Business Management, Estimating for the Painting Contractor

In this series of seven articles on estimating for the painting contractor presented by PaintPRO, you will be introduced to the fundamentals of estimating. The content will be basic, and will cover architectural specifications, blueprint reading, making a take-off, pricing structures, overheadbusines and profit. Although everything presented will be at a basic level, even experienced estimators might gain some insights as to how they might improve their estimating techniques.

One of the reasons PaintPRO is doing these articles is the recognition that, in general, the estimating practices of the painting industry is not very good. According to some surveys, painting contractors have the highest business failure rate in the construction industry. For every ten contractors that start up a business this year, only about three will be in business two yeas from now, and of these three, two will be only marginally successful. This should tell anyone that the industry has some problems. In general, there are three major reasons for this high failure rate:

• Lack of administrative or managerial skills.
• Inadequate capital or financing.
• Poor estimating practices.
• The fact that the variances in painting prices on any given job are usually the widest of any subcontractor group surely indicates a major problem.

It should be recognized that estimating is a management function, and as with any other part of the business should be a planned process. There should be good and sufficient reasons for bidding any given job. Simply because a job is on the market and general contractors are soliciting bids is usually not, in itself, a sufficient reason to bid that particular job. I have been fortunate in my years in the industry to have had the opportunity to travel extensively and to become acquainted with contractors throughout the country. I have observed that the more successful contractors have a very structured estimating program. In effect, they usually bid fewer jobs at a higher profit margin than the average contractor.

It should also be recognized that estimating is the first step in the profit or loss aspect of your business. While estimating, in itself, normally does not generate profit, it can certainly generate losses. In general, there are four major areas of potential errors in marketing:

1. Mis-interpretation of specifications.
2. A flawed take-off.
3. Misjudging production or materials factors.
4. Mathematical errors.

There are things that can be done to minimize these sorts of errors, mostly by revising your thinking of what estimating is about. Instead of thinking “estimate”, which according to the dictionary, is judging an approximate value, try thinking in terms of doing a “cost analysis”, which in reality is what we should be doing when pricing a job, that is, making an evaluation of what this particular job is going to cost your company to do, rather than how low do we have to be to get the job. If you have done everything right , your cost analysis should reflect your cost sheet in reverse. This means, also, that if you reduce your price to get the job, that reduction is going to come out of profit.

Another concept is to look at any given job as an investment, which in reality is exactly what it is. You are investing money and time in performing a service for which you expect a return. That is commonly known as profit. These concepts should indicate that some thought should be given as to whether or not to bid a job. Some thought should be given to the risks, the potential profit, the impact on finances, on your labor force, and on your ability to undertake other projects. The bottom line is that if there are more negative than positives, and you can’t expect a reasonable return on your investment, then it is most probably best to pass on the job.

A well structured estimate can be used for purposes other than just the bidding process. It can be a valuable tool when discussing or making a presentation with a client. It can be extremely useful in dealing with change orders or extra work. It can be used as a basis for ordering materials and in dealing with color schedules. It can be a valuable tool in preparing monthly progress billings, as well as monitoring the job schedule. And, again, if properly structured, will work right into you job costing program.

There is no question that good estimating is a laborious, time consuming and possibly expensive endeavor, but it should be obvious that the benefits far outweigh the negatives.

The next article will address architectural specifications and how they relate to the painting contractor.