The importance of construction cost estimation

Being able to estimate the cost of a construction project accurately relies on many elements. It’s a necessary process and is the launch of pricing a job or project. The accuracy or inaccuracy of an estimate can make or break a business’ profitability. The elements involved can complicate the process because a lot can go wrong, whether from a material or labor cost perspective. 

An accurate cost estimate takes practice and skill, and reliable data as each job has different variables. One of the most challenging yet most important jobs in construction is estimating. A recent study by Quickbooks determined that two or three inaccurate estimates could be detrimental to their business. 

Construction Cost Estimation Challenges 

Some risks in the construction estimation process can adversely affect your bottom line, like overestimating and underestimating. 

  • Overestimating: results in the owner or customer paying more, or you risk not winning the job. 
  • Underestimating: puts you on the line to either eat costs or lose the confidence of your customer. 

Tips to Create an Accurate Estimate 

Construction cost estimates are among the most critical components of your business’ profitability and winning new business. It’s essential to be as accurate as possible. It involves calculating various elements, including material and labor costs, subcontractors, equipment, and markup. Here are a few tips to help you with establish an accurate construction cost estimating process. 

  • Material Costs: You probably have a pretty good idea of your materials cost if you regularly use similar products. However, the supply and demand market can fluctuate from the start of the estimation process to the time construction commences. Working closely with your suppliers is critical as they have a pulse on the types of materials that might work best for your project from a value perspective. 
  • Labor Costs: The most difficult to estimate, with more than a third of the Quickbooks survey admitting to best guessing rather than hard data to calculate labor costs. It is the most expensive of all your project costs. You will be responsible for wages, taxes, benefits (if applicable), etc. There are a variety of calculations to help assist the labor costs that best suits your needs. 
  •  Assess Risk and Build in Contingencies: Mitigating risks and building in contingencies is vital to note. Things don’t always go as planned, and you must plan for them to make sure you recoup your costs. 
  • Accurate Takeoffs: A complete and correct takeoff lays the groundwork for the estimating process and helps determine material quantities for the project. Using software to complete a takeoff can increase accuracy by reducing room for human error if completed manually.  
  • Site Visits and Pre-Bid Meetings: From small to large projects, it’s essential to meet with the owner or customer because all job sites are different, even if the project is similar in scope to others you’ve performed. From road access to the amount of space to maneuver, it’s crucial to get the lay of the land. 

No estimate, however, is risk-free.  

Today many builders, remodelers, and contractors use software solutions to lessen the chance of errors and under or overestimating projects. Building construction cost estimating software is a key part of construction project management solutions, helps with accuracy, allows for greater collaboration and means tasks can be completed faster.  

Estimating Software Solutions 

If you’re a small residential builder or remodeler looking to improve your estimating process through speed and accuracy, Buildxact has a solution. Designed specifically around the needs of the small builder, remodeler, and contractor, Buildxact offers an easy-to-use construction estimating software. 

You can create accurate estimates in a fraction of the time — up to five times faster— with complete on-screen takeoffs and localized supplier price files (from your Excel files). You can create a professional-looking quote once and use it again and again in just a few clicks. You’ll never miss an item with our built-in checklist reducing common mistakes. 

You can also store customer information and documents like permits, quotes from subcontractors, material items (like customer images) along with photos you take onsite, and easily send them along to your customer. 

Buildxact is more than just a construction estimating software. It’s a complete, easy to use project management system, from first takeoff to the final invoice.  

Learn more about how our software can help you be more efficient and accurate in your business.