4 Expenses Contractors Overlook When Quoting Projects
Accurate quoting is a vital skill for contractors to ensure they have the winning bid and maintain their profitability. However, it is easy for even the most experienced contractors to misquote projects or forget to include expenses that may not seem important but quietly eat into the profit margins.
These problems are caused by tight timeframes for quotes, fluctuating material prices, and inaccuracies based on previous projects. Cost-related blind spots often lead to unnecessary and painful losses later on. Here are some of the most common expenses contractors forget to add to the quote and some tips on avoiding them.
Material Waste and Delivery Overages
Contractors often estimate materials based on a perfect construction schedule, forgetting that construction never goes according to plan. There are always off-cuts, handling mistakes, site damage, etc., that lead to waste—there is even a possibility of 10% waste or overages, depending on the material.
When contractors fail to factor the 10% into the quote, and it comes time to reorder additional supplies, whether it is mid-project or even during a project, they risk eating into profit margins or using their savings to restock the materials.
Smart estimators always put in a sufficient buffer to accommodate for waste materials and avoid the chance that their workload could end up costing them money out of their pocket.
Software Subscriptions and Technology Tools
Estimating, scheduling, and project management software can make or break a modern contracting business—but they generally come with a price. Monthly or yearly subscriptions to software that aids in everything from bidding, invoicing, and communicating with project teams may be classified as “overhead” and not included in specific quotes related to work. However, they specifically aid the execution of projects and should reasonably be allocated to each project.
One reasonable solution is moving from traditional software packages to cloud-based estimating platforms. For example, you could use a roofing estimating app. Besides improving accuracy and identifying cost components contractors don’t always attend to, the apps allow you to keep templates, incorporate real-time pricing, and limit human error.
Variability In Insurance Premiums
Contractors may see short term spikes in insurance premiums depending on the specific type of work. For example, work that is significantly higher risk, such as- roofing, or demolition, can create increased liability, or workers comp costs. Without planning and budgeting for future insurance costs, it could lead to budget and profit losses. Always find out how a new and different project will impact your policy and premiums before you quote the work.
Wear and Tear on Tools and Equipment
Most contractors add tool rentals to the project costs, but very few plan for depreciation and/or wear-of-tool costs for owned tools. Over time, frequent use decreases your tools’ usable lifespan, and repairs and/or replacement costs could become an unexpected expense you have yet to budget for.
Endnote
The margin between a small job and a huge disaster can oftentimes be just a few miscalculated details. If you continue to be aware of these blind spots, it can help preserve your profit margins and establish trust with your customers by providing them fair and honest quotes.