In an industry where profits aren’t too high, making mistakes on your estimates can really affect your profits. While some of these mistakes are very common and easy to miss, others are avoidable with the right tools and software.
Here are the top 10 most common estimating errors in construction that a lot of construction companies tend to make and ways to avoid them.
1. Estimating Only What’s Seen On Paper
While it might be simple to make estimates based on what’s on paper, seeing the project location in person can reveal things that aren’t too obvious.
Costs like needing to fix the landscape due to improper grading might come up or other things like logistics might be an issue due to the difficulty of transporting equipment to this specific location. Without seeing the project location in person, it’s hard to make accurate estimates on your bids.
2. Ignoring Previous Estimation Data
Data is one thing that a lot of construction companies tend to ignore or forget about.
Data can tell you a lot about operations and where errors tend to occur. By keeping track of your previous estimates and any incorrect values that were previously used, you can avoid making these expensive mistakes in the future.
Using software to keep track of your previous estimates is one great way to remember what was correct and what was incorrect and is crucial to running a successful construction company.
3. Not Using Construction Estimation Software
One of the easiest ways to avoid any costly construction errors in your estimates is by simply using construction estimation software.
With construction estimation software you can get a rough range of the typical costs for certain materials and procedures preventing any significant mistakes. Data has already been collected and analyzed by the companies that own this software so why not use it for your own benefit. It's especially helpful if you're just starting and don't have any data of your own yet.
You don’t need to necessarily follow it to the dot but instead use it to compare against your own to observe any large differences.
4. Making Estimates In Other Industries
What probably accounts for the most common estimation mistake is making estimates in industries where companies aren’t as knowledgable in.
While estimating how much a home foundation will cost is easy for a home construction company, estimating how much window installation or roof installation costs isn’t as clear.
When companies who aren’t experts in specific industries try to estimate these costs, incorrect numbers are often found.
5. Inaccurately Guessing Labor Costs
Out of all the things to estimate, estimating labor costs is one of the toughest things a construction estimator can figure out.
It’s not too surprising that estimating labor costs is one of the most common mistakes. There are quite a few factors to keep in mind like the number of employees for a project, their different salaries and experience levels, and different productivity levels.
This is another reason why ignoring previous estimation data is a big mistake, for hard to guess estimations like labor costs, having historical data at your disposal can help you determine a better estimate. Using a good accounting software program can also help you keep data on the costs of labor to make better estimates.
6. Underestimating How Long Certain Tasks Take
While having confidence in your employees is a good thing, it’s also important to be realistic.
Time and time again construction owners and managers don’t accurately gauge how long certain construction tasks take. While underestimating a simple task which instead of taking 2 hours actually takes 5 might not be a huge deal, consistently making these mistakes adds up.
Then what proceeds to happen is that your labor costs are higher than what you imagine since your employees are now working longer. Misjudging how long tasks take is a very common estimation error in construction.
7. Disregarding Market Trends
Being aware of the current market trends is essential to making accurate estimates. If you aren’t up to date with the cost of materials and policy/government regulations then you’re missing out on crucial details that might be losing you money.
You need to be consistently up to date and routinely researching the latest market trends to be accurate in your construction estimates.
8. Not Being Picky With Projects
Not every project is the same and not every project will give you the same profits or return on investment.
Unless you’re a huge company, you will have a limited amount of resources at your disposal. This means you need to be more picky and realize that you don't necessarily need to accept every project that comes your way since each project you choose to accept will take up resources that could otherwise be used for other projects.
More importantly, some projects will be harder to estimate since they might be far from your industry expertise. This will undoubtedly make it harder to have accurate estimates and not be as profitable as other projects out there.
9. Ignoring Risks
It’s no secret that every construction project has its risks. Determining the risks and avoiding projects that are too risky is essential to your construction estimation strategies.
Even if you still move forward with your bid, having a sense of the risks involve should influence the amount made in your estimates and other financial variables. You don’t want to end up in a situation where your profits have been impacted severely due to unforeseen risks that cause massive losses.
10. Incorrect Takeoffs
If you don’t carefully review the current project plans to determine the measurements and take-offs then you’re possibly setting yourself up for making bad cost estimates.
Without knowing the correct measurements, you can easily misjudge the right amount of materials and labor needed impacting your estimates. You can use takeoff software to help avoid this issue.