Sound estimating is the backbone of any remodeling business, whether you bid competitively or negotiate a design/build contract. We spend a lot of time benchmarking financial standards and processes; estimating deserves equal attention.
The first question to ask is whether the right person is doing the estimating. Most estimates are performed by a supplier, a salesperson, or the company owner, and all have shortcomings. Suppliers may guarantee prices for 30 or 60 days, but few will offer any guarantee that they've done the takeoff correctly. If the materials list comes up short, you're on your own.
Salespeople pose a different problem. Sales requires vision, but estimating demands attention to detail, and it's a rare salesperson who combines both qualities. In addition, salespeople have little or no incentive to estimate carefully because their focus is on closing the sale. Months later, when the job goes over budget, the salesperson is already on to another project, and it's easy to blame the production crew. There's no financial incentive either, because most commissions are paid on gross sales price before the job starts rather than on produced gross profit after the job is finished.
Company owners who do their own estimating don't fare much better. To begin with, most are salespeople at heart, with the same tendency to compromise to close the sale — only worse because they own the company. Besides, owners are really too busy to do the estimating, so they tend to take shortcuts, which usually result in budget shortfalls, sometimes big ones.
But the biggest reason company owners should stay away from estimating is because they are all hopeless optimists. They are legends in their own minds who estimate based on how it was back in the good ol' days. Their opinion of their productivity was inflated back then, and it's even more unrealistic now. They estimate nostalgically, not realistically.
So who is the right person for the job? I think it's someone whose job title is “Estimator,” which includes job costing, price updating, and everything else that goes along with estimating. Not everyone qualifies. A good estimator is methodical but creative, someone who relies on vision and attention to detail in equal measure. It doesn't hurt to be slightly obsessive-compulsive, someone who checks and double checks, and who doesn't sleep well until he's tracked down every last detail. Whenever the company owner says, “We can do that,” a good estimator needs to be able to stand up and say, “No, we can't, and here's why.” Finally, a good estimator needs to work and play well with both the sales staff and the production crew. He needs to be an advocate, not an adversary.
Ask yourself, how does your estimator measure up?
Takeoff vs. Estimating
Counting vs. Judging. We can count the number of windows on the plans, but we need to make a judgment about what it will take to install them based on their size, how high up off the ground they are, whether they have to align with other architectural elements, and so on.
Calculation vs. Predicting. Multiplying two known quantities to arrive at a final takeoff is simple math. But we also need to predict how the numbers might change based on weather, location in the building, availability of subs, personnel assigned to the job, and a host of other factors. A takeoff merely takes account of what is; an estimate looks into the future at what will be.
Costs vs. Prices. A takeoff gives us the cost of the job, whether it's for material, subs, or labor. But an estimate demands a price that includes all the “soft” costs: supervision, overhead, administration.