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.
If you find that you’ve been able to generate leads but you’re struggling to price the projects that new customers are requesting, don’t worry. Here are several of the most important things to keep in mind each and every time you pull together a bid.
1. Check Previous Estimates and Projects
When you’re asked to bid on a project, the first thing that you should do is consider similar work that has previously taken place. There are several ways that you can do this:
- Consider the cost of past projects that you’ve done that were similar in nature to the current request.
- Review any bids you may have created, even if you didn’t land the gig.
- Take a look at any other professional’s past projects and estimates within your network.
Past projects provide a helpful starting point for you to make a current estimate.
2. Examine the Scope of the Project
While past projects are a great place to start, it’s important to realize that they won’t always be exactly the same or up-to-date. Remodeling, in particular, can be extremely unpredictable. Demolition could expose a mold problem, or you could end up spending an extra day or two working around an unlevel surface.
Once you have a rough idea of how much a project could cost, it’s time to start narrowing down the current cost by considering the scope of the project. Are you being asked to reroof a small porch? That could take an afternoon. Do you need to upgrade an old farmhouse kitchen? That could take months.
3. Consider the Cost of Materials
This next step is one of the most obvious. If you’re bidding on a remodeling project, you will almost certainly need materials of one sort or another.
Whether it’s copper piping for a plumbing project, plywood sheeting for a subfloor, shingles for a roof, or anything else, always add up the materials involved in each project.
Consider the quality that you need to use — again, ask the customer those questions — and then calculate how much you’ll need plus an additional 10% or so.
4. Determine Labor Costs
Material costs are easy to calculate. You need what you need, and you have to pay for it. When it comes to labor costs, though, the entire estimation process gets a bit sticky — though not impossible. A few factors that often impact this area include:
- How many man-hours you need to complete the project.
- The potential need to hire other employees.
- If you’ll need to bring other contractors to meet the deadline, or if the project entails work that requires a licensed tradesperson such as an electrician or a plumber.
- The price difference between paying your employees and hiring other contractors.
Use these questions to get a rough idea of how much it will cost to do the work itself.
5. 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.
6. Establish the Timeline
While man-hours are important, the timeline of the project is also crucial. In most cases, a faster timeline is going to cost more money.
If a customer requests something to be done faster than normal, it can naturally add to the cost of the project. Materials may need to be shipped quickly. Third-party contractors may need to be paid top-dollar to move the project up in their schedules. You may need to hire extra workers to get things done faster.
Establishing a timeline of the project itself is always wise before you put any estimated numbers in writing.
7. Prepare for Unexpected Challenges
All construction projects suffer from unexpected setbacks. Remodeling is chief amongst the projects that are prone to the unpredictable.
A pipe might burst when you least expect it. You may remove a wall and discover structural issues. If you tear off shingles, you may find the sublayer of plywood needs to be replaced before you reroof.
Issues like these are part of why it’s wise to get a good contractors’ insurance policy. Construction insurance can help guard you against unforeseen issues. In the same vein, the potential for unexpected challenges is always worth factoring into your estimates and bids as well. Make sure to account for any reasonable extra costs that might arise from the unknown. You may need different types of coverage depending on the value of the project, the size of your team, and other variables.
8. Mark It Up
Once you’ve estimated the various costs that will come with the project, it’s time to make it profitable for yourself. In other words, you have to consider what additional fees you must add in order to allow your company to stay in business.
Marking up your price doesn’t just mean adding some cash onto the final price tag. You must consider how much time the project will take. Then consider how much profit you need your business to make during that part of the year. That will give you a good idea of how much you should mark up the price to keep your company profitable while you’re working on the job.
9. Avoid Giving Discounts
Finally, try to avoid the trap of offering too many discounts. It’s tempting to slash prices or toss in free labor as you go along, especially if you’re trying to undercut a competitor. And there are certainly times when offering a discount can help you get work.
However, if you give discounts either too often or that are too large, it can quietly undermine your ability to stay in business. Always consider the consequences before giving a discount.