Like most remodeling firms, mine began as a one-man show. Roofing was a skill that I was particularly adept at, having done a lot of it while working for my dad. I didn’t realize the downside of this until I had lost money on several jobs that I had estimated based on my own skills and ability. As I added staff, many jobs ended in the red until I began adjusting my estimating practices to match my crew’s production abilities instead of my own. In the case of roofing, I hired a good subcontractor who could do the work for a fixed cost, freeing my employees to focus on what they did efficiently.
Remodeling company owners all too often underestimate projects for a simple reason: no one else is you. Your estimates may reflect your vested interest in working efficiently, or perhaps the temptation to believe the job can be done quicker than it really can.
Employees may see things differently. They often don’t have ownership of the company or the project, or an incentive to work efficiently, or (unless you share the estimate with them) even a reference or goal to hit. Plus, they probably work at a different speed than you do.
And so, regardless of the hours that you estimate, you’re obligated to pay for the actual hours worked. Low estimating can also set back schedules and create backlogs of unanticipated delays, which can in turn tempt you to look for shortcuts, undercut quality, frustrate clients, and jeopardize your income.
Presence of Forethought
There are no easy solutions; estimating is never black and white, and on many projects, especially at first, you’re operating on as much guesswork and speculation as fact.
But there are systems for improvement.
Analyze and adjust. As you produce projects, execute job costing in a way that allows you to compare actual hours against estimates. Adjust your next estimate accordingly.
Ask for input. Have your production team review estimates (particularly the labor component) before sharing with clients. Are the hours reasonable, and, if so, will the team buy into the goal of meeting those hours?
Offer incentives. When jobs are well done and under budget, pay out a “bonus by whimsy.” Or structure a profit-sharing plan. Instead of job- or person-specific profit-sharing, I prefer teamwide profit-sharing that reflects the success of all jobs. For my company, team incentives yielded more consistent success in meeting goals and required less of my supervision, as everyone tended to watch out for one another’s work.
Finally, a few suggestions for helping your staff to get on the same page as you.
Improve the written specs that you transfer to clients and people in the field. Create standard operating procedures for the way you do your work. For example, have a standard method and details for trimming the interior of windows. All staff must trim the windows in the same manner for every project, unless the specs describe the job differently as an exception.
Hold pre-construction meetings at the project site. Confirm the details and methods you anticipated with your crew and the homeowner. What’s key: you are confirming the project specifications at this meeting — not creating them.
Allow time in your estimating process for employees to build the project in their head. Have them walk through the steps of how they will actually do it, all the way to completion. Besides improving the accuracy of your estimating, this can also help your employees build with more forethought.
They may even envision a better path for doing the job.
Replace the “we’ll see what happens” philosophy with a more aggressive and planned approach to estimating. Don’t let your pride, or haste, get in the way of your profit goals.
—Shawn McCadden founded, operated, and sold a successful design/build remodeling business. A co-founder of the Residential Design/Build Institute and former director of education for a national K&B remodeling franchise, Shawn frequently speaks at industry events and consults with remodeling companies. firstname.lastname@example.org.