Your profits: Smart estimating
Editor's note: The following article is based on the presentation "Estimating Best Practices for the Glass and Glazing Trade" by Anthony Callas, director of operations, Heinaman Contract Glazing, www.heinaman.net. Callas gave the presentation during the Glazing Executives Forum, Sept. 12, 2011, at GlassBuild America: The Glass, Window & Door Expo.
In a slow construction market, staffs are smaller and busier. From an estimating standpoint, this situation can be especially dangerous, as personnel are tempted to take shortcuts to get the job done. Estimating errors can be very costly to companies; miscalculations often lead to change orders and cut into profit margins. When creating an estimate, always remember to:
Other do's and don'ts
Price each scope item and account for all scope
Base estimate on quote
Know the cost of money over time
Know that direct labor is only a part of your costs
Track labor codes
Account for hidden costs
Wait to the last minute to estimate
Forget about labor overhead
Forget to account for hidden costs(financing, carrying,late pay, etc.)
Neglect your workload assignments
Use square-foot pricing
1. Factor in unforeseeable, short-notice cost escalations.
Keep watch and prepare for increases in sales tax, truck and equipment fuel, union labor negotiations and glass fuel surcharges. These often-overlooked costs can make deep cuts into profit margins if left unaccounted for.
2. Keep track of material cost changes.
The glass industry has seen numerous material price hikes in the last year for everything from aluminum systems to glass to interlayers. Document these changes, factor them into bids and communicate them to general contractors. Maintain a file of the material change letters and emails.
3. Do your homework when choosing a supplier and systems.
Evaluate your potential supplier based on performance; your existing relationship, if applicable; locale in relation to the job site; reliability; price; and responsiveness. When selecting a product system, consider engineering, fabrication, installation and freight. See the whole picture, not just the initial cost. If choosing between a domestic and foreign supplier, do a complete risk assessment, taking into consideration payment terms as well as the potential for: inconsistent paperwork, damaged material, slow replacement material, delays at customs, multiple carriers, changes without notice, language and cultural barriers, legal remedy guarantees (or lackthereof) and warranty reliability.
4. Review project mark-up percentage.
When establishing a mark-up percentage, make sure you know and factor in all company costs, including rents, salaries, utilities, supplies, training, computers, maintenance and other expenditures.
5. Gather input from project managers and field personnel.
Meet with project managers and field personnel to generate optimistic, realistic and pessimistic assessments. Use the information generated from the field, as well as historical information from previous bids, when estimating.
6. Most importantly, do not underbid.
A company that bids without allowing for any profit margin or overhead just breaks even, or worse, loses money on the job. Both situations forfeit any opportunity for growth.