Understanding how to increase your company's profit margin is vital to your business’s success. When you know not only how to implement cost estimating techniques but also understand how to improve upon those techniques, you'll see those improvements trickling into your data, reporting, and workflow processes.
Commercial construction estimation ties into each step of your pre-construction process and that is why securing estimation accuracy is vital. If a commercial construction company performs cost estimation that is too high or filled with inaccuracies, the results could lead to losing out on bids. If the estimate is too low, then that will affect profit margins negatively with a domino effect. In this article, we will discuss how to improve your construction estimation accuracy, along with how they tie into proper data management, reporting, and workflow process with your employees.
Table of Contents
History of the estimation process
In the past and still present, estimators would use spreadsheets to breakdown project information when processing and delivering estimates.
Today, businesses and estimators use cost estimation to streamline the process. If you were to use this process, you’d begin by listing the every line item you would need for a particular job and attaching a unit cost for each. Once you finish that, add up each of these costs to create a total. Now, there are construction estimating software to help rid inaccuracies through the estimation process, for example, ensures you’re using the correct unit cost figures every time. Using an up-to-date digital program ensures quick and accurate construction estimation through local pricing.
According to research, there's between 1% and 5% risk of errors occurring in spreadsheet cells. While those figures may not seem high when you're looking at them individually, they add up when you think about construction estimates that could contain over one hundred or up to one thousand cells.
Data integration + reporting
Data integration is another important factor to consider for your estimation process. Information exchanges occurring internally (among staff), as well as externally (those with whom the company works). Every construction company has different features, specifications, and estimation requirements for their projects. Therefore, the need for data integration is beneficial for increasing productivity, helping everyone stay on task, and allowing access to information immediately.
Because we're living in a data-driven society, that also includes working in "the cloud." What that means is, construction companies are starting to understand the benefits of technology, and centralizing their information. In doing so, you'll improve the reporting process, and will be able to see improvement in data-driven reports so that you will be able to take out the key nuggets of information that is of more value. When analyzing your reports, this will be one way to improve your gross profit margin.
Modern technology is replacing outdated spreadsheets in the world of commercial pre-construction estimating. The need for digital solutions that integrate with multiple users with takeoff capabilities is replacing single-user spreadsheets. Pre-construction projects not only need their process to be seamless for the estimators, but for key decision-makers as well.
Through the pre-construction estimation process with a dedicated estimation software will increase accountability and enhance teamwork across your estimators and other departments. When construction leaders have better visibility of what their team members are doing and where they are in the process, it creates a strong sense of accountability that is needed for a successful bid. Managers can achieve this through a dedicated pre-construction estimation software.
Under some circumstances, you may need to make adjustments to your workflow processes and adapt so create more accurate estimates.
Here are some examples:
- You can't expect your estimators to work at maximum productivity. Therefore, because you'll likely get approximately 70-80% from them, plan accordingly.
- Every project is directly related to time management, so be sure your schedule is viable and, if not, make adjustments to improve the estimation process to become more efficient.
What to look for
There's a large need for more accurate estimation processes from construction companies so that they may increase their profits efficiently and consistently. Commercial construction companies need to take a proactive approach and not a reactive when they are already losing money and need to catch up.
There is one dedicated cloud-based, pre-construction estimating software that helps commercial construction businesses create accurate estimates, fast digital takeoffs, seamless integration, powerful data-driven reports, and increased workflow processes. ProEst believe that commercial construction companies profitability starts with fully understanding all costs associated with a project. With this information, commercial construction owners can provide accurate estimates in order to scale their businesses with confidence.
If you would like to learn more about how you can improve your construction estimation accuracy in order to gain more profit, feel free to reach out to ProEst and schedule a free 1-on-1 walkthrough session today!