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5 Min. Read

Why Is Estimation Important in Construction?

Why Is Estimation Important in Construction

It doesn’t matter what type of construction your business does, estimation is an important part of it. The estimation process is integral to construction businesses, as well as customers. Accurate estimates give them an idea of how much they’ll be spending, and are the next best thing to exact answers. Providing reasonable estimates increases your chances of winning a bit, as well.

If you’re running a construction company, it’s important to know why accurate estimates are a big deal. Keep reading to learn more about the way that cost estimation can impact your potential projects!

Here’s What We’ll Cover:

What Is a Cost Estimate?

Why is Cost Estimation Important in Construction?

Are Estimates and Quotes the Same Thing?

What is the Best Way to Create Estimates?

Key Takeaways

What Is a Cost Estimate?

In construction, a cost estimate is the company’s approximation of what a job will cost. In most cases, it’s the deciding factor when it comes to winning projects, as well. While an actual answer can never be provided about what a job will cost, an accurate estimate can make a customer happy. After all, how much money they spend on construction can affect their everyday life.

Here are some of the criteria that go into making accurate cost estimates:

  • Labor hours
  • Cost of materials
  • Outsourced labor (contractors)
  • Indirect costs (delays due to staffing or material availability)

Typically, the more criteria you’re able to plug into an estimate, the more accurate it is.

Why is Cost Estimation Important in Construction?

There are a handful of reasons that cost estimation is important in construction. See the below reasons that estimates should be a construction company’s number one priority!

Estimates Influence Business

When a business is able to provide accurate estimates, they are more likely to receive business. If a business provides inaccurate estimates it can create negative relationships with customers. Those will soon bleed out into negative reviews, which will cause a downturn in business, most times.

Estimates Take Time, and Time is Money

Estimates for any construction project take time to develop. Inaccurate estimates can cause revised estimates to be needed. The more time you take creating new estimates, the more money you are losing. Time is also critical for customers. Having to have more than one estimate be done by a company slows down their plans. If you are working on commercial construction projects, this can cause your clients to lose money, as well.

Estimates Drive Expenses

When you’re creating an estimate for a project, you’re also estimating your company’s associated costs. Estimates include how many labor hours a job will take, as well as the materials needed. If your estimates are incorrect regarding either, there’s a good chance your company will have to absorb the costs. Many jobs are done using a flat rate, or the materials for them are bought in bulk. If your cost estimate doesn’t include all of the necessary labor or materials, you’ll likely end up going over budget.

Are Estimates and Quotes the Same Thing?

No, the two are very different, in fact. Estimates are just that, a rough idea of what a job will cost. Quotes, however, are more detailed. They outline exactly what a client is going to pay for the job that your company is doing. An initial estimate will give them a ballpark idea, where a quote will break the cost down line by line.

It’s also important to realize that quotes come with contractual obligations. The service provider must abide by the cost of the quote. An estimate can change, while a quote remains concrete.

As such, it’s important that your estimates are close in price to your quotes. An original estimate is done well when the quote that follows it isn’t vastly different.

What is the Best Way to Create Estimates?

When you’re looking to create accurate construction estimates, you’ll want to use estimation software. Estimation software comes with plenty of built-in tools that help you create accurate estimates. Many of them also have integrated material costs, and can update on their own. This way, you’ll never be surprised with the actual cost of materials, and neither will your customer.

In the past, many estimates from construction companies have been guessed based on prior experience. That, or they’d take a long time, being calculated manually. While experts can generally tell you what a job will cost, there’s no need to guess or wait any longer. Estimation software can do most of the work for you!

Key Takeaways

Construction estimates are some of the most important estimates when it comes to business. They need to be accurate and timely to ensure that projects can be won. Thankfully, thanks to technology, construction estimates have been made easy. Many software programs exist, and they do most of the estimation for you!

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