The saying goes, "Luck is when preparation meets opportunity." And so it was in 1985, when I had the good fortune to be hired as a carpenter's helper by a small remodeling company in Washington, D.C. I didn't know it at the time, but I had stumbled upon a growing company where I would find my niche creating an estimating system that by 2013 would help sell and produce many millions of dollars of profitable remodeling work.
Estimating is the most critical and yet most often overlooked discipline in a construction company. A crusty old carpenter with memories and a scratch-pad is not an effective estimating system, and neither is a slick software package or an Excel spreadsheet, at least not on its own. Rather, estimating needs to be intertwined with your entire business. Since that's too large a topic for one article, I'll focus here on how to set up a process to consistently and reliably collect data about your company's projects so you have accurate information to base your estimates on. In future columns, I'll address extending your estimating system beyond the computer to make it an integral part of your business.
The Truth About Estimating
The first thing I learned as an estimator was that cost was only one part of a project. Everybody involved with a project cared about something different. The clients cared about getting their dream project done yesterday without overpaying. The salesperson cared that I understood how simple the project was, how tight the budget was, and how special the needs of these very special clients were. The production manager made sure I knew that there were 20 steps up to the front door, the client was OCD, and the crew would have to work around two cats and a dog — and that he and the carpenters really, really needed a bonus on this job. And my boss made sure I understood that we had to close this sale and make good money on it so we could hit our projections.
What no one cared about was how many walls I had built or cabinets I had hung, or whether I knew exactly how much time it took to do these tasks. Nor did anyone care what my estimating system said the project should cost. For me, this was truly a no-win situation.
I quickly realized that if I was going to succeed, I would have to put my personal beliefs, opinions, and judgments aside and institute a system based on the actual results of completed projects. Once the system was in place, I reasoned, there would no longer be any arguments about who was right and who was wrong. Salespeople would have more confidence in the estimated price. Clients would sense that conviction and trust that they were hiring the right company. And the production staff would know that they were capable of meeting the budgets and even making a bonus. All I needed to do was incorporate our job histories into our estimating system, and the world would be sunny and bright.
The second thing I learned as an estimator was that the existing estimating process had no link to our job histories; in fact, the job histories were prehistoric. This was a surprise to me because our system was loosely based on HomeTech's Remodeling and Renovation Cost Estimator (the first estimating resource I ever saw that was tailored to small contractors), and one of the ideas we had embraced was its 25 phase categories or divisions. The management team had duly developed a timecard that listed all 25 divisions, plus a few more for office time, sick days, and vacation days.
When I was still in the field, I had religiously filled out my card each day, fully confident that this information was being used by someone in the office. So years later, when I started estimating, I assumed we had a vast treasure trove of data I could transfer into our new estimating process. To my dismay, this was not the case. I was told that very few carpenters filled out the form correctly, and even though some did, the data was too diluted to be useful.
Undeterred, I moved forward, committed to the belief that labor was the most critical item in an estimate, because it was the hardest to forecast and had the biggest impact on the bottom line. I needed those labor histories, and I reasoned that the best way to get them was to redesign the timecard. It would have to be simple enough that carpenters would fill it out, but detailed enough to be useful to the estimator and the accountant.
The Silver Bullet
My solution, while unscientific, makes practical sense and has worked remarkably well for 20 years. I knew I had to reduce the work categories to the smallest possible number that would produce useful results. Inspiration came from an unusual source: my 1981 Honda hatchback (photo below). Because I couldn't afford a nice big F-150, I had to work out of the car, which the older members of the crew mockingly dubbed the Silver Bullet. There was no way I could get every tool I owned into that hatchback, so I had to load it each day with the tools I would need for that day's work. Certain tools would get me through project start-up, but when framing began, I needed a different blend of tools. The same was true for other phases — exterior finishes, trades (electric, hvac, plumbing, insulation, and drywall), finish carpentry, and finish surfaces and punch-out.
When I looked at the timecard problem this way — and thought through the different mind-sets that went along with each collection of tools — I realized I had found a way to reduce 25 work categories to just six that would fit almost any job. Even though I knew those six could have multiple subdivisions, experience told me that in small construction companies where the workers have to be generalists, there was nothing to be gained by making things more complicated.
That change was the first one I implemented when I took over the estimating system. It laid the foundation for the collection of accurate historical data that would feed a database that could consistently forecast the actual labor cost of any job. Workers in the field understood and could easily fill out the timecard; accounting could more easily and accurately input the reduced quantity of data into the accounting system; and project managers were even able to use reports to help improve productivity.
In order for job histories to be useful, they must be part of a process that is based on sound fundamentals, calculations, and data and is consistent from job to job and estimator to estimator. But having those histories is what makes the rest possible.
That old Honda really was my silver bullet. Take another look at your timecard. Is it giving you the maximum bang for the buck?
George Weissgerber, once a carpenter's helper, is senior vice president at Case Design/Remodeling in Bethesda, Md.
