The importance of construction cost estimation

Estimating construction costs accurately relies on many elements. It’s a necessary process and is what underscores the pricing of construction projects. The accuracy or inaccuracy of an estimate can make or break a business’ profitability. However, the elements involved can complicate the process and result in a lot of risk, whether from material price fluctuations to uncertain labor costs.

Material price fluctuations directly affect the total project cost. While calculating estimated costs, you want to make sure the cost data is as accurate as possible. Buildxact’s dealer integration updates offer cost data in real-time to ensure you are always estimating as accurately as possible.

By using actual costs, as opposed to average cost, you improve the efficiency and accuracy of your cost estimate process and stay ahead of the competition. No one can afford construction estimates to end up costing the business money. Every cent matters. Making sure your actual construction costs match your cost estimates ensures you are watching every penny.

Creating an accurate construction estimate takes practice, skill and reliable data because each job has different variables. It remains one of the most challenging yet most important skills in construction. A recent study by Quickbooks determined that just two or three inaccurate estimates can be detrimental to a business.

Construction Cost Estimation Challenges 

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

  • Overestimating: results in the owner or customer paying more, or you risk having an inflated price prevent you from winning the job in the first place;
  • 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 create an accurate construction cost:

  • Material Cost: You probably have a pretty good idea of your material cost. However, the changing supply and demand within the market throw off an estimate by the time actual 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;
  • Labor Cost: Perhaps the most difficult expense to estimate is labor, with more than a third of respondents to a Quickbooks survey admitting to best-guessing rather than using hard data to calculate labor costs. It is the most expensive of all your project costs. You will be responsible for wages, payroll taxes, benefits (if applicable), etc. There are a variety of calculations to help assist the labor cost 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 best estimating process by determining solid material quantities for the project. Using software to complete a takeoff increases accuracy by reducing the human error present when 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 the under or overestimating construction costs. Building construction cost estimating software is a key part of accurate construction costs and construction project management. It helps with accuracy, allows for greater collaboration and means tasks are done 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 easy-to-use construction estimating software.

It is a must-have to accurately estimate indirect costs, direct costs, capital costs and maintenance costs. An efficient cost estimation process using software for construction cost estimating should be part of every construction process. Providing a customer with a detailed estimate sets you apart from the competition, which, in turn helps your business grow.

Accurate estimation is the fuel that propels growth for construction businesses because it ensures that the construction estimate matches the total project cost at the end.

Moreover, you create accurate estimates in a fraction of the time — up to five times faster— with complete on-screen takeoffs and  localized supplier price files . You create professional-looking quotes once and use them 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. Buildxact will help you consistently achieve accurate estimation for your construction estimate every single time. Calculating your building costs, overhead costs, supervision costs, equipment costs and all other costs, will be quick and easy.

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

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