Writing an Estimate in 5 Steps: A How-To Guide for Small BusinessesEstimates helps small businesses figure how much a project is going to cost them. It also helps generate new business and lets clients budget for a project. Another plus: accounting software can easily convert estimates into invoices later on. Overwhelmed by where to start? The step-by-step guide below will walk you through the process of creating an estimate. For more details on what exactly an estimate is, read this article. In this article, we’ll cover:
- Review the Project Scope
- Estimate a Timeline
- Price Out Subcontractors
- Estimate Material Costs
- Check out the Competition
1. Review the Project ScopeDon’t start writing your estimate until you understand what your client wants. Often, clients don’t know exactly what they want, in which case you’ll need to ask the right questions. Here are some questions to ask your client:
- Do you want to see a complete breakdown of costs?
- Do you want to see an itemized breakdown of services?
- What services do you require?
- What services do you not require?
- What’s your expected completion date?
- What expectations do you have for this project?
2. Estimate a TimelineAn estimate only needs an approximate timeline. But it’s important to provide a rough completion date both for your client’s sake and so you know how much to charge based on how much time it’ll take you. With that in mind, stay on the conservative side when providing a timeline. It’s important to manage client expectations so they know exactly how much time you need to complete the project and prevent disputes later on. Don’t lowball the completion date. You should also mention any possible factors that could delay your project. For example, a contractor should mention possible delays and red tape with obtaining permits. You should also keep in mind other projects you plan to take on and if the timeline will interfere with their completion.
3. Price Out SubcontractorsBig jobs may require subcontractors, especially if you normally work alone and not in a team. Be realistic about what you can and can’t do. For example, a website designer may need to hire a copywriter to write copy such as blog posts, the about page and more. The client might also ask for the project to be completed extra quickly. For example, a client asks a painter to paint her entire first floor in a day in preparation for a party. Normally, this would take the painter a week on his own. So he must hire a team so he can complete the job on time. It might also be best to hire subcontractors if you’re swamped with additional projects. That way you can meet the deadline without burning out.
4. Estimate Material CostsDon’t have the materials you need to complete a job? Research how much they’ll cost and include that on your estimate. You may be able to rent items like tools instead of buying them. Some items may be used on multiple jobs. Instead of charging them to the customer, write them off on your taxes instead.
- For example, a graphic designer who needs to buy a new computer will write that item off on their taxes, not charge the computer to their new client.
5. Check out the CompetitionDo some research and find what your competition is charging for similar projects. Join a trade organization or check listings from your competitors. Here’s a list of U.S. trade organizations. You don’t want to price too high but neither do you want your pricing to be so low you won’t turn a profit. Plus, charging too little may make potential clients suspicious. Find out the ballpark range the competition charges. You’re a professional and you should charge what other professionals charge. Payscale is one place to do research. Still, fees vary according to experience level. Compare your prices to other experienced professionals if you have many years in the business. If this is your first year in business, compare yourself to other new businesses. People also ask:
What Is an Example of an Estimate?Below is an example of an estimate created with FreshBooks. Source: FreshBooks This is a very basic estimate but it has all the components an estimate needs. These components include:
- Services to be provided
- Supplier and client names and details
- Date of issue
- Estimate number
- Project scope (what it includes)
- Exclusions (what the project doesn’t include)
- Completion date
- Terms and conditions
What Are Some Free Construction Cost Estimators?Doing your own estimating from scratch is labor intensive. Save some time by using a free construction cost estimator. Here are some free tools:
- Easy-Pro Builders Estimator. It has different worksheets for different trades and automatically calculates labor and materials costs and taxes (by country). It’s a great option for small businesses.
- All-In-One Calculator Free. This free Android app helps you do construction-related calculations.
- Building Calculator. This free app works on all devices and assists in calculating the amount of materials you’ll need for a project.