Expert estimating

 

	Tom Swartz, CGR.

Deciding who is best equipped to handle estimating can be tricky. This month, Tom Swartz, CGR, explores with two experienced remodelers the pros and cons of having full-time estimators or salespeople perform that function. Andy Wells is sales manager for Normandy Builders, a 22-year-old company in Hinsdale, Ill., with about $15 million in annual revenue. The company uses trade contractors as its field crews. Dale Crisp, CGR, owner of Kendale Inc., Jacksonville, Fla., also serves as sales manager for his 25-year-old firm, which uses its own employees as labor.

TS: Please explain your methods of estimating.

DC: I’ve got two estimators on staff. I also have salespeople who can do their own estimates. I’m moving very strongly toward total computer-driven estimating, developing a mostly yes-and-no format where someone who may be not as skilled in estimating can perform an actual estimate. The salesman goes out, ascertains the needs, helps the architectural department develop a set of plans and then orchestrates a meeting that brings the estimator out to the site so they can discuss any particular issues with that design.

AW: Everyone who sells for us does their own pricing to give an estimate to the customer. The person who is on the spot at the job site from day one is responsible for recognizing things that cost money and pricing them into a project. We actually call them architectural designers instead of salesmen.

TS: What do you see as the advantages and disadvantages of your method?

DC: The control is what I like best. I’ve got two individuals who are in the office full time, dealing with the same issues daily. They can become more accurate and build better relationships with the vendors, suppliers and contractors on returning quotes a little quicker.

The handicap I see is obvious: If only one or two individuals know your estimating software programs and one of them gets sick or leaves, it’s a pretty large bump in the road.

AW: We like the sales estimator to see the project so he can know exactly what he’s got to price. The benefit of it is that he has firsthand knowledge of what is going on. The weakness of the system is that it requires a lot of training to know what to look for and how much it costs.

TS: How do you use technology and computers in the estimating process?

DC: We use Timberline, which we’ve found to be a very powerful system, especially for a labor-based company like ours. When we do sub work, we can negotiate unit cost with a supplier or a subcontractor on an annual basis.

 

	Andy Wells

AW: We have the HomeTech software from Walt Stoeppelwerth. We refer to his books quite often to make sure our prices are in line. We’ve used it, along with experience, to develop our own internal, proprietary cost book. We know what things should cost and what things cost in our area and what we like to pay. That’s done on a manual cost sheet relatively quickly. I would use software if it made our process faster. I don’t know that doing something on the computer would be any more convenient than being able to do it on paper. I can price a job sitting at lunch with somebody.

DC: Andy, are you unit-base-driven?

AW: Pretty much. You figure out each individual step of the job.

TS: On the average, not including additional work authorizations or change orders, how close is the final price to your original estimate?

AW: In most cases we’re within 5% of what we estimate.

DC: We typically run within 1% to 2% of the estimate. We don’t allow a contract to go out unless it is reviewed by the estimator. The salesman is an integral part of that review. So is the production manager.

TS: What kind of training or background do you require of a person doing the estimating?

DC: Firsthand field experience is a tremendous benefit. The project coordinators and estimators also receive a lot of in-house training on the estimating program, our procedures, what’s important to us, what’s important to the client. We want sales-people to estimate some of the smaller jobs themselves, and even the larger ones if time allows.

AW: The main ingredient is to be likeable and competent in sales. Our designers can get plenty of support and help here in the office on pricing. Our cost book is pretty simple to understand.

TS: Do you check the estimates before they go back to clients?

AW: We have 12 people selling, and we have to rely on them to be competent to sell for the right price. The salesperson’s commission is di-rectly based on the profitability of the job, and it’s in their best interests to make sure it is going to be billed profitably. When a job is sold, it goes to an expediter, who reviews it and estimates, trade by trade, what we’re going to pay.

DC: All estimates are reviewed prior to going to a client. The reviews typi-cally may influence any one particular phase by 2% to 5%. We’re trying to strategize the most accurate estimate up front. I’m looking forward to the day when accuracy floats between 0% and 1% on a consistent basis.

TS: Which estimating method is the better business practice?

 

	Dale Crisp

DC: What is required is to have an acceptable degree of accuracy and consistency. I don’t think there is one universal right or wrong. What is the discipline embraced by the company, and does it consistently provide the profits essential to the prosperity of the company? I like software, but I can tell you right now that software is not necessary in a unit-cost system for a subcontractor base. It has to go back to what the owner wants to accomplish.

AW: I’ve thought of many ways to change our method, but I keep coming back to this way. We’re full-service, so the designer needs to be involved in the entire project from day one until the end. We want to get some referrals from these customers so the designers go through the whole process with them.

Selected portions of the interview are available on the audio page.