8 Common Construction Estimating Mistakes

Estimating is one of the most difficult jobs in construction. It is also one of the most important. Profits are typically won or lost based on how accurate your estimates are and how closely they match up to your final project costs.

So, how accurate are your estimates? A survey from QuickBooks and TSheets shows that nearly a third of construction companies make less profit than expected based on their estimates. That’s not too surprising given that 40% of respondents aren’t that confident in their estimates.

Chances are that one bad estimate on a project that loses money won’t put you out of business. String together a couple of unprofitable projects and you might find yourself closing the doors for good. A quarter of all respondents indicated that it would only take two or three bad estimates to ruin their business.

Getting accurate estimates is no easy task and a good estimator is worth their weight in gold. There are a lot of variables that must be accounted for to deliver accurate estimates on every project. Everything from nailing down accurate labor and material costs and understanding workers’ productivity to get precise takeoff measurements and factoring in items like risk contingencies and overhead must be nearly perfect.

One or two mistakes could throw your estimates completely off and will result in a bad bid, one that you will either lose because it’s too high or win because it’s so low that you won’t make a profit. Here’s a look at some of the most common construction estimating mistakes and how to prevent them.

Not Conducting a Site Visit

Most bidding opportunities provide prospective bidders with a chance to attend a pre-bid meeting and visit the job site. Often, these are mandatory in order to submit a bid, and with good reason. No two jobs are identical and unknown site conditions can cause unexpected, and costly, issues when construction gets underway.

When conducting a site visit you’ll want to take measurements, inspect the topography, and take some soil bore samples if that hasn’t already been done. You also want to look at road access and traffic to the site, determine how much space there is for staging, equipment and materials delivery and storage, and what environmental protections will be needed during construction.

Be sure to have any subcontractors whose work may be impacted by the site condition make a visit as well. This allows them to assess the site for themselves and factor in any additional costs that existing site conditions might present into their estimates and bids.

Inaccurate Takeoffs

Your takeoffs lay the groundwork for your estimates. If they’re incomplete or incorrect it can really screw up your estimates. Accurate takeoffs help you determine the exact quantities needed for all your materials and supplies. They are also required to determine your labor and equipment needs. If you miss items during takeoff or don’t get accurate measurements, you’ll either overestimate the project and not win the bid or you’ll underestimate and risk winning a project that won’t be profitable.

Labor Costs

Labor costs are probably the hardest item to nail down accurately when it comes to your estimate. In that survey from QuickBooks and TSheets, construction business owners say “labor costs are the hardest to estimate and are ranked as the most expensive project cost.” There are several variables in play when it comes to estimating labor costs including the number of available workers for the project, their experience level, rate of pay, and productivity.

A good, experienced worker may make a higher salary but are more productive and can get more done in less time than a worker with less experience who makes a lower salary. Focus on determining how many man-hours it takes to perform a task to use as a guide when estimating labor costs.

Don’t forget to determine whether prevailing wages are required on the project, which may or may not be different from what you typically pay each worker. Always keep records of job costs, especially labor costs, as you can use this historical data for more accurate estimates of future projects.

Materials & Supplies Costs

Building materials and supplies are another high cost for construction projects and rank high in being hard to estimate accurately. Prices for materials can fluctuate dramatically from the time you start an estimate to the time that construction commences. Demand for materials is high and uncertainty over tariffs and their impact on prices are making it even harder to get estimates right.

Establishing relationships with your building product manufacturers and suppliers has its advantages. Not only can they help you lock inaccurate prices while you put together your estimates, but they can also steer you to alternative materials that might be a better fit for your project.

Locking in prices for your materials is crucial but don’t forget to make sure that you provide quantities to your suppliers. This allows them to ensure they can fulfill your order and deliver on time. Costly delays caused by workers not having the materials they need is embarrassing and will hurt your bottom line.

Failing to Assess Risks & Creating Contingencies

Every construction project comes with risks. Completing a risk assessment should be part of your estimating process. For one, it helps in your bid/no-bid decision-making. A good estimator can identify a project that is too risky and pass on submitting a bid. It also helps to determine how much to estimate for contingencies.

Failing to assess risks and build contingencies to your estimate will be detrimental when things go wrong. The bigger the risk, the more time you should spend on determining ways to mitigate them and how that could impact your costs. You likely won’t be able to recoup the losses that occur should an unforeseen issue crop up once construction is underway.

Making Uneducated Guesses

Don’t gamble on your bids by making uninformed or uneducated guesses in your estimating. Tracking job costs on every project is a great way to ensure your estimates, and ultimately your bids, are as accurate as possible.

Job costs for labor, materials, and equipment should be based on the most current data available. Make sure to factor in overhead costs and soft costs such as those for permitting and inspections that can often be forgotten or neglected. You also want to make sure that you have the workforce and equipment available for the project. Having to unexpectedly subcontract additional work or rent extra equipment can quickly eat up your profits or wipe them out completely.

Not Reviewing Your Work

Everyone makes mistakes. Estimators are no exception. Small estimating errors or omissions might not make much of an impact but big ones like omitting scope items, inaccurate measurement, or using the wrong units of measure can spell trouble. Take the time to carefully review your work or have another person on your estimating team review your estimates. Double-check your measurements are accurate, and your math is correct for all your costs.

Give yourself adequate time to put your estimates and bid together. Rushing through your work just to meet a bid deadline will only result in mistakes that will ultimately cost you, so take the time to get it right the first time. Profitability on a project is almost always determined by your estimates. If you underestimate your bid, there’s usually no amount of cost-cutting measures that will be able to make up for the shortfall.

Not Reviewing Subcontractor Estimates

If you’re a general contractor, chances are you are going to have to subcontract out some of the work to trade contractors. Be sure to review their bid estimates and proposals thoroughly. Make sure they understand exactly what aspects of the projects you are wanting them to bid on and complete. This will avoid duplication of work in their estimates that are being covered by you or another subcontractor.

Do You Really Need Commercial Auto Insurance?

What is Commercial Auto Insurance?

Commercial auto insurance covers vehicles used for any business purposes. Different scenarios include:

1. You’re a sole proprietor, self-employed, or own a small business that uses a vehicle in any capacity (other than commuting from home to the office).

2. You own a vehicle (or a fleet) and pay someone else to drive it, making you liable for their insurance. It is the employer’s responsibility to sufficiently insure the vehicle with the right coverage for business use. Whether it’s one vehicle, 5, 50, or 500, any vehicle used for work purposes needs commercial auto insurance. The good news is that any company vehicle covered by commercial auto insurance is tax-deductible.

3. You pay an employee to drive their personal vehicle for work-related driving, you must insure the vehicle for work-related purposes only. For example, if you own a home handyman business and your workers use their own trucks, you must put commercial car insurance on their vehicles.

4. Contractors who are not employees of your company are required to insure their own vehicles. So if you hire contractors, you are not responsible.

If you own a contracting business, commercial vehicles are one of your company’s most significant expenses. That’s why it’s so important to ensure these valuable assets are fully covered. To help choose the best commercial auto insurance policy for your small business, this article will explore the coverage, cost, and benefits of this insurance.

• Liability coverage: Bodily injury and property damage liability insurance will cover loss of life or property, as well as damage and harm done to any person or property caused by your vehicle.

• Medical payments: Personal injury protection covers any medical expenses caused by diagnosis and treatment of any bodily injury or physical damage caused by the collision, regardless of fault.

• Collision coverage: Covers all costs involved to tow and repair or replace the vehicle in the event of a collision. It will often include the cost of a rental car suited for your work while you wait for repairs or a replacement.

• Uninsured motorist: If the vehicle collides with an uninsured motorist––meaning the other driver wouldn’t be able to cover the costs––your insurance policy would pay the damages up to policy limits. This coverage might also payout for the charges owed by an underinsured motorist if their own vehicle insurance coverage limit doesn’t cover the expenses caused by the collision.

• Comprehensive coverage: Covers the costs involved in repairing or replacing your vehicle if it incurs damage due to theft, vandalism, flood, fire, or any damage caused if your car is hit by an object or another vehicle.

Do I Need to Have Commercial Auto Insurance?

The short answer? It depends. Your need for commercial auto insurance depends on your industry/occupation. Here are a few examples of professions or scenarios that require commercial auto coverage:

• Transport goods or people in your vehicle for a fee: Suppose you drive for Uber, Lyft, GrubHub, Amazon, or a similar company; you’re going to need coverage. Essentially any time you’re using your vehicle for work purposes, it needs to be covered by commercial auto insurance.

• Provide a service with your vehicle: Bus? Tow truck? Snowplow? Ice cream truck? If you use your vehicle to provide a service, you need commercial auto insurance.

• Need more liability coverage because of the nature of your work: If you transport the elderly on field trips or something similar, you’ll want to make sure you have enough professional liability coverage in case something goes awry. If your work puts you or your passengers or cargo at a higher risk of injury or damage for any reason, you need commercial auto insurance coverage.

• Operate a fleet: Whether your fleet is two delivery vans or 100 box trucks, the more vehicles you have, the more auto insurance coverage you need.

• Haul weight in tools or equipment: If you’re using your vehicle to transport heavy loads––tools, equipment, cargo, etc.––your car has a higher risk of damage and will require commercial auto insurance.

• Are not the sole owner of the vehicle: If vehicle ownership is in the name of the business entity, a co-ownership share agreement is in place, or if the vehicle has multiple drivers for work purposes, commercial auto insurance covers all drivers without individual policies. If your group of drivers is regularly changing, you need commercial auto insurance.

Some people make the mistake of thinking that commercial umbrella insurance covers vehicles, but it doesn’t always. Contact us today to make sure you have the auto coverage you need for your business.

Commercial vs. Personal Auto Insurance Examples

Commercial and personal auto insurance are two different types of insurance that cover different events. Commercial auto insurance is only available for vehicles used for work purposes. Personal auto insurance is for when you’re driving your car for personal reasons.

Most personal auto insurance policies have exclusions, which means they may not cover your vehicle for business use or only offer minimal coverage for business use. Likewise, your commercial auto insurance wouldn’t cover loss or damage caused when using a business vehicle for personal use. That’s why you need both. Here are some examples of the two being used in the same scenarios:

How Much Does Commercial Insurance Cost?

Commercial auto insurance costs a little more than personal insurance because it offers a broader coverage and higher liability limits. The cost of commercial auto insurance rates is affected by a few factors, including:

• Type of vehicle

• Number of vehicles on the policy

• What purpose the vehicles are used for

• Who will be driving (driving records matter)

• Your specific business needs

Each business is unique, so it makes sense for commercial auto insurance policies to be tailored to best suit each company.

Business Insurance with Contractors Liability

Contractors have unique insurance needs. They typically carry contractors’ liability insurance to protect the job site, materials, and people who could be injured on the job site. However, liability insurance does not cover vehicles, so business owners in some industries must carry commercial auto insurance and contractors’ liability insurance.

Commercial auto insurance covers all events while the vehicle is being used for business purposes. It doesn’t matter if your business involves plumbing, roofing, or even driving an Uber; you need commercial auto insurance any time you use your vehicle for work.

Let us take the hassle out of searching for the best insurance quote. Tell us about your business, and we’ll help you find a policy tailored to match your needs at the best price!