Knowing your numbers – growing your sales and profit
Software can plug any profit leaks in a building project and bring you financial success. Here’s why…
There are two important factors when it comes to the profit on any construction project:
The accuracy of your quote - A large amount of money can be made or lost depending on its accuracy.
The management of the job once won - a large amount can be lost if its managed badly.
Fortunately technology - specifically software - can help make sure you don’t lose money at any point in the process.
The quote
Lots of firms either use square meterage rates or spreadsheets that they have built up over time. Unfortunately, both of these methods don’t cut the mustard today.
With these methods;
Prices are out of date
Details are often inaccurate or missing
They don’t necessarily reflect the specifics of the current job
They don’t account for wastage or wear and tear or things going walkies
Very often they don’t include;
An overhead figure
The inflation
A proper profit margin on top of all of the above
What estimating software gives you
With professional, well-designed estimating software like EstimatorXpress or Take-off & Estimate Kit you get:
Access to the very latest materials prices - ideally updated monthly - crucial right now while the market is so volatile
Wastage and wear and tear calculated for you
An allowance for your overheads
Inflation calculated for you
A proper profit margin on top of all of the above
Inflation
Construction cost inflation, at 20% year on year, is at its highest in a generation. A generation is 20-30 years so we need to be incredibly mindful of this. Rising prices – inflation - neutralise the money that you earn from your building work profits. To judge how much money you are really making, you need to take inflation into account.
If you quote today’s prices - they’ll be completely out-of-date when you come to actually start the job in six, nine month’s time. So it’s about applying job start date prices - and again good estimating software will have an inflation tool to do that for you. That’s just as well, because applying inflation isn’t quite as straightforward as slapping 10% on the job price or whatever figure you might guess at. It’s a bit more complicated than that.
Project management and profit
Whilst you may argue that your manual method of estimating is just fine, your square meterage calculations or spreadsheet certainly can’t provide you with the management information that you need to run the job effectively. An accurate quote is obviously essential but your profit really comes from how you manage the job.
Decent estimating software, such as Take-off & Estimate Kit or EstimatorXpress, at the same time as producing your estimate, is also automatically assembling data to give you valuable reports like material schedules, cutting lists and so on. Everything you need to build your project - your ‘shopping list’ if you will - of materials, plant and labour is itemized.
Right now materials are in short supply - so the organised building firms are getting first dibs. We all know that builders’ merchants need an epic amount of notice so hand it to them on a plate and get your supplies locked in. Detailed lists are also brilliant for negotiating with your suppliers.
Getting organised is critical
Don’t fritter the margin away through poor management. An up-to-date Build Programme or Gantt chart can bring it all together and plan the project properly. Your estimating software should automatically create a Build Programme off the back of the estimate. You can then use it to inform all the automatically produced materials, labour and plant order schedules to manage your booking and ordering.
It’s a standing joke that no building project ever goes to programme but why not start as you mean to go on? And as the job flexes so does the Build Programme - with all the changes cascading through the chart - and all the reports.
There are some jobs that are actually worth missing out on
Estimating software produces estimates sufficiently fast enough that you can afford to spend a little time assessing which jobs to steer clear of.
Is it worth doing? Is there any money in it? Does the profit at the end of it justify the effort? Every day needs to count so use technology to manage the best use of your time - which may mean no work for a few days rather than jobs for the sake of working.
And you stand a better chance of winning the higher margin jobs by presenting detailed, professional looking quotes and demonstrating to the client WHY the job costs what it does, including your inflation calc and reports to back it all up. And you only get that with the help of software.
Finally, estimating software is just one tool that contributes to profitability - CAD software, Health & Safety software, Contracts software - all have their part to play. And if you can find software tools that talk to each other - you stand to make an even larger profit.