The typical progression of a building contractor is this: You work as a carpenter, start doing work on your own, hire a helper, hire an experienced carpenter, start doing more complicated work, and, before you know it, you’re doing a half million in volume and realize you don’t actually know if you’re making any money or not. At that point, you start looking for resources that can help you move from busy to profitable.
For more than a generation, one of the first books people turned to was David Gerstel’s classic, Running a Successful Construction Company. It helped countless contractors navigate the perilous path, and we were lucky that Gerstel was not only so well organized but such a good writer.
Now, Gerstel has come out with a book that, I think, will prove even more essential. In Nail Your Numbers: A Path to Skilled Construction Estimating and Bidding, Gerstel has put together a book that is as well-organized and comprehensive as his estimating system. Getting through its almost 400 pages is a serious undertaking, but contractors at any phase of their careers can profit from the book.
The book is divided into five parts comprising 19 chapters. Chapter 1 is titled, appropriately, “The Heart of Our Business” and is a full-throated defense of why estimating is where a company is made or broken. Gerstel has been a careful student of the subject and is generous in acknowledging all the other contractors and writers whose work has helped him along the way.
After this, he dives into the nitty gritty. Each chapter is a deep dive into a subject, starting with such easy-to-overlook issues as where are you actually working? Is it comfortable? Quiet? He also takes the time to make sure the reader understands what a complete set of plans includes, points out some common mistakes, danger signs, or complications in plans, and even goes over some basic math estimators need. In fact, he spends the first three chapters solely on making sure the reader is ready to dive into an estimate.
Part 2 is really the heart of the book—creating your estimating system. Over the course of five chapters and almost 100 pages, Gerstel goes through, literally, the nuts and bolts of creating an efficient but comprehensive estimating system—“if you have 100' of foundation and are spacing bolts every two feet, you will need 50 AB’s (100÷2=50), plus one more for the end of the run.”
In addition to valuable discussions on things like how to do a comprehensive site visit, how to develop waste factors, and how to create clear and well-organized take-off forms, there are innumerable sidebars in which Gerstel illustrates his points with stories drawn from his own or others’ careers. Topics range from how to say no to a job and knowing the level of risk you are comfortable with to various pitfalls he and others have encountered along the way.
As someone who is in mid-career, I found his chapter on General Requirements particularly valuable. He argues convincingly that this phase—comprising all the things that are part of, but don’t become a permanent part of, a job—is where many contractors lose untold thousands. Gerstel himself says he found that “General Requirements consistently amounted to close to 10% of direct construction costs.”
What is included in this mysterious category? The book includes a selected list with more than 100 items—everything from preconstruction costs like permitting and plan check, to construction costs like cleaning, getting materials, scaffolding, and snow removal, through post-construction service calls and project management during the job. His compelling argument for why all these costs belong together convinced me to adjust my own bid spreadsheet and move where I entered certain costs. At a minimum, these adjustments will allow me to track all these somewhat amorphous costs as a percentage of job total with more accuracy in the future.
The rest of Part 2 consists of deep dives into various facets of a successful estimate—specific phases like interior and exterior finishes, how to get good estimates from subcontractors, how to write scopes that accurately reflect the work proposed (and, just as important, what is not included), and more. The sections can be dauntingly detailed—this is a book that will require focus and return trips to benefit from it. But anyone wanting to benefit from the accumulated knowledge of a successful and systematic contractor will be well advised to put in the time.
While many people have put together good estimating systems, where Gerstel stands out is in the subject of Part 3—“Capture Your Costs.” His focus is, rightly, on the area most of us struggle the hardest with—our internal labor productivity rates. He takes us through his steps for setting up, tracking, and using a well-organized, clear set of assemblies based on carefully collected historical data. He also gives examples of adjusting data to account for different conditions (access, first vs. upper floors, fussy details, difficult client, and so forth). His recommendations are a challenge to implement, but will yield a treasure trove of essential information for the remainder of any building contractor’s career.
Several times in the book, Gerstel makes the important point that estimating is an administrative function, while pricing the job is a management function. It is the job of the estimator to figure, as accurately as possible, what it will cost to produce the job. What to actually charge the client, however, is a different question and should be considered separately. This is largely the subject of Part 4, “Take Command.” This section of the book helps you consider questions like how to recoup overhead and make a profit, then moves on to other nettlesome issues like change orders, contract writing, and charging for estimates.
He also returns to a related subject he discussed in Running a Successful Construction Company—Capacity Based Markup. He argues that, since total volume may fluctuate significantly from year to year based on how much material we use or how many subs we hire, we should base our markup (and thus our coverage of overhead and profit) on the constants—either the number of project leads we have or the total number of billable hours we expect our crew to produce annually. I have long found this argument compelling and find that the approach helps provide a more accurate sense of risk and reward on both labor-light and labor-heavy jobs. His treatment of the subject is, not surprisingly, thorough and well-reasoned.
The final section is a brief discussion of the pros and cons of various software solutions. Not surprisingly for someone who clearly excels (foreshadowing alert!) at creating his own systems, Gerstel comes down firmly on the side of creating custom spreadsheets that meet your needs, rather than signing up for integrated packages.
Fortunately for us business-challenged contractors, there are an increasing number of valuable books to help with what is, ultimately, a challenging way to make a living. Nail Your Numbers is, I’m confident, destined to be a central work for contractors and is one of a small number of those books that I would say are essential.