Accurate estimates and contracts

Construction estimating: Benefits, guide and construction estimator tips

Estimating in construction isn’t easy. Keep these tips in mind to create accurate estimates, win more jobs and protect your profits.

Graphic of a construction estimate next to a calculator.

How do you ensure you provide accurate project estimates?

This is a question that’s tough to answer in any industry, but it’s especially difficult in construction. There are so many varying factors to consider for every project, making each estimate unique from the next.

As a builder, you know the importance of estimating accurately, and with fluctuating material prices and a competitive building environment, it’s only natural to worry about whether your bids can win. Estimating too high risks losing the job while estimating too low jeopardizes profits and your company’s future.

Although it may seem like a lose-lose situation, it doesn’t have to be. Learn everything there is to know about construction estimating, including construction project estimating tips to help you provide accurate and fair estimates.

What is a construction estimate?

Construction estimating is the first step when starting a construction project. Builders use an estimate to calculate the expected final cost of a project. It consists of figuring out the quantities and the cost of the materials needed to complete a home build or remodel. The estimate can also include labor costs and may calculate profits and contingencies in construction.

By creating a construction estimate beforehand, you can give your client an accurate total cost; so, they know what to expect. It’ll help them decide if they’d like to proceed with the project.

What is a construction estimator?

A construction estimator handles the analyzing and calculating of costs needed to perform the job. The role of a construction estimator can be neglected at times, but it’s crucial to ensure the project stays on budget. During the construction estimating process calculate the quantities and costs of materials, along with labor, profit and other expected costs.

If you’re unsure where to start, learn how to create accurate estimates by referring to a construction estimating guide.

When do I need to use construction estimates?

You should use construction estimates before the build even begins to ensure your projects stay on budget. You wouldn’t want to get to the end of a project and realize you wasted money or spent way more than expected. By creating a construction project estimate, you have a baseline to reference throughout the project and can predict how much will be spent by the end.

You should also consider using construction estimates when you have clients you’re building for. Most of the time they want to see whether they can financially afford the project before it starts. By giving accurate estimates to your clients, you’ll build trust and win more jobs in the future.

Construction estimate walkthrough

Let’s look at an example of estimating for construction. Here are some key steps to follow to create an accurate estimate.

1. Review construction drawings and specifications

  • You will need to review the details of drawings and scope of work to perform your construction takeoff.
  • This is also a good time to figure out location, site health and a project timeline.

2. Gather your data, including:

  • Prices: The raw costs of materials and costs that make up the project total
  • Quantities: How much material and labor hours are required to complete
  • Percentages: General contractor markups, margins and taxes needed
  • Additional Costs: Subcontractor costs, equipment costs, contingency fund, etc.
  • Scope of Work: The details and descriptions to explain each specification of the project

3. Structure your estimate

  • The typical cost line in a construction project estimate will be set up as: Quantity x unit cost + any percentage add-ons.
  • Each cost line will be added together to make up your total cost.
  • If applicable, calculate the profit margin from the total cost.

Construction estimating tiers

The American Society of Professional Estimators has a five-tier construction estimating system that you can follow. It’s important to understand these tiers of estimating and what purpose they serve so you can choose the best one for your circumstance.

Order of Magnitude:

An initial or rough estimate of a project’s cost when you have very few specific details. Order of Magnitude is generally used when starting a project and gets refined later. It’s used for an initial evaluation to determine whether a project is sustainable.

Intermediate or Schematic:

This estimate type determines if a project is feasible and calculates the preliminary budget. During intermediate estimating, you’ll see if the project is achievable and know whether to move forward.

Preliminary or Design Development:

This estimate can be done when the project scope is known. The materials and labor are clearly defined, and you can break down quantity takeoff.

Substantive or Construction Document:

This estimate type will determine the actual cost of the project. You can compare it against the progress of construction and costs. You’ll calculate all areas, including profit margin and contingencies.

Definitive or Bid:

The most accurate estimate is Definitive or Bid. It’s used as the baseline for the project and assesses construction bids, vendor negotiation and claims evaluations.

10 tips for construction estimators

Follow these ten tips to become an excellent construction estimator. These helpful tips will keep you ahead in the industry and ensure you create accurate estimates and reduce errors. Speed up your construction estimating process so you can spend more time building your business.

1. Use construction estimating software to make sure your takeoff process is top notch

In your takeoff process, you should have a detailed outline of everything you’re going to need for each job. Investing time in this will save you time and will reduce the chances of making an error down the line.

Using a takeoff software is one of the best ways to start your construction estimating process at the beginning of a project. Although you might be savvy at estimating by hand, there are now tools available to save you time and headaches.

You may be asking; how do I choose a takeoff software? When choosing a software, you should look for:

  • A work breakdown structure
  • The option to use more than one database
  • A large report menu

Buildertrend Takeoff allows you to automate blueprints so you can measure and calculate to scale. You’ll be able to keep your measurements accounted for and your calculations accurate, all while reducing risk and streamlining your process. The takeoff process is 33% faster with software.

2. Keep your cost-estimating catalog up to date

It’s difficult, if not impossible, to create a construction cost estimate without the use of a database. Over time your database should continue to grow and evolve, making it easier to create estimates for new projects. You can also use your database to assign crew and production rates to each project variable.

Your construction database plays a crucial role in forming an accurate estimate, so be sure it’s always up to date.

Databases give you the type of visibility you want when planning and pricing projects. Material costs vary from project to project, so having a working knowledge of industry standard costs and construction inflation is key. When you create accurate estimates, you save on material costs, keeping you on track to order what you need – and nothing more.

Plus, when you know what to expect from suppliers, you can move with speed and calculate your costs faster.

3. Create a checklist to keep projects on track

Making a checklist or using a construction estimate template with a built-in checklist of the most important steps will ensure organization. Plus, with a checklist, you’re less likely to forget important project details.

Using a templated list is convenient, so you’re not beginning from scratch each time. You’ll have your basic list and then you can add any necessary items that are job specific. Implementing a construction management software like Buildertrend to makes building and using templates easy.

For the success of your projects, your profits and your people, it’s vital to have a well-structured timeline as well as checklist. Figure out how long it takes you to produce an estimate, and set up your deadlines based on your past processes.

Additionally, when you create a strong timeline for your business, you can better estimate how long each project will take – and subsequently, what fixed expenses will need to be allocated in your estimate.

4. Know material costs and be prepared for fluctuation

Today especially, materials and appliances can be hard to come by, and the costs change constantly. Keep this in mind when you’re building your estimates. You may also want to consider questions such as:

  • Is there high demand for certain materials?
  • Are certain items or appliances backordered?
  • Are there any limitations for products?
  • Does this project require any custom work?

Staying informed on these topics at the start of a job will help inform your estimate.

5. Anticipate risk and factor in its costs

Your construction estimate should include costs for things that could possibly go wrong. No one can tell the future, but a good way to predict these unexpected costs is by looking back at previous projects. This will give you a good idea of what could potentially happen.

Anticipating these costs will allow your client to prepare financially and covers your end if something goes wrong.

6. Assess larger costs more closely

When forming your construction estimates, you’ll want to center your focus on the pieces of your job that have the highest percentage cost. Your scope of work, number of tasks, labor pricing and material costs should take precedence when building your estimate. Looking closely at these items will help you to prioritize and cut costs in other areas if necessary.

7. Remember costs outside of labor and materials

In addition to the attention to detail you give your larger cost items, you’ll also want to keep in mind the operation costs that will fall outside of labor and materials during your construction estimating process. For example:

  • Operation and administrative
  • Architect or engineering
  • Land acquisition
  • Legal services

8. Determine your equipment needs

Some projects are bigger than others and will require more equipment. Having the proper equipment for the job will ensure the job is completed efficiently, but more equipment means more money. Don’t leave out these extra costs. The best time to factor them in is when you’re building out your project estimation.

It’s also a good time to consider whether it makes more sense to rent or buy the needed equipment. Is it something you’ll use regularly that will pay off in the long run? Look at the pros, cons and costs from all angles to help you decide.

9. Factor in your subcontractor and specialty labor costs

You more than likely work with several subcontractors on multiple projects every day. So, you probably have a good idea how much each one will charge for a certain project. Take some time to consider which subcontractor is best for each job and how their cost will factor into your overall construction estimate.

And don’t forget about specialty labor costs. Working with specialty laborers or craftsmen may cost more depending on their trade or skill.

10. Only take on jobs that will bring success

This should go without saying, but only provide project estimations for jobs that will bring success to your business. By now you know which jobs will be profitable and which ones won’t. There’s no need to take on every job that comes your way. Being able to determine the right kinds of projects allows you to be more selective, which will ultimately create a more accurate estimate.

What to do if a potential customer rejects your construction estimate

If a potential customer rejects your construction project estimate, ask why. Figure out if they have questions or concerns about your estimate. Make sure they understand your estimate proposal. You might hear that they have financial or timing concerns, in which case you can negotiate. If possible, find solutions. See what they are willing to compromise on and capitalize on opportunities.

Most importantly, maintain and preserve the relationship. Keep a smooth process throughout so your potential clients have the best experience with you. They may have obstacles that you can eventually overcome through continued outreach. Overall, if they trust you and value your relationship, they will be more willing to come to you in the future.

What if you exceed your construction estimate?

If you exceed your construction estimate, the first thing to do is figure out why that is. Were your materials a higher cost than expected? Did the job require extra labor hours? Assess the situation and come up with an explanation. Then come up with possible solutions to the problem.

After that, discuss the extra cost with your client. It’s always best to maintain open and honest communication with them and build trust. Explain the situation and why it happened. Come up with solutions with your client moving forward. Maybe you’ll have to cut costs somewhere else. But it’s always best to work together to find a solution that suits both of you.

In the future, you might want to consider being more aware of unexpected costs. You can even build contingencies in your estimate to account for unforeseen costs throughout the project. Actively review the budget throughout your projects to target problems before they arise.

Create accurate estimates with Buildertrend’s construction estimating software

Looking for a better way to build your construction estimate? Buildertrend’s construction estimating software is here for you. Manage your price breakdowns and see the potential profit for each job.

Schedule a demo today to see how Buildertrend can take your construction cost estimating to the next level.

Want to learn more about Buildertrend? Visit our frequently asked questions.

Construction estimating FAQs

The construction estimating process can take time to master. Investing in construction or building estimating software like Buildertrend helps automate the process. A software tool can cut time and ensure you formulate accurate estimates.

A good construction estimator is organized, detail-oriented and a critical thinker. While you can be a savvy construction estimator on your own, it’s also crucial to have software that can assist with the building estimating process. An estimating tool will help to automate the process so you can spend your time building your business and taking care of clients.

A construction project estimate is a type of cost estimate. A construction project estimate is specifically used to formulate the expected cost of building the structure for your project.

One common mistake is inaccurate takeoffs. If this information is inaccurate, it can be detrimental to your construction estimate. Invest in a construction takeoff software to help you with this step and guarantee you provide accurate estimates.

Another common mistake is the “in your head” estimating method. While you may be experienced in construction and making good guesses when it comes to your estimating, it’s far safer to work in a construction estimating software. An estimating tool ensures you’re making less errors and allows you to check your work.

  1. Reviewing construction specifications and drawings
  2. Executing a construction takeoff
  3. Building a construction estimate using an estimating tool
  4. Determining your profit and overhead costs
  5. Presenting it to your client in a proposal

About The Author

Madyson Alger

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