The Challenges of Estimating in the Current Building Landscape

Complex market dynamics have created a large gap between supply and demand in the building industry. As a result, the cost of building has risen quickly and delivering an accurate estimate has never been so important.

The building industry has been unstable. The high demand for housing sparked by government stimuli has combined with supply chain issues, to create sharp price increases, a lack of trades, and project delays.

Building is a cash flow business and it’s become difficult to deliver accurate estimates and stay profitable. Some builders who didn’t have the right margins or contingencies in place to handle the unexpected have been forced to close their doors.

That’s why it’s essential to understand the challenges of estimating in the current building landscape and how to overcome them.

Rapid Inflation

Government grants sparked an influx of fixed-priced contracts during the pandemic, creating a huge amount of financial risk for builders who hadn’t factored inflation into their estimates. When the cost of supplies inevitably went up, they were already locked into the price they negotiated with the customer at the time.

The RBA is continuing to pull back its economic support measures and inflation rates are going to continue to rise. So, it’s important to continue applying recent learnings and put buffers and contingencies in place in your estimates.

If you’re still doing estimates based on spreadsheets or the information in your head, then you’re exposing yourself to a huge amount of risk. When you rely on manual processes, you’re not able to see price increases and factor them into your quotes.

At G.J. Gardner Homes, we use a proprietary software system called GJ5 to track the latest prices offered by our extensive network of suppliers and ensure that they are updated in real-time so that estimates are built off the correct rates.

Knowing that we’re calculating estimates from the right price at the time and then accommodating for inflation with a safe margin, gives our builders and customers confidence that the job will be able to run smoothly. Estimating software also puts you in a better place to hand over the critical role of estimating to your sales team as your business scales.

Uncertain Supply

How do you put together an estimate when suppliers can’t even tell you when they will have the materials you need in stock? It’s a catch-22. There might be a shortage of materials and project delays, but you still need to send quotes to secure future work.

That’s why you need to find strategies to increase your buying power and showcase the reliability and momentum of your work. Secure supplier agreements will give you more leverage and control when times get tough. If you can also showcase reliability and momentum in your projects, then you’re more likely to be able to procure supplies at a workable price.

The franchisees at G.J. Gardner homes have the advantage of leveraging the buying power and reputability of a national network, while still being able to build their credibility as a local builder.

Diminishing Trust

When people see builders liquidating, project delays, and huge cost blowouts in the news, it’s only natural that they will start scrutinising quotes more closely. So, it’s important to be able to put yourself in their shoes and instil a feeling of security.

This starts with learning deeply about your customer’s needs from the get-go. An hour of discovery with a customer does not put you in any position to make the right recommendations and deliver an accurate estimate.

Honesty and reliability are things that people will pay for, especially when they are pouring their life savings into their first home or investing their hard-earned capital into a better future.

Avoid the urge to give a prospect a fast quote, drop your prices, and then cut corners down the track. When you take the time to understand and cater to their true needs, you’re able to simplify the emotionally intensive journey of selecting a builder and establishing a home.

Delivering on a customer’s goals with integrity will only build your trusted reputation and bring on more work in the long run.

Trust the process

Builders have been through tough inflationary periods and it’s essential to have a reliable and accurate estimating system in place. When you use the right system, don’t cut corners, protect your margins, and operate with contingencies, you can protect your position when the tough times arise. An accurate estimate sets the tone for the rest of your project and creates the momentum you need to grow your business.