Creating estimates and proposals with ultimate efficiency
By Phil Harwood, Landscape Industry Certified Manager
During my many years as a contractor and a management consultant working with contractors all over the United States and Canada, I have recognized a common problem for many companies—a lack of good estimating systems, which results in needless erosion of profits. Unfortunately, estimating remains an expensive, time-consuming, and error-prone source of frustration for many contractors. Even with the introduction of web-based measuring tools, many estimating systems are tedious, inconsistent, and unreliable.
The difference between profit and loss
The costs involved with estimating and producing proposals may be substantial. However, these costs may be greatly reduced, while dramatically improving turnaround time, by employing a more systematic process.
In many companies, it’s difficult to retrace the estimator’s steps or verify the accuracy of the calculations after the proposal is created because the estimator’s notes and calculations were not captured in a uniform manner or saved in a logical place. Sometimes, the estimator’s notes are discarded or misplaced. As a result, if a prospect wants to negotiate prices, it is extremely difficult to do so without recreating the entire proposal from the ground up.
Furthermore, manual systems, where estimating is based more on experience than anything else, still exist in our industry. In these situations, accurate measurements are not taken, production rates are unknown, and no semblance of a systematic estimating process exists. In addition to being horribly inefficient, this overreliance on experience is what often makes estimating unnecessarily expensive and time consuming.
Manual estimating systems are also very error prone because not only is it very easy to make a mistake using a desktop calculator or cell phone calculator function, but those mistakes are also difficult to detect. One simple, undetected error in estimating calculations may be the difference between profit and loss.
Some contractors using industry software programs are frustrated by their inability to understand these complex programs or by the limitations of these programs when it comes to making changes. With few exceptions, contractors have to change their business processes to conform to the software’s requirements instead of changing the software to fit their business. Some of these programs simply cannot be tweaked at all or without incurring great cost.
Whether using a manual system or an automated system, every business should have an estimating system in place with a logical, documented sequence of steps that encompasses everything from measuring to developing the proposal. An efficient and systematic estimating process will result in increased accuracy, less cost, increased sales capacity, and more sales.
For the large majority of contractors, the best solution is to use Microsoft Excel for creating estimates and proposals. Excel is a powerful productivity tool used by hundreds of millions of people every day. By using Excel, accurate estimates and proposals may be quickly produced, saving precious time that may be used to increase sales capacity and sell more work.
Because of Excel’s flexibility, any type of estimating and bidding system may be devised. If you can dream it up, it can be built in Excel. In addition, estimating programs may be mapped directly into proposal templates to eliminate time-consuming and error-prone data entry.
In my previous life as a contractor, we outgrew Excel at around $5 million in annual revenues. There are limitations inherent with the use of spreadsheets, especially if they are not mapped to other business management systems. However, until we reached this point, we found Excel to be the perfect solution.
What about you? Is your estimating and proposal process documented? Is it simple and understandable? Can senior management audit your estimate? Are you spending too much time estimating and not enough time selling?
If you would like to have a complimentary review of your estimating process, please email me at firstname.lastname@example.org.
Phil Harwood, Landscape Industry Certified Manager, PLANET Trailblazer, and Certified Snow Professional is founder, president, and CEO of Pro-Motion Consulting, a management consulting firm with the mission of accelerating healthy growth in entrepreneurial organizations, serving clients in the United States and Canada. His firm offers PLANET members special rates on its programs. Visit mypmcteam.com to learn more.