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As digital transformation continues to roll through the construction industry, the day of construction estimating services has come. Digital transformation cuts costs by 4-6% while improving construction productivity by 14-15%. With construction firms needing to become more agile and flexible to keep up with rapid market changes, many businesses have begun to outsource their ancillary departments and services to attain the critical level of flexibility needed to be successful in an increasingly competitive market. This may include accounting, marketing and, in many cases, the estimating department. It’s no secret that construction cost estimating has traditionally been a major pain point for most firms. In many cases, an inaccurate estimate can be the sole reason for losing a bid or the reason a project develops a cost overrun that drastically reduces profit margins or results in a loss. Outsourcing this type of wasteful, old-fashioned estimating process in favor of construction estimating services is becoming essential across the industry to help contractors win more bids and improve their margins on the projects they complete. Outsourcing estimation not only improves builders’ profitability and flexibility in the market, but also provides the critical cashflow necessary to invest in their business for long term growth.
Why Construction Estimating Services are Replacing Cost Estimating
Traditional construction cost estimating is an inexact science–one that’s being replaced by greater levels of accuracy by construction estimating services. This is because construction cost estimating accuracy often varies at a range of points through the project, from wild ballpark figures at the beginning to precise measurements when the project is nearly complete. That level of inaccuracy is one of the reasons why contractors often survive from project to project without a great deal of buffer to cushion the blow of a bad project. Though change orders and additions are fairly common in construction projects, this level of inaccuracy can lead to serious problems for contractors who do not have enough resources to see them through the hard times.
Because of these inaccuracies in determining cost at the outset of the project, construction can be fraught with change orders and additions to the project that often vastly overstep the original budget estimate. Professional studies have shown that the final estimated building cost may be up to 80% higher or lower than the original estimate, creating a wide margin for error that many financial institutions are hesitant to gamble on in the long run. Operating an estimating department in these conditions can often add even more overhead expenses to the inaccurate cost estimate in the first place, dragging your business down when a project ends up being unprofitable due to poor estimates, material overruns and similar situations.
You Need Alternatives to an In-House Estimating Department
When you’re running a small construction firm, hiring an in-house estimator or setting up an in-house estimating department can be too expensive to remain sustainable, especially given today’s fast-paced market conditions. This high cost adds to your business’ overhead without bringing in any profit, until the projects that are being estimated are won and completed at a good rate of profit. However, even when you’re not winning projects, you’re still expected to pay for the talent you have tied up in your estimating department. Even worse, when a project ends up being significantly more expensive than your estimate, you often have no choice but to eat the loss, hoping to keep your business operating successfully through the next project to turn a better profit.
Potential losses and excessive overhead like this is one of the reasons why part of the digital transformation process involves outsourcing your estimating department to construction estimating services. When there aren’t a lot of projects to stay on top of, you’re not paying someone’s wages, benefits and taxes to sit idle and wait for the next project to come in to be estimated. You only pay when there’s actually a job to be estimated. When your business has a lot of estimates to have prepared, you’re not stuck paying a lot of overtime to an in-house estimating department. Instead, you simply pay the service to continue handling your estimates.
How to Avoid the Cost Estimating Software Trap
When you begin working with cost estimating software, there is a long learning curve before you can actually start using it. If it’s not the major focus of your business, it’s easy to miss areas where you can economize, such as setting up pre-determined assemblies or creating streamlined workflows for specific situations. For a number of situations, it can feel as though you need to have an IT degree to be able to navigate the software and spend a lot of extra time keeping up with the changes to the software. If you didn’t update the pricing database, your prices may be inaccurate from the beginning, requiring careful checking and cross-checking to make sure you’re putting the best possible, but still accurate, prices on your estimates.
Now imagine a better way of handling your estimating needs. When you hire construction estimating services to handle your estimating needs, you’re leveraging professionals with decades of experience with cost databases and estimating tools. Because estimates and takeoffs are their mainstays, they effortlessly manage the headache of learning updates to pricing and software so you don’t have to. Overall, this expertise can help to significantly lower your estimating expenses. In addition, because the estimating service needs to work as efficiently as possible to stay ahead of their expenses, they know how to keep their workflow moving smoothly and with the greatest possible efficiency so your estimates will not only be more accurate, but also completed faster.
The Benefits of Using Construction Estimating Services
Here are are the top five benefits of outsourcing your cost estimation to an estimating service:
- Win More Bids with Fast, Accurate Estimates: You don’t have to be an IT genius. Goodbye software updates and training! Instead of spending a lot of time trying to install updates, figure out tools or simplify your estimating process without oversimplifying the pricing structure, you can focus on getting the job done, whether that involves drumming up new projects to estimate or simply working on the projects you’ve already won. Let the estimators with decades of construction estimating experience keep on top of the changes while you get back to making a profit.
- Eliminate Overhead that Cuts into Profit Margins: When you outsource construction estimating, you’re not paying an idle estimating team. Instead of waiting for you to provide more projects for them to estimate, the construction estimating service simply goes on to its next customer’s projects, then gets back to your next set of projects when you provide them. You’re not paying estimators to simply sit around killing time without bringing in any profit; you’re paying them to work. Why keep idle estimators on the payroll with expensive benefits and taxes when you could instead pay a service that only charges you when they’re working?
- Save Money by Increasing Margins: You save money in the long run. Construction estimating services not only save you money by reducing overhead, but they also save you money by delivering accurate estimates that ensure projects are completed under budget. Reducing overhead and completing projects on or under budget will increase your net profit margins, so you can channel that cash into investment in your business, i.e., making it easier to invest in that new boom lift, power tools, on-site computer cabinet or any number of other new assets that will help you get ahead in a highly competitive market.
- Eliminate Headaches and Wasted Time: You don’t have to chase down material price changes. Copper’s up, steel’s down and aluminum is bouncing like a yo-yo. Whatever is happening with your material prices, you don’t have to be the one chasing those prices, spending hours trying to get and track the latest price sheets from your clients. Nor do you have to spend days agonizing over every detail in your estimate that is likely to be inaccurate. Simply turn over the plans on the latest project you’ve discovered and let the construction estimating services handle it for you.
- Grow Your Business: More importantly, you can focus on what matters most– running your business. It’s easy to get distracted by all of the details in running your business, but when it really comes down to it, your expertise is construction, not running a computer, fretting over spreadsheets, or worrying over material price estimates. By outsourcing your estimating process to construction estimating services, you can ensure that you’ve got plenty of time to keep your business running in the black instead of running over budget–again.
Instead of spending a lot of time trying to keep an in-house estimating team working efficiently and effectively, you’re only paying estimators who know how to optimize their workflow for the time they’re actually on your project. This can save your business a lot of overhead expense that is being wasted in your current setup, allowing you to invest that saved value in other places where your business needs funding to grow.
With the broken state of construction cost estimating, the cost of retaining your own in-house estimating talent and the extensive time required to train your estimators to significant proficiency in estimating software, hiring out your project estimating needs to construction estimating services is of vital importance to your business’ bottom line. By making this change, your business can continue marching forward in time with digital transformation, making it easier to take advantage of market changes as they occur and maximize your projects’ profitability. If you’re ready to take the next step towards using independent construction estimating services,1build can help. Please feel free to contact us today with any questions, or sign up with our effective construction estimating services.
You made a good point when you mentioned hiring an estimating service can eliminate headaches and save time from having to spend hours doing something that you are not familiar with. It is better to leave the job to the expert who is knowledgeable in the area. Therefore, I would like to think if a company needs to do cost estimation, they should hire a reliable service that can help out with it.
I found your tip about how an in-house estimator costs too much for small construction firms. I’d like to hire a construction service that is not afraid to work with others. This will show me how easy they will work with me later on.