Tips to Increase Project Profits by Construction Estimating Software
Oded Ran, CEO and Co-Founder of Clue since 2019, expertly integrates AI and data tools to revolutionize construction equipment management and maintenance, positioning Clue as a premier software choice in the construction industry.
Are you using a scale, ruler, and paper plans to create takeoffs all day long? While you're waiting on your supplier to provide you with precise pricing for your estimates, you learn that your customer decided on a different builder since they received their price more quickly. There is an advanced method.
One of the most difficult and time-consuming but necessary aspects of the work is estimating. The profitability of a business can be determined by its accuracy or lack thereof.
Since no two jobs are the same, accurate estimating requires expertise, time, practice, and trustworthy data. A precise estimate raises the average profit margin for your building company.
Construction business owners need to watch overhead costs, gross profit, and net profit to help keep healthy profit margins.
Ultimately, when it comes to deciding whether a business is successful or not, the most important is how much money that business makes.
Integrating construction estimating software within your construction company makes all aspects of estimating, like takeoffs, estimate creation, professional quotation distribution, and positioning your construction company for success, much more easier.
Intense competition forces construction companies to monitor direct and indirect expenses to spur corporate expansion.
Every construction business owner should invest in the best construction estimating software to ensure the projects are well-staffed, organized, and completed in a timely manner to keep customers happy and the business operating efficiently.
What is Project Profitability?
In its simplest terms, project profitability measures how much money you’ll earn from a client after factoring in total costs.
Typically, this involves subtracting the total costs from the total billable amount. The amount left over — the total revenue — is the profitability per project.
To be able to make the right decision on which clients to work with and which projects to do first, it’s very important to understand project profitability.
So, if you realize it is not bringing you a profitable return, then it is obvious to terminate the client.
Or you can compare the profit a particular client brings to your company vs the profit another client brings to your company in order to decide where to allocate your resources and the efforts you need to invest.
Project Profitability Formula
Project Profitability=Total Revenue−Total Costs / Total Revenue×100
Where:
- Total Revenue is the total amount billed to the client for the project.
- Total Costs include all expenses associated with the project, such as labor, materials, overhead, and any other relevant costs.
Tips on How Using Construction Estimating Software Can Boost Project Profits?
Here’s how it can significantly impact your project profitability:
1. Real-Time Cost Data for Accurate Bidding
Using construction estimating software has the advantage of integrating real-time cost databases. It’s very common for prices for materials and labor to constantly change, and having access to the latest pricing can really make a difference.
This data on hand reduces the risk of underquoting and the accompanying financial burden due to unexpected price hikes.
Current pricing prevents profit erosion during project execution with accurate bidding. The higher your profit margin, the closer your estimate should be to the actual project cost.
Real-time integration to supplier pricing on platforms like BCS ProSoft enables dynamic adjustments to bids as material costs fluctuate.
This might include regularly updating your quotes if the price of concrete, for instance, changes suddenly with supply chain issues, as the best construction estimating software automatically uses the latest supplier data to adjust your quotes.
2. Estimating Templates for Specific Project
Not all projects are equal. Different project types (residential versus commercial) call for industry-specific costs, labor rates, and materials, and that means that when you customize your templates for projects, they reflect the realities of each project type.
These templates are tailored to help prevent precarious contingencies and to improve profitability by reducing estimate inaccuracies.
With Quick-Devis you can customize templates that fit the type of project, or client needs. For example, a residential construction project will need to use different labor rates and material types than a commercial renovation.
With templates, it is possible for you to quickly generate estimates with regard to the specificities of each project, ensuring you do not make any costly oversights.
3. Data Analysis for Strategic Cost Estimation
Your past project data is a treasure trove of insights. By analyzing historical project costs and performance data through your construction estimating software, you can refine future estimates.
This analysis helps identify areas where cost overruns occur and where efficiencies can be improved.
Learning from past projects allows you to refine your estimation process, leading to better forecasting, fewer surprises, and increased profits on future jobs.
Utilize the best construction estimating software that integrates with Enterprise Resource Planning (ERP) systems to analyze past project data and adjust future bids accordingly.
For instance, if you notice that similar projects consistently exceed budget due to labor overruns, you can adjust your labor estimates for future jobs accordingly, potentially saving thousands in costs.
4. Incorporate Contingency and Risk Factors
Since construction projects are notorious for the unexpected, they are often prone to unforeseen risks, including weather delays, site conditions, or material shortages.
With estimating software for construction, you can estimate contingency costs and perform risk analysis straight into your estimates.
By proactively accounting for potential risks, you can prevent budget overruns, and thus protect your profit margins.
Tools such as ProEst will allow you to add contingency percentages and risk mitigation factors into estimates, adding a buffer for the unexpected challenges.
For example, let’s say our historical data tells us that projects consistently experience weather delays in one or another region; then we can add a greater contingency percentage into our estimates to account for those typical causes of delays.
5. Reporting Tools to Track Project Finance
Construction estimating software includes advanced reporting tools which give real time updates on project costs, budget allocated and potential overruns.
This capability permits near real time course correction as soon as costs begin to deviate from the estimate. Financial tracking in real time simplifies cost control, allowing you to stay within budget and minimize the loss of profits.
Detailed financial reports that alert you to potential financial risks early in the project are available from tools like BCS ProSoft.
And if your reporting reveals that material costs are rising above the budget you’ve allocated, you can handle the situation quickly by modifying procurement techniques or discussing with your clients about possible modifications.
6. Automate Labor and Equipment Cost Allocation
Construction projects are not cheap, so labor and equipment costs are huge pieces of the equation. Estimating software for construction can estimate labor assignments and equipment costs based on unique project needs and local rates.
What this automation does is it’ll avoid cost overruns from incorrect misallocation, it’ll avoid human error and it’ll ensure that it’s always precise in allocation.
Streamlined operations can be achieved with many modules, such as Autodesk or Procore, which integrate labor scheduling to estimation of cost.
By utilizing software such as Clue, coupled with other platforms like Autodesk or Procore, project managers are able to automatically set labor assignments and equipment rental rates based on every project’s unique requirements and local cost structures.
Teams can integrate Clue to track real time costs of each resource and reduce the risking of overruns and avoid human error.
With Clue, your budget remains free flowing throughout, and every dollar spent on labor and equipment is logged accurately and in line with project financial goals.
7. Optimize Material Procurement with Data-Driven Decision-Making
Integrating construction estimating software with procurement platforms allows you to optimize material purchasing by aligning it with the project schedule and locking in prices early.
Timely and data-driven procurement can lead to significant savings, especially in volatile markets. Ensuring that materials are available when needed prevents costly delays and ensures project continuity.
Use estimating software for construction like ProEst that integrates with procurement systems to track materials in real-time and optimize purchasing decisions.
For instance, if your dashboard indicates that a critical material is in high demand and prices are rising, you can act quickly to secure your supply before costs increase
further.
8. Reduce Project Overhead with Centralized Collaboration Tools
Communication and collaboration centralizes time reducing miscommunication and rework. With cloud based solutions, you can work from anywhere and everyone will be working from the same dataset.
Streamlining communication and decreasing project rework result in lower overhead costs and better profitability.
Estimates and updates that are available in real time are available with the help of cloud based collaboration features such as PlanSwift and Autodesk Construction Cloud.
An example might be when a project estimate is changed — all team members get instantly notified, reducing the risk of errors that occur from out-of-date information.
In a Nutshell
If used effectively, construction estimating software can significantly add to project profitability by increasing accuracy, reducing workflows, and providing live insights.
Using features like real time cost data, customizable template and sophisticated reporting tools, the construction companies can ready themselves for the future competition.
More accurate bids, less overhead, and a marginally better bottom line can be accomplished by investing in getting the right estimating package and making sure your staff is trained to use it.
Then, by adopting these strategies, your estimating process will be improved and you will be able to earn more profits on all of your construction projects and your business will grow.
With the right tools and practices in place, you’ll be ready to ensure your business can succeed in the tough construction industry.
FAQs
1. What is the most popular estimating method?
For early-stage projects, the most popular estimating method—top-down—works effectively. Setting a completion date for a project is made easier with the top-down estimating method. It also helps set project milestones so that management can easily monitor how far along the team is.
2. What are the four categories of estimation software?
A specialist in this complex field will need to be familiar with the four basic forms of estimates: preliminary, detailed, quantity, and bid. In the course of a project's lifetime, each type serves a certain purpose.
3. What are the key features to look for in construction estimating software?
Key features include real-time cost tracking, material and labor estimation, supplier integration, project budgeting, and reporting capabilities for better decision-making.
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