Questions every estimator should ask
In every area of business, trends play a vital role in the analysis of what makes a business successful (or not) and predicting the possible future. As estimators, we play an important part in our company’s current state of business and its future. By analyzing trends in your estimating, you can discover what works and what doesn’t, thereby refining your estimating skills and increasing your company’s future success ratio.
So, today, we are going to ask questions about trends your company may be experiencing with estimating. Are they good trends or bad trends … or both? What are the trends for your company’s estimating? What types of jobs have you won? Lost? Are they similar, or is there a diverse mix? If similar, why? If mixed, again, why?
Why is there a trend in the types of projects you have won versus those you lost? Have you studied this? Have you even thought about it? Could it be that you are winning certain types of jobs over others because of your estimating techniques? How you estimate, when and how often? What about your estimating knowledge or lack there of? Could this play a factor in the types of contracts your company wins and then therefore builds?
What about your company’s estimating software? Could it be affecting the trends? The parts and assemblies database easily could be the reason for the wins or the losses. Are the materials up to date? Are you cutting too much or not enough? Just exactly how are you using that national pricing service or program? Have you adjusted labor units to more accurately reflect the true installation times of your electricians?
I talk with a lot of contractors about estimating software and their databases. Too many have not really worked with their databases, adjusting them along the way.
Now, what about the trends of profitable projects versus the losers? Are there any commonalities? Did three or four similar projects make you money, whereas three or four unique projects lost money? Or was it vice versa? This study may even help you recognize how well you know (or don’t know) your company’s field personnel, which types of projects they build well and which ones they don’t.
Do your vendor or subcontractor quotations play a major factor? With which vendors or subs are you winning? Losing? Do you have one you use all the time, or do you use multiple vendors? Do you always go with the lowest quote? Can you spot any trends in your quotations? Are they consistently low or high? Or are they erratic and have no noticeable pattern? It is very important to know if your quotes play a factor in your wins or losses.
Then there is the “GC Factor.” With which general contractors are you winning and with which are you losing? Is there a noticeable trend with any in particular? If you discover a loss trend with one GC, perhaps you should stop bidding to them. If you are always winning with another GC, ask why? Maybe your prices are too low.
You should ask yourself the same questions about your competition. If you discover a trend that you are always getting beaten by the same companies, then perhaps you need to avoid bidding on projects they are bidding. Maybe these losses are tied into the trends you discovered with your vendors.
You have to look at everything. You have to know exactly how each element of your estimating plays against the others. For example, if you don’t know what role your database plays with your wins and losses, any analysis regarding your estimating techniques will be flawed.
I often hear contractors say they are bidding a project “because my GC client asked me to.” This is understandable; you have to serve the client, right? However, I also hear, “I really don’t want to bid this job,” or “We don’t typically like to build these types of projects.” This, too, is a trend that can produce devastating results. You must try at all cost to bid on only the types of projects dictated by your company’s business plan, i.e., the ones you are good at building and projects you are good at estimating. Now, I’m not saying you shouldn’t estimate new types of work or expand your education and experience. But learning and experimenting shouldn’t come at the expense of the company’s well-being.
I guess it’s safe to assume you are following your company’s business plan and only bidding on the types of projects your plan dictates, right? Certainly, you are only bidding projects that are part of your plan—right? Maybe this would be a good time to visit the plan and see how you are doing.
Analyzing the trends in your estimating shouldn’t take too much time. It may take some effort at the beginning—building spreadsheets, charts, etc. But if you develop a system along the way, it should eventually become automatic, and your reporting will be ready to review any time. You can then use these reports as a compass to guide your estimating toward a more successful trend. EC
SHOOK is the president and chief estimator for his estimating company, TakeOff 16 Inc. He has worked in the electrical construction industry for more than 18 years. Reach him at 707.776.0800 or sfs@TakeOff16.com.