Costly Estimating Mistakes Contractors Make

It’s that time of year when estimates are flying out the door, and you’re filling your pipeline for the season.

If you’ve ever finished up a job, and been frustrated at how doing that job in real life wasn’t exactly what you imagined when estimating it…

Well.. that’s what I am digging in to today.

We’ve all done jobs where we wished we had given it just a few more minutes of thought and reviewed the details one more time before sending it.

So, here’s a quick list to sanity check your estimates before hitting send.

• Make sure you’ve estimated labor in full day chunks
• Plan for and estimate worst case scenario (in job difficulty)
• Factor in time for logistics, clean up, and the final details.

Sometimes when estimating we get all honed in on what it would take to do the job, and forget about all the work related to prep and wrap up for the job.

Estimating Labor in Full Day Chunks

If you’re estimating a job, and you come up with 2.5 days, or you come up with 75 man hours, round up to the nearest full day’s worth of your labor.

For instance, if you have a 3 person crew, and work 10 hour days, that is 30 man hours per day.

So your estimates should always contain 30, 60, 90, 120 manhours, and so on.

Don’t take a 30 man hours per day crew and estimate something like 45, 75, or 110 hours on a job.

Why? Because your hourly rate is set at a place to recover all of your overhead for that day, when you work a full day.

If you work a partial day, your hourly rate is not generating enough dollars per hour to cover all your costs for that full day.

Even if you work a partial day, your overhead expenses are coming in at full day costs. 😜

Even if the job is wrapped up within a partial day, that’s cool, just ensure that you charged enough to cover all your overhead expenses for that day.

(BTW, you can find your hourly rate at this man hour rate calculator)

When you wrap up a job at 2 PM, you won’t be able to go out and get meaningful work done on the job for the next day.

Job 1 is responsible to recover all of your overhead for that day.

Note: this practical tip applies to companies doing installation jobs, or multi day jobs. If you are doing things like leaf cleanups, etc, where you do multiple small jobs in a day, this is not such a big deal. Although you’ll still want to ensure you have enough of man hours in those multiple jobs to be billing out a “full day’s worth” of man hours.

Plan for worst case

It’s happened to all of us.

We’re super optimistic when estimating that job, and crushed when we actually do the job.

We ran into snags that made it take longer, and it most certainly didn’t go off without a hitch.

In fact, how often does a job actually go off without a hitch?

The thing to note here is, when estimating, take off your rose colored glasses for a sec, and ask yourself what could go wrong or delay completion.

Just remember to factor that stuff in your estimate.

Note: this is in the context of doing quoted/fixed pricing on your estimates. When doing time & material deals, this isn’t such a big deal.

It’s never fun when you estimate for best case scenario, then worst case happens, and you feel the urgency to wrap up and get on to the next job.

The client picks up on that vibe, and starts issuing complaints, and nit picking on the details.

You’d love to go above and beyond for the client, but you’re already behind on both schedule and money on this job, so you feel like you’re between a rock and a hard place.

It’s so much better to plan for worst case, so that it’s easier to go above and beyond for your customer, and really impress them with a 5 star experience.

And if worst case happens?

You’re not so stressed.

Factoring in time for logistics

I’ve definitely fallen in this trap for only thinking about how long it will take to do the job itself, and not all the peripheral tasks pertaining to procuring materials, logistics, prep work, and all the last 10% of wrapping up the job.

Just know that to do a seemingly simple “one day’s worth” of work on site, it’ll take another 20ish% of time for the details.

Don’t forget getting materials on site.

It rained, now the driveway is muddy and the client wants you to power wash it.

The ground was soft, so you had to lay out mats to prevent rutting the yard.

You get the idea.

Conclusion

So the next time you’re working up that estimate, pause for a hot minute and reflect on all the things you’ve taken into consideration..

…and ask yourself what things you may have failed to consider.

If you make a habit of doing this, you’ll create more margin for yourself and your crew, and create the environment where you’re not as stressed, and it’s much easier to go above and beyond for your clients.

And when you’ve got things under control like that, you’re clients will notice, and you’ll just find that those happy clients and 5 star reviews just come so much easier.

Good luck as you continue climbing the entrepreneurial ladder!

Go get ‘em!