A building business must be sustainable and resilient to provide reliable service to clients who are making one of the biggest financial commitments of their lives.
What is estimating?
Estimating is the process of working out the cost of materials, labour, profit, and business overheads for a building project. Estimating can be done with pen and paper, by using a spreadsheet program like Excel, or with a building estimating program. An estimate should also contain a bill of quantities – known as a ‘take-off’ in industry – for efficient ordering when the job is underway. A well-defined estimating process is also helpful to pick up problems or discrepancies on building plans.
Being able to produce reliable estimates for building work is vital to running a strong business but presents unique challenges. Some of these challenges are:
- the large volume of tasks, labour, and materials to be accounted.
- having an estimator with the hands-on experience to make realistic labour allowances for individual tasks.
- making sure all estimates include business overheads, running costs, and profit to allow the business to be resilient and grow.
Builders’ risk explained
There are also greater risks involved in building work than in other industries. Building jobs take a long time. If a job is unprofitable, it can mean a builder is devoting all their resources to a loss-making exercise for many months.
What might happen if a building business has poor estimating practices? Two possibilities are:
- ‘Yo-yo’ quoting’ – A building company might lose money on one job and consequently make their next quote overly high to ensure it doesn’t happen again. This ‘feast-and-famine’ business cycle may result in cash flow problems, an insecure pipeline of work for the builder and poor outcomes for clients.
- A small building company might find that they are losing money on a house extension project. They are then offered a contract to begin another job which they think will be more profitable, so they divert their labour and attention to this job. This causes delays and inferior workmanship on the first job because it isn’t being managed properly.
How we approach estimating
At Northern Building & Carpentry we use estimating software developed specifically for the Australian building industry, and we believe this produces the most accurate and detailed quotes possible.
Our estimating process follows these steps:
- An initial site meeting is held to run through the design, specifications, and unique features of the job.
- A follow up email is sent to the client to summarise our discussions at the meeting.
- An initial estimate is provided which includes descriptions of work and materials required.
- Revisions are made based on budget and client specification, for example if the client decides to change the flooring to carpet in the bedrooms.
- The final contract estimate sheet is issued to the client. This contains all the pricing and detail required to prepare the next – and most important – document in the building process, the major domestic building contract.
Choosing a professional, sound builder who provides a thorough and realistic cost estimate is the best way to ensure you get quality workmanship delivered on time and on budget.