Do Away With Guesstimating!
Are You Losing Money Before You Even Start?
Let me ask you a question. Would you ever cut a board like this? You look at the space where the board is going to go and say... "That's 82 1/2" and then you get out your saw and look at the board and say there's 82 1/2" and start cutting. Would you expect the board to fit? No!
If you're like every contractor I've ever seen, you get out your tape and measure the space and measure the board and cut it. No guesswork involved.
I don't know if you're one of them, but a lot of contractors bid that way. I call it "eye balling and guesstimating." How can anyone expect to make money guesstimating this way?
It's even worse, because if you get a job and make money on it you don't know why. You can't duplicate the process on the next project.
It's a viscous cycle and a death spiral.
Organize Your Estimates for Accuracy & Speed
One of the things that's going to make your estimating faster and more accurate is using what I call "Sections." Sections are a way of breaking a project down into the steps you take when you're doing a job. Some people call them tasks, phases and classes. It's all the same concept.
Sections are a logical breakdown of your jobs. Sections would include things like: Site Preparation, Foundations, Framing, Roofing, Landscaping, and so on. By the way, most of the examples in this letter are based around general contractors. However, exactly the same principles apply to specialty contractors. No matter what trade you may be in, these rules apply to you.
Here's how it's going to make your estimating more accurate, and faster too. When you use sections you take one section at a time and you take each of the items you need for that section of the job. If you're taking off foundations all of the items for foundations are in the Foundation section. By having only foundation items it's much easier to spot missing items and duplicates. That eliminates errors.
Imagine what your estimate would look like without sections and you have several hundred items in the estimate - that's at least 2 pages. You could spend hours reviewing the estimate looking for missing items and duplicates. Because it's all one big random list, it's much harder to find duplicates or missing items which creates errors and it take a lot longer to find any errors.
Use Measurable Items
The only way you can estimate consistently job after job and make money is by making sure everything is in measurable units. A measurable unit is a linear foot, a cubic yard, or a square foot, and so on. It's something you can measure with your measuring tape.
What that means is you have to have a system that everything is taken off in measurable units that you can calculate a cost for materials and labor. For example, a 2X4 interior wall with drywall on both sides takes (I'm totally making up numbers here) 1/2 hour of labor per linear foot (your labor production rate, i.e. how long it takes to do something.) and $10.75 in materials.
That's measurable and when the job is complete you can compare your cost for materials to what you thought it was going to cost. If there's a difference, you know which part of your job cost your profit and so you adjust your estimating for the next job. Maybe your material cost should be $11.25 a linear foot, or maybe $10.25. It doesn't make any difference if you're high or low, adjust to the correct number.
And, you can compare your labor hours to how long it actually took. Adjust labor hours, labor production rate, in the same fashion.
Do NOT estimate by hours always estimate by the units you are taking off. For example, I've talked with a contractor that would estimate that a 10 foot wall will take about 8 hours to build and the same contractor a week later will look at a 15 foot wall and say it will take about 8 hours. How do you measure that? You can't!
The Contractor's Profit System™
When you use The Contractor's Profit System with LiteningFast Estimating you will:
Estimating is important! If you don't estimate, you don't get jobs. Without jobs you don't have an opportunity to make money.
If you estimate, but you don't know what it costs to do the work, are you estimating or guesstimating? Are you making the same mistakes over and over again, job after job?
One of the ideas behind The Contractor's Profit system is that it no only includes LiteningFast™ Estimating, it is integrated with QuickBooks® so you can do job cost. Not only is it integrated with QuickBooks, it creates simplified budgets that give you the power you need to make money job after job. By the way, the program has been tested and certified by QuickBooks.
What do I mean by "simplified budgets"? Budgets are created based on sections. This means that:
I'll tell you more about the system in a minute, but first...
Why Should You Listen to Me?
I had my first construction client in 1977. It wasn't that I was a contractor or specifically interested in construction, I had a good reputation and approached by someone that wanted me to develop software for his company. His name was Doug Allen and his company was a large plastering and drywall company. When I say large, I'm talking millions of dollars in revenue in 1970's dollars. His company was involved in plastering the Moscone Center in San Francisco many years ago, as an example.
With one contractor "under my belt", I started looking for other contractors to do business with. From going on the road talking with contractors about my system I learned what they needed that was different from my original system. The system evolved over the years based on user input.
I created a system that ran on PCs, before the days of Windows. They were DOS machines and the program included everything a contractor needed to do business: Estimating, Payroll, Payables, Job Cost, Receivables, Financial Statements, everything.
One of the most important discoveries I made over the years talking with 1000s of contractors is that successful contractors were keeping track of their costs and adjusting their estimating when they found differences. A successful contractor is one that's been in business for years and is making money consistently on his or her jobs.
In 1994 I sold the original system to another company. When talking with contractors I heard a lot of "I'm using QuickBooks." That unleashed an idea.
After digging into QuickBooks I discovered there was an import function that that would allow me to import budgets. I figured an estimating program that would create budgets for job cost in QuickBooks had to be a winner. I created that program. I called it LiteningQuick Estimating. Back in 2001 Intuit (the makers of QuickBooks) didn't like the fact that I had "Quick" in the name of the program. They were helping me market the program, so I was happy to change the name to LiteningFast, which it remains to this day. That was over 4,172 clients and 7 versions ago.
Saving You Time... Estimating Quickly and Accurately
You will estimate more quickly for 4 primary reasons:
Estimating Accuracy -