Financial Side of the Question or 4 Tips How to Estimate the Project Profitably.


Managing finances has never been easy. When making each deal with clients and discussing the peculiarities of their projects we all have to make an important final decision and answer the question “How much?”. If you estimate the job accurately, you get positive testimonials, the repeat business, and earn the trust of your clients. But how to estimate the project profitable and at the same time affordably to your client? We have collected 4 tips that will help you to feel this “golden middle” between your profit and the budgeting framework of your client.

Tip #1: Always calculate the job cost. Make it a habit to evaluate each stage of the work on the project. Moreover, compare the estimated cost with the actual ones at the end of each project completion. Thus, you will be able to do it more accurately in the future and to improve the margins of estimation value of the future projects. Being a pro in the price of each stage, you will be able to indicate the money amount for the customer more correctly and not understate or overstate the project’s cost. Not so many professionals do this and because of this, it is quite difficult for them to quickly and correctly evaluate the project. Doing this, you will maximally reduce the errors in calculations and be able to reasonably explain why does it cost the price you offered.

Tip #2: Regularly check the materials cost. Professional consultants recommend creating a database which will be updated each week where all the cost of the materials will be recorded. Some people use services of different estimating companies instead of doing this on their own but it may not provide you with the same result. Such companies just provide you with the best guess while when recording all changes on your own invoices you will be the one who is responsible for it.

Tip #3: Be concentrated. Concentration is above all. In many cases, even a small distraction from the calculations and estimation of the project may result in a mistake of more than $6000. Do you think that your minute distraction on the phone call or on the small talk with your colleague costs so much? Of course, no. Prior to making an estimation, make sure that you turned off your smartphone and other devices, closed the doors to the cabinet, you are not hungry and thirsty, you don’t want to go to bath or anywhere else. Only in such fully concentrated atmosphere, you will be able to maximally correctly estimate the project and reduce the probability of errors to zero.

Tip #4: Establish a margin for the overhead costs. Prior to making estimation, you should determine the markup of the company. The markup is the constant percentage needed to cover possible overhead costs in order to ensure the profit. In most cases, this number is estimated at the beginning of each year and should be changed once in a quarter or in half of the year. As a rule, the markup is equal to 8-10%. It may be changed if necessary but not on a project-to-project basis. You should take into account that the contingencies such as materials, risks, and other factors that may influence the final cost, shouldn’t be included in the markup.

Conclusion words

It has never been simple to estimate the project and you should put up with the proven fact that it will never be simple. There is no one “golden rule” for all cases which would help you to avoid all the errors and to predict all contingencies that may occur while working on the project. The one thing you can do to maximally simplify this process and get the better results each time is to do the estimation regularly. Don’t afraid to make mistakes, learn on them, improve your work, take into account factors that you haven’t noticed before and you will increase not only your profitability but the overall status of your business.