Work is harder to get. Your margins aren't where you'd like them and your backlog is down. You had to pass on several bids last week because you just didn't have time. You made a mistake on a bid that cost your company a lot of money.
Sound familiar? How would you like to take care of these issues? A new estimating-software package may be the answer. To get work done, you must be able to do estimates quickly and accurately. Whether it's a design-build, plan and spec, or negotiated project, you need to know your costs to perform the work and make the profits you are after.
An estimating package can help you analyze the cost of running different specifications in seconds, compared with the hours it would take to do the work by hand. For example, if a project's engineers call and want to see the cost of lined vs. non-lined ductwork, you can provide them the answer while they're still on the phone.
Know your workloadTo determine if you need an estimating system, look at how many hours you are currently spending estimating and quoting work.
If you wanted to see a decent return on a software investment, it used to be that you had to spend at least 20 hours a week on estimating work. Now with packages priced less than $10,000 and many available for half that, an estimating system may be worthwhile if you only use it 10 hours a week.
To figure out if a system is right for your company, create a payback sheet or what many people refer to as ROI (return on investment) statement. Here is an example so you can see how the formulas work. For this example, assume the contractor does $1 million in annual volume, all on plan-and-spec work. Officials currently spend 15 hours per week on estimating. The workers earn an average of $35 per hour.
To see if a system would work for your company, start by adding up your current estimating hours. Don't forget to plug in hours for doing change orders - something often overlooked. The number you come up with will be the total hours estimating per week. Then look at the wages. Put your figures into this formula:
Total hours estimating per week x average hourly wages x workweeks per year = estimating cost per year
15 hours x $35 per hour x 48 workweeks = $25,200
If your total is more than $10,000, consider an estimating system. The savings could be substantial. Start with the time you spend "stripping off" the drawing, because that's where many people see the biggest impact and spend most of their time. Estimating packages sometimes come with a device called a "digitizer." A digitizer is a board, typically larger than your drawings, which allows you to measure and count items by touching points with a penlike device. The pen sends a signal whenever it is tapped down on the board, marking the position. It makes the traditional scale rule unnecessary.
When to buyIf you're a small contractor, you may be able to save money by purchasing a digitizer later. However, if you spend more than 15 hours a week on estimating, a digitizer is worth considering immediately.
When looking at a digitizer, check how its design has you access the items that are not on the unit's menus. Does it require two input devices: a computer mouse and a pen? Count the total number of keystrokes when having to take off a piece of ductwork. Extra steps could add up to lots of time when you repeat that keystroke a few hundred times a day.
You want the system to be as efficient as possible. A more simple, intuitive interface can make the difference between a system that sits on the shelf and one that becomes an integral part of your estimating process. Productivity can vary significantly, based on the software package you purchase. Compared to manual estimating, you can expect 40 percent to 80 percent more productivity with a "digitizer takeoff," and 30 percent to 60 percent more with a "mouse takeoff."
The two biggest areas where many people spend the most time on a system is on takeoffs and extensions. Your percentage of savings will vary depending on how you are currently doing them. For example, assume that you do everything manually. Say that 60 percent of your time will be doing the takeoff and other 40 percent will be doing extensions.
Takeoff can include stripping off the drawing, but it can also include setting up the pricing and specification tables.
Total hours estimating per week x 0.6 x 48 workweeks per year = current time spent doing takeoffs
15 hours x 60% x 48 = 432 hours
Take the number from the above formula and assuming you will be using a digitizer station, plug it into this formula:
Current takeoff time x wages x 50% productivity savings = cost hours saved for takeoff
432 hours x $35 per hour x 50% = $7,560
'Batch-file' and 'real-time'All estimating systems perform extensions, but all do it differently. There are primarily two types of systems: "batch-file" technology and "real-time" technology. With batch-file systems, you do your takeoff and when you run reports, the system does the calculations. With real-time systems, as you take off items, the system does the extensions at the same time.
Many people find the real-time system more efficient. It gives operators the ability to see answers without having to run a report. This can significantly reduce implementation and training time, because you can see exactly what the system is doing. The savings can be more significant than those that come from using a digitizer, since using a real-time system is up to 80 percent faster than doing the same work manually.
Total hours estimating per week x 0.4 percent x 48 workweeks = current time spent doing extensions
15 hours x 0.4 percent x 48 = 288 hours
Time currently spent doing extensions x wages x 80 percent productivity savings = savings cost
288 x $35 per hour x 0.8 = $8,064
Add the new cost of doing extensions to the new estimating cost of takeoffs and you'll get the total cost savings.
New cost of extensions + new takeoff estimating cost = total cost savings
$8,064 + $7,560 = $15,624
Now take your total cost savings and subtract it from the current estimating hours.
Current estimating cost - total cost savings = new cost
$25,200 - $15,624 = $9,576
Picking a systemIf a system costs $10,000, you would recoup your costs in less than a year.
Figuring out those formulas was the easy part. Now you have to pick the system that is right for your company. Start by creating a list of the features you want. Remember a feature is only worthwhile if it benefits your company. Ask yourself: What percentage of your clients would use that feature?
The Internet has changed everything, even shopping for estimating systems. A few years ago, one of the issues contractors faced was the amount of time between presentations for different software packages. Because of the difficulty coordinating times, contractors often saw products weeks or months apart. That made it difficult to remember if one system stood out from another.
With the majority of estimating-software companies now offering presentations via the Internet or with free-trial periods, it's easier to compare products while they are still fresh in your mind. Try to see different products within a couple days of each other. If questions come up, call the supplier. Remember, online presentations not only save you time, they save suppliers time as well, so they should be willing to help you.
Judging from a list of references furnished by the software company can be difficult. Odds are the people only have good things to say, otherwise the company would not have provided the list. Instead, ask to talk to officials from companies that went through a recent evaluation or better yet, ask to talk to people who recently switched from other systems.
Keep in mind that as fast a technology is changing, opinions about a system purchased three years ago doesn't mean much today.
The true cost is the price of the software, plus the cost of implementing the system. If you're not careful, implementation costs can exceed the price of the software. Ask the manufacturer what training is provided. Do they train over the Internet, or is it in a classroom? How long is it? How many students will be in the class? Will you be able to come back and re-train if needed?
Make sure you get a complete answer. A company may say they provide online training; however, they may not readily tell you it only happens after classroom sessions. If your company can't afford to have staff gone to classes for days at a time, then Internet training is essential.
(Todd Liebbe is vice president of sales at Quote Software Inc., a Eugene, Ore.-based manufacturer of HVAC- and mechanical-estimating systems.)