Jim Benoit uses an estimating discipline from his commercial contracting experience to enhance his company's residential remodeling estimates. Instead of including project supervision in overhead, he includes it as a line item in all the estimates produced by Benoit & Czarnecki Design/Construction, Newtown Square, Pa. These expenses add to the direct cost of a project and increase the base to which he adds markup. “I probably come close to someone who marks up 1.67, but I know my exact costs,” he says. “This allows me to have firm costs for a job I really want instead of blindly marking up by 1.67. Using 1.67 as a multiplier might mean I'm making one job more expensive, or if another job is more complex, maybe that 1.67 markup might not be enough. As long as I make a steady 10% [net profit] on each job, I know I'll have 10% profit at the end of the year,” Benoit says.
The company's project managers handle five to six jobs at a time. For a six-month job, Benoit includes three to five hours of project management per week in the estimate. He also includes a line item for supervision by the lead carpenter. “He is not producing carpentry every day,” he explains.
Benoit and partner John Czarnecki also do not include all of their owner salaries in overhead. They each fill out time sheets and direct-bill their supervision time to specific jobs.
Before Benoit had a history of the supervision time required for jobs by the lead and the project manager, he used past experience to estimate the hours. “If you know how long the job will take,” Benoit says, “and if you give your lead one hour per day for site supervision and the project manager two to three hours per week, that should work.”
Benoit says this practice may be successful due to the company's open-book policy. “My guys have a copy of the spreadsheet,” he says, so they are aware of the hours they are given to supervise each job.