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Keys To a Better Year: Eliminate Estimating Mistakes

January 3, 2019 Uncategorized 0 Comments

 

Construction financing factoring estimating mistakes

This year, to kick off 2019, I’ve decided to kick off a new series of posts:  Keys to a Better Year.

The goal of this series is simple:  To provide you with a set of (hopefully) helpful tips and suggestions for improving your life and bottom line. These tips will cover everything from fixing basic business mistakes, to helping everything in life run a bit smoother.

For some of you, these tips may seem obvious, but believe me, they come up. Time and time again.  So please, feel free to take the five minutes to read.  Think about whether this is an area where your company could stand to improve.  And if so, dig further. Learn more.  Become more knowledgable than I am.*

Today’s edition of Keys to a Better Year comes courtesy of an article in Jobsite, with tips for cutting down on estimating mistakes.

https://jobsite.procore.com/eliminate-estimating-mistakes-with-these-4-strategies

The simple reality is that estimates will never be perfect.  There will always be uncertainties in construction, and surprises will always come up. But, there are ways to cut down on those surprises, as well as to give yourself a greater margin for error.

  • First of all, make sure you know what you’re really estimating.

This sounds obvious. So obvious.  But mistakes happen all of the time.  Are things being measured in cubic feet? Square feet? Board feet?  Did you measure the right wall? Did you take into account that giant window? Are you sure you know what kind of wood they’re talking about? Remind me again what the scope of work is–did that include painting and caulking?

At this point, I’ve lost count of how many times I’ve seen jobs drastically underbid because square footage was improperly calculated, or nobody knew whether fixtures were included in the agreement.

  • Be aware of your known unknowns

Sometimes, there are things that you just won’t know going into a project.

I don’t know how much it will snow in St. Louis this winter.  I don’t know what lumber prices will be six months from now. I don’t know exactly what the soil conditions will be like at the 800 block of 3rd Street.  I don’t know what gas prices will do, or what the steel tariff situation will look like next year, or if it will rain next week.

At the start of every project you’re looking at, before you commit to a specific dollar figured, try to figure out what all of your known unknowns are. Then, create an estimate that takes these unknowns into account.

  • Be careful with commercial cost databases

Commercial databases can be a great tool in preparing quick, accurate estimates.

However, they’re only as good as the information they’re using–if their numbers don’t match your actual costs, they’re useless.

Make sure you and the database are referencing the same materials.  Make sure their prices line up with what you’re paying your suppliers.

  • When you find a method that works, stick with it.

Whatever your process is, if it works, keep doing it.  Taking a different approach to estimating each time only increases your time spent and the risk of mistakes.

  •  Check your formulas

Even after you’ve measured everything correctly and accounted for the fact that you can’t know what the weather will be like next week, you can still end up with inaccurate numbers if your spreadsheets are using the wrong calculations and formulas.

Know how your software of choice works. Periodically check the information being used.  Keep track of how the projections it gives you line up against the end cost.  And if a number doesn’t sound right, double check things.

………………………

No matter what you do, mistakes will happen.  Estimates will be off by a few hundred (or thousand) dollars.  But, a little time looking at your process now should yield solid benefits down the road.

 

 

 

*A low bar if ever there was one.



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About the Author

Tipper Coker

Tipper Coker

Lawyer. Business development manager. Nerd who has read far too many AIA contracts.


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