In our industry, underestimating is far more prevalent than overestimating. This is due in part to human nature — the "hope springs eternal" phenomenon. But it's a serious problem: Not covering your costs because of a low estimate jeopardizes your ability to do a good job on behalf of your client. Ironically enough, undercharging causes more damage to our industry's reputation than overcharging. Ninety percent of the struggling contractors I talk to are struggling not because they're bad builders or have no work, but because they're hemorrhaging cash and thus lack sufficient resources to get out of the hole they're in. They blame their crews, they blame their competition, they blame the weather, their subs, whatever — they blame everything but their estimates. But all too often, that's where their troubles began.
I wish there were a more flattering root to the problem, but the three main reasons contractors underestimate project costs are laziness, ignorance, and fear.
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