Way to go?
Whether you prepare estimates manually or electronically, be sure you have covered all the costs to keep your business viable. Brian Seymour explains.
During the past few decades of training estimators I have often been asked for recommendations on the best estimating program.
My answer is: “Use whatever you are comfortable with.”
There are many software packages on the market.
The most sophisticated will help generate accurate and financially feasible estimates, offering historical databases and updated prices for materials and labour. They also include ‘what-if’ analysis and the ability to download digital plans and use them to generate take-offs.
At the other end of the scale there are basic spreadsheets that take the drudgery out of mathematical calculations.
Many of the younger generation of estimators believe that the electronic estimate is the only way to go. However, there are also plenty of new and experienced estimators who do not trust electronic systems. They have heard disaster stories about contractors using the wrong calculation or program.
The ‘yes’ case for manual estimates is supported by having a feel for the job – an advantage when assessing labour. Estimators should understand the requirements for difficult or unusual installation methods, the time taken to reach the work site, and the labour involved in moving tools and equipment.
The ‘no’ case for electronic estimating is that the result is not necessarily right simply because it comes out of a computer. This can be overlooked when the final figures are being checked.
Common mistakes include hitting the wrong key with extensions at ‘per 100’ instead of ‘each’, or leaving out the additional percentage for degree of difficulty (height, depth, heat, cold, etc).
The essence of a valid estimate lies in the accurate assessment of material quantities and labour hours for completion of the job at a reasonable profit. However, no matter how sophisticated the software, a good result still relies on an experienced, clear-thinking human being to ensure all bases are covered.
The material take-off is the simplest part of an estimate. The final quantities should be extremely close to the actual on new work and within a small percentage on a refurbishment.
Irrespective of what method you use, materials still have to be counted and measured. However, if you prepare the estimate manually, errors in determining the pricing, extending, and totalling can be substantial.
Although you can’t anticipate changes in the installation by on-site staff, or unusual waste by workers, you can reduce material overruns with proper project management.
Labour is far more difficult to predict than material, and this is what sorts the men from the boys.
The manual method has been used by electrical contractors since the beginning of the last century. The advantage is that you don’t need a computer or computer skills. The downside is the demanding time it takes to complete the estimate. With short tendering deadlines it can be challenging to finalise on time.
The choice of estimating technique should be guided by what you are most comfortable with.
The fully manual approach using a pencil and calculator makes the task more difficult for these reasons:
- time to complete the estimate;
- increased potential for mathematical errors; and
- stress from late alternatives and changes.
Using a basic computer program involves the same procedures as the manual system, but the computer can perform calculations at the speed of light.
- decreased estimating time;
- extensions, additions and transfers to the final selling price with minimum errors; and
- coping with last minute changes
- limited computer skills causing errors;
- blind reliance on an unfamiliar database; and
- limited knowledge of price updates.
Using sophisticated software offers the advantages listed above, plus:
- last-minute changes updating the estimate immediately;
- improved project management software covering job tracking and bid analysis;
- built-in databases, ideal for ‘assembles’;
- ‘what if’ analysis;
- program scheduling; and
- cash flow projections
The disadvantages are software expense and costly training.
If you are short of time, or you believe the estimate is beyond your capability, an independent estimating service may be of value.
The best part of outsourcing electrical estimating is that it enables you to concentrate on income-producing work while others prepare the quote.
You can email or courier the relevant drawings and specifications for your project. The service examines the documents and gives you a timeline and likely charges. Once you have agreed and paid, the estimate is completed and returned to you with all work sheets.
With such a service you get the benefits of computer-based estimating without having to invest in your own system. You also know in advance how much the service will cost.
No matter what estimating method you use, you must be comfortable and confident that your bottom line includes all costs, expenses and profit to maintain a successful business.