Estimating the price of a construction project can be difficult. Remodels can be particularly dicey, as they often come with unforeseen surprises.
Accurately pricing the value of a professional service takes a significant amount of forethought, and putting all your services together to complete a remodeling project may be more complex than just adding the value of each service together.
Everything from supplies and labor to insurance and incidental should factor into the project plan and help you develop the most accurate timeline and cost estimate possible.
Don't be concerned if you've been able to generate leads but are having difficulty pricing the jobs that new clients are demanding. Here are a few of the most crucial things to remember every time you put together a bid.
Check Previous Estimates and Projects
When you are requested to bid on a project, the first thing you should do is research similar work that has already been completed. You may accomplish this in a variety of ways, including:
- Consider the cost of previous initiatives that were comparable in type to the current request.
- Even if you didn't get the job, go through any bids you made.
- Examine the prior projects and estimates of any other professionals in your network.
Past projects might serve as a good beginning point for making a current estimate.
Examine the Project's Scope
While previous projects are a good place to start, keep in mind that they may not always be precisely the same or up to date. Remodeling, in particular, may be a highly uncertain process. Demolition may reveal a mold problem, or you may find yourself spending an extra day or two working around an uneven surface.
Once you have a general concept of how much a project may cost, it's important to start narrowing down the current cost by examining the project's scope. Are you being requested to replace the roof of a small porch? That may take the better part of an afternoon. Do you want to modernize an ancient farmhouse kitchen? That might take several months.
As you examine the scope, make sure to ask your customers questions — and offer to answer any of their own — to ensure that you completely grasp what they want.
Consider the Cost of Materials
This is one of the most apparent steps. If you are bidding on a renovation job, you will almost probably want supplies of some kind.
Always count up the materials required in any job, whether it's copper pipe for a plumbing installation, plywood sheets for a subfloor, shingles for a roof, or anything else.
Consider the quality that you need to utilize — once again, ask the consumer — and then figure how much you'll need plus an extra 10% or so.
Determine Labor Costs
Material costs are simple to compute. You require what you require, and you must pay for it. When it comes to labor costs, though, the procedure becomes a little more difficult – but not impossible. Among the many elements that frequently have an influence in this area are:
- How many man-hours are required to do the project?
- The possible need to hire additional workers.
- If you'll need to bring in more contractors to make the deadline, or if the job involves work that necessitates the use of a certified tradesperson, such as an electrician or a plumber.
- The difference in cost between paying your workers and hiring outside contractors.
Use these questions to get a ballpark estimate of how much the job will cost.
Factor In Specialty Costs
With a remodel, you may find that you have to work with a unique request. A home might have a vaulted ceiling that needs special attention or a floor may need to be leveled.
When this happens, it’s important to identify it beforehand if possible. Then factor the costs of any specialty work separately from any typical costs that you associate with the remodeling project, in general.
Establish the Timeline
While man-hours are significant, the project's timetable is equally critical. In most circumstances, a shorter schedule will cost more money.
If a customer wants that something be completed faster than usual, this will inevitably increase the cost of the project. Materials may need to be supplied as soon as possible. Third-party contractors may need to be compensated handsomely in order to bring the project forward in their timelines. To get things done faster, you may need to recruit more people.
Before putting any projected figures in paper, it is usually a good idea to establish a timeframe for the project itself.
Prepare for Unexpected Challenges
Unexpected setbacks occur in all building projects. Remodeling is a prime example of a job that is prone to the unpredictability.
When you least expect it, a pipe may explode. When you take down a wall, you may find structural problems. If you take off shingles, you may discover that the plywood sublayer has to be replaced before you reroof.
These are some of the reasons why it's a good idea to have a decent contractors' insurance coverage. Construction insurance can protect you against unanticipated problems. In the same line, the possibility of unanticipated obstacles should always be factored into your estimates and bids. Make careful to include in any acceptable extra expenditures that may come as a result of the uncertainty. Depending on the worth of the project, the size of your team, and other factors, you may require different forms of coverage.
Profit
Once you've evaluated the project's different expenses, it's time to make it lucrative for yourself. In other words, you must examine what additional costs you must charge in order for your organization to remain in operation.
Marking up your pricing entails more than just adding a few dollars to the total amount. You must think about how long the project will take. Then calculate how much profit your company needs to earn during that time of year. This will give you a decent sense of how much you should mark up the price in order to maintain your firm profitable while you're on the job.
Avoid Offering Discounts
Finally, try not to fall into the trap of providing too many discounts. It's tempting to decrease costs or throw in free labor as you go, especially if you're attempting to undercut a competition. And there are situations when giving a discount might help you land a job.
However, if you provide too many or too significant discounts, it might quietly weaken your capacity to continue in business. Before granting a discount, always consider the ramifications.
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