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How to master building cost estimating – best tricks for fast and accurate estimates

8 minute read

Money runs the building and construction industry. To be successful you have to have a lot of money coming in and not as much going out. This is where building cost estimating is invaluable, but there are tricks to getting fast and accurate estimates.

What is building cost estimating? 

Simply put, building cost estimating is the process of putting together an accurate list of the costs associated with completing a construction project. This includes any direct costs (materials, labor, equipment hire, etc) and indirect costs (utilities, insurances, tax, etc). However, it is much more complicated than that. It also has an element of risk assessment and forecasting future needs or issues as well. Essentially, it is a combination of using the known and the unknown to establish an accurate cost for your construction job.

Why is estimating important? 

It is crucial to do a cost estimation for every construction project you undertake, whether you are part of a large company or small business. Without a construction cost estimation, a project budget can be underfinanced, or the time expectations could be understated. Construction cost calculators are tools that introduce more accountability, create more transparency and build trust when your building estimate is on point. Ultimately it is about saving money and getting your construction jobs done on time.

Accurate planning 

A building cost estimation allows you to produce detailed plans that consider the weather, site conditions, regulatory requirements and other uncertainties that may not seem so obvious. Such as changes that may occur over time among industry regulations or labor strikes – especially for a construction project that is carried out over several years.

Better resource management

With a construction cost calculator, it is easier to organize your resources, track and allocate them and to create a building schedule that doesn’t have laborers sitting around waiting for materials or tradies to finish up.

Better visibility of costs

Once you calculate the cost of building a home you can see the feasibility of your construction project. Is your client’s budget going to cover the costs needed to build their house? Are there any cost variances that can alter your profit margin? Better visibility of costs leads to better value and fewer surprises down the road.

During what stage of the project do you estimate the build? 

This is a bit of a trick question because there isn’t any one time to do cost estimates. The first one is done at the pre-design stage, then a more detailed one is done. It is reviewed regularly throughout the design process and is redone when changes are made to your building design, or when materials are altered. The more you keep your construction cost calculator crunching the numbers the more accurate estimates you get.

How long should building costing estimating take? 

Again, this is a question that doesn’t have a simple answer. The most time-consuming part of the building cost estimation process is the material quantity takeoff. A precise and detailed takeoff is the backbone of an accurate cost estimate, but to do the entire process by hand will take a considerable amount of time, skill and industry knowledge. However, if you use Buildxact’s estimating software, you can get back about 80% of the time you’d usually spend on the construction estimating process.

What’s included in a build estimate? 

Everything that will cost money on a construction job, or house build, must be included in cost estimates. Whether they are direct or indirect costs they will affect your bottom-line if you don’t account for them in your bids and quotes.

Equipment and machinery

In this category you must include the cost of tools, the hire of equipment and the costs associated with running machinery, equipment and work vehicles. Also, another often forgotten aspect is the logistics and costs of transporting machinery and equipment to the worksite. If the equipment stays onsite, then securing them may also end up being a direct cost you have to account for.

Labor

To get your project completed you are going to need a workforce. So, adding labor is crucial but you also have to consider contractors’ and tradies’ costs as well. Some of your labor costs may be determined by price per job or it may be cost per hour. In which case, to get an accurate cost for labor you need to have a timeline estimation too. Luckily our building cost calculator software can do that for you.

Materials

By conducting a quantity takeoff you can collect the material costs, but there are more cost estimates you need to include. You have to consider the costs of deliveries, of moving materials, price increases and whether you need to allow time to make any adjustments to anything your building project will use.

Overheads

These are indirect costs that your business must recoup if it is to survive, yet they too are often ignored. Costs like rent on your business premises, insurance fees, taxes, utility bills, and maintenance on your office or business home base. If you don’t include them, down goes your profit margin.

Different types of estimating 

There are four types of building projects that use construction cost estimating calculators. Although they all consider labor, materials, direct and indirect costs in creating an accurate estimation the major focus can differ between the four.

Commercial developments

In this category, timelines are more stringent, and they are often tied to producing revenue as soon as possible. Such as a high-rise with residential apartments, the sooner individual flats or floors can be sold the better. Construction can continue on unfinished floors, and apartments, while money starts coming in making investors happy. So, a commercial development cost estimation is essential to meeting time frames and to ensure the quick influx of money.

Remodels and extensions 

A remodel or extension that requires structural work to be done needs to consider unforeseen issues (like mold in the walls, unseen asbestos or hidden beehives) and requires tradies to coordinate themselves. Your cost calculation must include a contingency fund that allows you to deal with issues whilst remaining within your client’s budget. Calculating an accurate timeline is also an important factor in coordinating tradies and getting your clients back in their house as quickly as possible.

New homes

Building a new home is like putting 3D puzzles together, you can’t put the next layer on until the last one is complete. If the plumbing isn’t done before the foundation is poured, then you’ve got major issues. So, communication and timelines are crucial when dealing with different tradies who must coordinate together to get the project completed on time. So, your cost estimate will only be accurate if deliveries arrive on time, tradies complete their jobs on schedule and labor costs don’t balloon because of waiting around. Estimating correct time frames is crucial to calculating accurate labor costs.

Civil projects

Often tied to public money, civil construction jobs usually have a large work scope with many sectors to juggle at once. By using construction estimating and job management software building schedules are created, each contractor or manager has more accountability and an increase of transparency will enhance the trust your clients have in you and your construction business.

The building cost estimating process

It can take a lot of time to get through the cost estimation process and if you want it to be accurate it must be extensive. That’s where we, at Buildxact, come in. We give you back 80% of that time just by using our cost estimating and job management software in the production of quotes and for scheduling.

Agree on the approach

Firstly, you need to agree that the right approach for all your building projects is investing in time-saving, accurate cost estimating software like the one we have at Buildxact.

Prepare a base estimate

Once you know the type and size of the house you have been asked to build you can prepare a base estimate. This is not a detailed or accurate cost calculation, but a rough idea. If your clients are happy with your ballpark offer, the design can be created. By starting here you can work out which projects aren’t worth taking on before you invest too much time and money.

Base estimate review

After the detailed plan is made it is time to review the base estimate and turn it into an accurate cost estimation. This is when you need to find anything you’ve missed and add them to your estimate.

Assess potential risks

By potential risks we refer to issues that may happen, like bad weather, too much ground water or regulatory changes. Factors like this must be considered when creating your construction cost estimation. That way if they do occur you’re not taken by surprise and you have a contingency fund to help deal with any of the potential risks.

Establish communication process

The next step is to set up an efficient communication system where you can contact contractors, suppliers or engineers. Somewhere they can clearly see their job allocations and schedules. Our construction estimating and job management software can help you with this.

Review

Most importantly you have to review, review and review. Every time a change is made, a delay occurs, or material costs increase you must update your construction cost calculations.

Common mistakes to avoid

It is easy to lose money or jobs if your cost estimating isn’t accurate. There are some common mistakes that you should avoid when calculating your costs.

Labor costs

As a major expense, labor costs must be calculated correctly or your budget will balloon out quickly. The only way you can be sure to calculate labor costs right is to accurately estimate the timeline of your building project. If your project goes over by six months, that’s likely to be six months of labor you haven’t accounted for, throwing your budget way out. Plus, you may need to factor in pay rises if your project is going to take a considerate amount of time to complete.

Not factoring in risks

If you don’t consider things like bad weather when producing a construction cost estimate then you’re going to end up over budget. If there’s likely to be any incident that will stop, or slow down construction then you need to factor that risk in. Delays cost money but if you’ve considered them in your estimations then you’ll stay on track.

Leaving out costs

Before you can make a profit, you must cover all your costs. So, when you have left things like utility bills and office maintenance out of your cost estimates then your profit margin will suffer. Make sure you include every direct or indirect cost in your estimation.

Tools to improve building cost estimating

There’s only one way to improve your business’ cost estimating and that’s with fast, accurate and easy to master building cost estimator software. You’ll have a quantity takeoff produced, a cost estimate compiled, a quote written and sent all in about 80% less time than it used to take.

Where are the tricks, you ask. No tricks, just our construction estimating and job management software. Book a demo or try it for 14 days free. Making life easier and giving you more time back is what we, at Buildxact, are about.

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