Become a better estimator in construction estimating
Become the best at pricing, making you more profitable with costing. We give you our top tips for better cost control.
What is costing?
Estimating is about calculating what a building and construction project will cost and what you will earn from the project. You can calculate everything from large construction projects such as single-family homes, schools, hospitals and docks, to small jobs such as replacing a door or laying parquet flooring in one room.
An estimate can be both simple and complex. Today's estimators tend to use Excel or Word with a manual price bank based on previous experience or an estimating system that must be installed on a PC. This can make it challenging to keep up to date with market price increases and to include all costs associated with the project. We therefore believe that good tools and aids are essential to ensure good price estimates and descriptions of the project. Such tools help to lay the foundation that will ensure the profitability of your projects.
Why is costing important?
We like to say that costing is the essence of your construction project. For a builder, it's crucial to know how much the project costs and what it contains. The contractor wants to know the difference between the cost price and the selling price, i.e. how much profit you'll be left with in the end.
Accurate calculate of the construction project will give both you, the project manager, and the customer a better overview. Through the calculation, you will be able to see all costs in a construction project, add your own profit and thus determine the sales price to the customer.
How to calculate a building and construction project?
The most important thing to consider when estimating is to determine the right costs. To do this, you first need to decide what work you will do yourself and what work you will hire from other suppliers.
There is a distinction between direct costs and indirect costs. Direct costs are costs that are directly related to the construction project you are carrying out. These include material costs, labor costs and costs related to subcontractors. Indirect costs arise regardless of whether you have an ongoing construction project or not. Electricity, office rental, cars, insurance and other administrative costs are all indirect costs.
What is contribution or cost accounting?
There are several ways to calculate, either by the contribution method or by the cost recovery method, which is the most common method.
The contribution method: When calculating in construction, it's important to find out what your contribution margin is. The contribution margin is your selling price minus your direct costs. In other words, the contribution margin is what you are left with, which is used to cover profits and fixed costs.
The cost price method: Using this method, you find the company's cost price by adding up all the costs you have, i.e. both direct and indirect costs. Once the cost price has been calculated, the profit is added to find the sales price. This is often set up point by point in a cost price calculation, where it is easily calculated as follows:
Direct costs + Indirect costs = Cost price
Cost + Profit = Selling price
Regardless of whether you use the contribution method or the cost recovery method, there are some things that are very important to remember. Namely, the accuracy of the material costs. It is very important to have accurate price lists to ensure the correct cost of materials. Many in the industry like to use Excel to make calculations, but struggle to enter these manually due to major challenges such as constantly changing price lists. So how do you actually get to grips with costing?
The norm in the industry today is to calculate that you will be left with around 10% profit at the end of the project. It is therefore important to include all costs.
Forgotten costs
When you enter costs in a spreadsheet, it's important to include everything. When calculate construction, it's easy to focus too much on the costs associated with the construction. That is, materials to be used, wages for own work and subcontracts. Many people forget that there is also a lot of work before, during and at the end of the construction project. These are factors such as design, clearing and cleaning after own work, safety inspections and other HSE work, transportation, scaffolding dismantling, etc. .
This work requires time and can easily be overlooked at the beginning of the project. If this is forgotten, a post-calculation will reveal that the project was not as profitable as first thought.
10 tips for costs that are easy to forget:
Waste. Do not calculate exact material consumption. It is important that you enter waste in order to include all materials.
Take into account that the total time spent is probably higher than the specific tasks indicate.
Enter what actually needs to be done. For example: The job is to paint the wall, but have you remembered scaffolding installation, scraping and washing?
Own transportation and goods deliveries. The costs associated with driving to and from the construction site every day should be included in the project costs.
Tools, tool wear, purchasing special tools and servicing blades, steel, etc. used in the project are easy to forget.
Fasteners. The costs associated with adhesives, nails, screws, plugs, etc. in a standard construction project are surprisingly high. It is common to take nails that are in the car or in your own inventory for the next project.
Waste management, container rental and transportation of waste is another important cost factor.
Safety, health and working environment(SHA), or HSE as it is also known.
Rigging (up and down rigging ) and site operations .
Operating costs such as office expenses, car operation, insurance, salary and price increases, etc.
We recommend that a minimum of 15% mark-up on the calculated price is added as other project costs related to the project. This means that a project costing NOK 100,000 should, as a rule of thumb, have an additional cost of NOK 15,000 that goes to "other project costs". This mark-up will of course also vary based on the size of the project.
How to calculate construction easily, smartly and accurately?
To become more accurate and save time, you should use a costing tool. A calculation program aimed at the building and construction industry will provide a more efficient and time-saving calculation, where everything is clear, accurate and more adapted to the market's price level. This helps you avoid spending time on messy "homemade" calculation templates that are prepared in Excel but not adapted to your project.
Our calculation program mycalc is the result of many years of development based on a large professional environment, both internally and with the assistance of our customers. mycalc is designed to be easy to use, whether you are a beginner or an expert in calculation. The calculation system can be used for new construction, demolition, renovation, conversion, damage cases and much more.
The system has a large price bank that is updated several times a year, so you get the right prices at all times. If you have your own price lists from your material suppliers, these can easily be imported into mycalc so that you can create a customized calculation for your building or construction project.
To calculate in mycalc is time-saving, efficient and helps ensure that your construction projects get accurate price estimates right from the start! The calculation program also supports standards such as NS3451, NS3420, NS3459 and more.
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We look forward to helping you on your journey!
Feel free to contact us if you need help with your calculations, maybe it will be a profitable chat?
