Maximizing Profitability: How Efficient Estimating Can Transform Your Business

8 mins read

To achieve effective utilization of resources and profitability in a construction business, job estimating plays an important role. If you do not know your real costs properly, you may well be making a loss on individual projects through underbidding. On the contrary, overestimating may lead to the loss of potential customers and may harm business. Getting estimating right: best practices, challenges, and solutions – Get Estimating Right. Yet, when it is optimised it can be incredibly beneficial to your business and your balance sheet.

A Look at the High Cost of Over and Underestimations

Failing to accurately estimate the overall cost of a job is one of the fastest ways through which any contractor has the potential of launching a business only to close it similarly within the shortest time possible. If the bid is low, you are a loser for every hour that is worked. This gradually brings down your profits per job every time you undertake different projects. Even experienced contractors routinely underestimate expenses like:

  • Labor: Modern construction projects are characterized by poor estimating and this has resulted in understaffing and overtime pay provision as well as low profits.
  • Materials: Levelling of lost Information and not considering change orders or changes in price significantly reduces margins.
  • Equipment: It is costly not to budget for repairs, rentals, and fuel since they can come up with a surprise.
  • Subcontractors: It means that their bids could be more than what they anticipate.
  • Overhead: Certain other overhead expenses such as license fees and insurance have to be borne.

Although increasing estimates to incorporate risks and uncertainties appear reasonable, that option can be counterproductive as well. Sometimes, very high bids may not secure a particular job especially when other firms come up with better estimates of costs and prices. The last but most important, key task is to discover the project’s ‘sweet spot’ where the desired amount of profits can be earned without cutting off the chances of winning.

Improving Estimate Accuracy

Record keeping and project documentation remain crucial steps that can help to enhance estimate accuracy, and this starts with getting as much detail about a project as possible. Key data to capture includes: 

  • Specific information about the project and the job profile
  • Construction blueprint and architectural design
  • To complete the table, information such as the type of material required and the current supplier price must be provided.
  • This section of the business plan will outline the various pieces of equipment and tools that will be used by the business in the execution of its operations.
  • Dividing the job into smaller accurate and measurable components
  • Time for each task of the selected activities and the number of workers needed

With this detailed information about the project in hand, one can have a clear perspective of costs by the enterprise’s actual expenses. That is why it is important not to guess or use some standardized or industry-average estimate when estimating. The most profitable contractors back their bids with: 

Historical data: One of the areas that can be analyzed is the past project records as far as costs are concerned. It is also necessary to track deviations between the estimated value and the actual value.

Productivity rates: Understand labor expenses more accurately in terms of productivity realized by your crews in the field.

Current subcontractor bids: Call all the preferred trading partners to get their project offers.

Up-to-date material prices: Ensure the latest quotes from the supplying company are used and not older estimates.

It is important to keep this quantified view of your real cost in the background constantly. In the long run, accurate estimating can be obtained from continued tracking and evaluation. Estimating is a process that should be continuous as contrary to guessing it provides a positive outcome for every bid.

Estimating Best Practices

Construction cost estimators who have profit at heart make estimating a core business value and not just something that is done hurriedly just to meet the bid deadline. Some proven tips include:

  • Estimating should not be done at the last minute; I suggest you allow sufficient time for estimating.
  • One can compare different estimates obtained from various estimators to check for differences between the estimates.
  • The post-mortem of the projects that have been done can be analyzed to point out the estimating inaccuracy.
  • This shall provide a comprehensive database of the cost estimates that have been done in the past and the actual costs that have been incurred.
  • In every project, it is best to measure or put a figure to risks and contingencies rather than inflate the total estimate.
  • Make sure to keep estimate data current with the current supplier price rates.
  • Identify the probability of the most common types of unplanned expenses and include them in the forecast.

Technology also continually increases its presence in this area as well. Specialized construction estimating software consolidates historical data from prior construction projects at the same time that the software is updated in real-time by the supply chain. That makes the commercial estimating services process much faster and helps eliminate the dependency on old manuals and spreadsheets.

Extending the project time frame also increases accuracy; however, it is possible to achieve even better results with shorter project time frames. The plan with a longer horizon of performance compares with the detailed plan prepared closer to the start of the project to find out which costs were omitted. Larger projects can also benefit from phasing to enhance the level of accuracy attainable.


It is a well-known fact that estimating is an infinite, sophisticated process. However, since material costs and skilled labor are other critical inputs in construction projects, underbidding has turned into a more dangerous practice due to the rising costs of preliminary estimating services projects. Estimating as a critical skill is one that if managed as a strategic business tool, firms that invest in technology and practices will be able to gain a competitive edge. It also makes them the organization that can most dependably turn bids into fat profits because this is not a matter of guesswork. When it comes to business as well as carpentry, better measure twice and cut once is good advice. Estimating helps contractors avoid playing the financial shell game and stay on top of their own game.

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