Accurate Esitamtes and Forecasting with Cabbage and Sage

Cost estimating & financial forecasting are the most important steps in construction project management. This approximation figures out the costs of a build at different stages of project development, based on available data.

In a nutshell, cost estimating is done using previous experience to estimate the total cost of a construction project – before you start. But if your cost estimator or project manager is ball-parking costs, you could be missing out on big bucks.

Estimating: What You SHOULD Be Considering

When you’re estimating a project, it’s important to consider both direct and indirect costs. The direct costs are a no-brainer, but the indirect costs are where you end up leaving money on the table.

Here are a few considerations for ensuring your estimates are on target:

Use a checklist

It’s easy to forget things such as permits, landscaping, hardscaping, etc. Using a checklist will prevent you from forgetting important steps and items. (Also helpful is professional construction project management software, which tracks updates on costs, change orders, and subcontractor information.)

Factor in project risks

Look at prior projects to see which unknowns became margin killers.

Know your materials pricing

Material prices can change every day, so pay attention to factors that can affect pricing, such as high demand, delivery challenges, rush delivery needs, seasonal limitations, market factors, and custom materials.

Don’t overlook general requirements

Items such as zoning and environmental permits, impact fees, and legal fees will negatively affect your cost estimating if you fail to factor them in.

Equipment and labor costs

Fuel, equipment insurance and maintenance, and payroll are obvious costs, but don’t forget other employee costs, like the cost of benefits or replacing employees. In fact, employee costs can be the most significant costs you miss in your estimating. (Sounds like it wouldn’t be a problem, but the Bureau of Labor Statistics says the construction industry has one of the highest turnover rates in the country.)

When a job wraps up, have a post-mortem meeting to see if the cost estimate aligned with actual costs. If not, figure out where you misjudged and keep that in mind for the next project.