How to Write a Professional Estimate in 5 Steps

Every construction project in the world requires a stable plan and a cost estimating management system. A large number of physical assets are necessary to begin from scratch. Labor, land, raw materials, equipment, and machinery are examples of assets that are widely utilized.

Along with physical assets, we need to calculate the cost estimate flow during the construction project process. However, there is always the possibility of human error when it comes to calculating the overhead costs on each part of the construction.

But wait, no need to panic! We have a solution and have simplified for you how to write an estimate.

Let’s have a look on what is estimate and how to make a professional looking estimate.

Introduction to Estimating for Contractors

An estimate is a document that is issued before the inception of the project. It outlines the anticipated costs of a project or a service such as itemized pricing for materials, labor, and other expenses. This ultimately helps clients understand the scope and cost of the job. An estimate is essential if you want to establish a preliminary agreement, ensuring transparency, and setting clear expectations between businesses and their clients.

5 Steps to Write a Professional Estimate

The following steps will help you to create a professional and accurate estimate. So, let’s get started.

1. Review the project scope

The initial and essential part which you should not miss while preparing for job estimations are understanding what your clients want. An unclear job estimation will affect your business as clients will not accept unprofessional and messy written estimates.

Ask your clients what they want or do not want before writing an estimation. Furthermore, there will be situations where the clients are unsure of what they want and don’t want. In such situations, ask them these questions:

• What is your expectation from this project?
• What services do you want to have?
• Do you want to break costs?
• What are they looking forward to in the project?

2. Estimate a timeline

You have assigned the same task to the two workers individually to finish, do you think both of them will be completed at the same time? Of course not because every worker or business worker has their own way to finish the task. They work parallel but not the same.

Therefore, you need to ask your client to give a rough compiled date of estimation of the time needed and at what time they are expecting you to finish the work. You can charge your clients on the basis of the time required in the project.

The given rough estimation data also help you to prepare work estimation and know how much time you need to assign in this project. It is important to manage clients’ time and meet their expectations while performing work.

However, there will be times when mishaps occur but do not worry; inform your clients about the possible factors that will delay work to prevent disputes later. Hence, contractors need an approx timeline for the estimation while writing the most accurate estimate.

3. Calculate subcontractors and additional cost

Are you working in a team or working individually? Whether you work as a team of multiple members or are an individual contractor, at one point you will need help to finish the task. Yes, there is no denying that you are good at your work but a little help will ease your work.

There are few jobs that cannot be accomplished by one person and require hiring another person, who might be an expert in it for that work. For instance, one of your workers fell sick and is not able to perform the task. And also, you have given a time limit to the potential customers and need to finish it.

In such a situation, hiring another worker for that particular work will be helpful for your business. There could also be times when clients ask you to finish work faster and early, for that extra helping hands would not hurt.

All of the above-mentioned situations will come under additional cost and you need to mention it while writing estimation.

4. Estimate material costs

Is there any work in the business where you do not have to use the material? No, every business required materials and labor resources to perform the business. So, how can you miss it while writing an estimation and providing it to your clients?

It is important to consider materials and labor resources used in the business because it is a part of the expenditure. Do a bit of research on what is the present cost of the material and do you require any other material in the future?

Even though you rent tools instead of buying them you need to write in estimation. Furthermore, while calculating the material cost, you will come to know whether to take the particular project or not. Once the estimation is created, you will get better clarity of the project.

However, there are times when you or your clients require more materials to accomplish the work. In such a situation, you do not charge extra to the client and neither reveal it in estimation, instead write them off on your taxes. Show it as your business expenses while filing your taxes.

Also, if you have primary materials that you use frequently for different tasks, keep the price list for reference while preparing estimation. It will save you time while calculating the entire balance in the end.

5. Analyze market and competitors

Let’s face the fact that you are not the only one who is providing service in the contract industry. There are already well-established and start-up companies that are juggling to make a way in the domain.

No, we are not scaring you off but telling you the importance of estimation. But as a small business owner, it is essential to do research about the market and competitors. If you are new to the business, you may not be aware of the exact price and charges of other contractors, research about it.

Follow the market trends, do analyze the functioning of other competitive contractors. In the beginning, you may have to determine the lower price to attract customers but ensure it is not that low to make a profit.

However, in this industry, clients believe that businesses with low prices do not provide good quality; thus, charge accordingly to the average market price. You need to be paid on the basis of your hard work so don’t charge low to be unreliable.

Hope you are clear on how to write an estimation. Still, confused about what to add and what not to include in the estimation? No worries, we have got you covered; keep reading!

What to Include in Estimation?

A professional and well-informed estimation always impresses clients. To make clients engraved with your estimation, here are the necessary and basic information you should include in your estimation while creating estimation with estimate templates or software:

• Company information – How a potential clients will select your business if they do not know anything about your business? The first and most important thing to include in your estimation is the company’s information. Company’s name, phone details, address, concerned person’s name, and contact counts in company contact info.
• Itemized list of labor and material cost – As we mentioned before, it is necessary to include material and labor costs in the estimation. However, do not get too in all the details and simply write the primary cost.
• Payment terms– One mistake in payment can cost you heavily for your contract business. Thus, payment terms and methods should be included in the estimation.
• Total cost– Calculate all costs and prices and sum them up to create the total cost. It will help you to tally the total cost of the project.
• Terms and conditions– Add terms and conditions to prevent any future disputes or incidents.

Tools and Software to Improve Estimation Accuracy

The estimation of a project needs to be accurate as it maintains profitability and client satisfaction. Doing so manually can be error-prone, lead to delays, and result in unexpected costs. As a result, businesses are increasingly relying on advanced tools and estimation software. An estimation tool streamlines the process, enhances precision, and saves valuable time.

Features of estimation software

Check out the top features of estimation software:

• Automated calculations: Users can eliminate manual errors with instant calculations for costs, taxes, and other charges.
• Customizable templates: Estimation tools offer numerous options for templates that users can customize to create professionally tailored estimates for specific industries or projects.
• Integration capabilities: Estimation tools can seamlessly integrate with your current accounting and project management tools to streamline workflows.
• Real-time collaboration: Users can generate reports and share estimates with clients or team members for instant feedback and approvals.

Benefits of Using Software

Estimation software provides many benefits for small businesses and contractors. These are:

• Improved accuracy: Estimation tools help businesses minimize errors and miscalculations that result from manual calculations. It leads to more reliable cost assessments.
• Time efficiency: Using these tools helps you save hours by automating repetitive tasks and using pre-built estimate templates.
• Enhanced client trust: Generating professional, clear, and detailed estimates builds credibility for your brand and fosters client trust.
• Scalability: Estimating tools help you generate multiple estimates at scale. You can easily handle multiple projects and complex estimates as your business grows.

Additional Resources and Templates: Create a Professional Estimate with InvoiceOwl

Suppose, we give you two copies of the estimation, one is messy with no proper information and the other one is clean and has all the necessary information. Which one will you choose? The latter one, right?

Because no one wants to have an estimation that is unprofessional and has a lack of information. It’s very important to have a professional written estimate for your business. Earlier, it took hours to create estimates manually.

But thank god for the advanced technology, we have automation estimate software like InvoiceOwl that creates estimates just within a few clicks! InvoieOwl allows you to add line items, tax, price, and notes for clients.

Moreover, you can attach photos, supporting documents, and files that enhance your estimate.

Conclusion

In this blog, we discussed the importance of the cost estimate process for contractors for contractors. Estimates help the contractors win the job and grow their business. Thus, contractors must try contractor estimate software like InvoiceOwl to smoothen the estimating process.

If you want to create and send accounting documents like estimates, invoices, purchase orders, and credit memos, try InvoiceOwl for free