
The guessing game is not a fun game in real life. Underbidding jobs will leave you in a financial mess and struggling to keep your business afloat. Overbidding presents missed opportunities to win. Without analyzing your estimate data, your business is on a rickety rollercoaster ride.
Precon insanity – if you keep doing the same thing over and over, it’s called insane! Why bid jobs with a GC where you can’t meet your margins? Or work in a region or trade where you haven’t been successful? You need to know where you came from to get where you’re going!
Bad gut check – a lot of times our gut tells us one thing, but too often we forget about the project that went awry.