For contractors and builders the biggest hurdle is to get the construction estimate just right. When you talk to a prospective client and discuss the project, you have to make plans that will fit the budget placed before you. More often than not, the requirements made on you will exceed the financial limitations placed before you. It is here that you have to walk a tight rope and work things out precisely. Estimate right and you make a pile of profit but wrong calculations can hugely set you back. You cannot possibly tell your client that you have undercharged him after signing on the dotted line in the contract.
Here are a few tips to ensure that as a contractor you have cost estimates done as accurately as possible. True, construction management software can take a load off your shoulders but then it will be as good as your inputs only. So before you finalise plans with your client, keep these things in mind.
- Finalise plans with your customer – As said before a client will first give you an estimate of the financial outlay in mind and will then give you specific requirements. This might be quite different from what you have in mind. You should also be able to work comfortably within the allocated funds. The trick is to have a good set of plans in place – not a sketch of the ideas after a brainstorming session between the two of you. Every facet of construction has to be included in the plan before a contract is drawn up and both of you sign it. This is the best way to avoid expensive modifications or do-over during or post construction.
- Cost estimating method – Accuracy in estimating costs depends to a great extent on the methodology adopted by you. One is the stick method where every job, sub contractors, materials, permits required and every other work is listed and then a cost put on each of the items. It is a very long drawn and tedious process and simply finalising the estimate might take weeks. If your customer is in a hurry to start on the construction, such delays can cost you the project.
The other is the unit method which is a far quicker and better option and one that you should follow. List out all the line items (assemblies) that will be required for the job and fix the unit price to each of them. Total them up and have the numbers checked by another builder to ensure that you have got the unit prices right. Once you have the total numbers, apply your mark-up and your plan and estimate is ready for submission to client. It is also a lot more accurate than the stick method.
- Take professional help – A crucial reason why your estimate can go way off the mark might be because of your lack of knowledge and skill sets in areas that are not linked directly to construction activities. For example, getting required building permits will mean following certain statutory and legal formalities that you might not be aware of. Hence take professional help and stay on the right side of the law. If you are operating in the State of Victoria, Australia, consult a property conveyancer in Melbourne to guide you in this regard,. Incidentally, one of the leading property law firms in the State is P&B Law.
This is all the more important as their charges too have to be incorporated in the cost estimate being drawn up by you. The same goes for other jobs that you might have to outsource like plumbing, flooring and other similar jobs. You can take help of construction estimate templates to get started.
- Review subcontractor’s estimates – There are a lot of jobs that you might have to parcel off to your subcontractor. It is possible that they miss their mark when working out estimates that you will be incorporating in your final plan. Even though they will be solely responsible for any errors, it will affect your construction flow if you have to make modifications midway. Hence it is always advisable to check your subcontractors’ estimates as meticulously as you check yours.
Follow these few tips and you should not have any problem in preparing accurate construction cost estimates.