The Guide to Accurate Labor Cost Estimates

Providing your clients with accurate estimates is essential to providing the kind of service that will have your clients recommending you to others. You don’t want to be out of pocket at the end of a job if you stick to in inaccurate estimate nor do you want to charge clients more than they were expecting.

Nailing the labor costs is the most difficult part of accurate estimates. You can’t account for every hardware store run, unforeseen absenteeism, or equipment failure. There are many factors that can put out even the most careful estimates like weather or injury. You can use job cost records or cost catalogues to try to narrow your estimate error margins, but these still don’t account for the unforeseen, yet inevitable, issues that crop up on the jobsite.

Productivity Records

Productivity records can help to give you a ballpark figure to work with. When you use past jobs to estimate your future jobs, be sure that the crew and conditions are similar. If your past job took place in good weather with a full crew, but your next job is in the dead of winter, you need to account for delays that will potentially be caused by inclement weather.

By taking the time to record the hours it took to do every job your crew takes on, you can create a quick reference for future jobs. From the construction of a single home, you can build performance records that will be extremely useful for your future house estimates.

Performance records are a great foundation, but they are just the beginning. As you adopt new methods or materials, be sure to record your crew’s time in installing them. Add time for every unusual or time-consuming feature on the house and account for changes in your employee lineup. New crew members may not work as fast as your seasoned pros.

As you develop your records, you can get more specific in your estimates, including times for things you may forget like blocking, flashing etc. Having a list for each task with a corresponding time estimate will help you to produce more accurate estimates.

Once you have added the labor estimates for every task, don’t forget to give yourself wiggle room on weather delays, equipment issues, absenteeism and potential holidays during build time.

Determining Your Labor Costs

Once you have determined the number of hours you will use on the job, you can estimate the cost of each crew member based on their hourly wage and labor burden. These costs are based on the hourly wage of each employee as well as the cost of payroll taxes, insurance, benefits, supplies and any other costs your employees may incur like transport etc. This will give you the baseline costs per hour for each individual crew member.

Now you have a good formula for estimating accurately for each job. Always leave a margin for unforeseen circumstances. It’s always better to come in under your estimate than over.

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