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The foundation upon which successful companies are built is financial confidence. A primary step towards financial confidence is accurate estimating. From securing projects through competitive bids, to steering strategic decisions and ensuring financial stability, estimation impacts every part of a construction company's operations.
Accurate estimating not only determines your construction firm’s direction but also helps ensure its long-term success in a competitive and changing industry.
Why construction cost estimates are vital
Estimating in a construction company is far more than crunching numbers — it shapes the trajectory of the business. Accurate estimates bolster financial planning, facilitate better decision-making and build client trust.
In contrast, poor estimates can lead to financial hardships, missed opportunities and compromised project outcomes. They can even mask potential project issues.
If a project has great billing terms and can be prebilled, issues may not be detected until the project is mostly complete. When project issues are known early, teams can help mitigate problems by obtaining change orders, pushing subcontractors to complete work or adjusting staff on the project.
Emphasizing the importance of precise estimating empowers your firm to achieve sustainable growth despite competition.
Here are five ways construction cost estimating can impact your firm’s success:
1. The construction bid process
Estimates are the key to winning or losing a project during the bidding process. Companies that have comprehensive and realistic cost estimates have a better grasp on a potential profitability and can secure projects where they are more confident in the outcome.
They are also able to recognize and turn down projects that will not benefit the company in the long run. Alternatively, poor estimations may result in winning projects that will not benefit the company or losing potentially lucrative opportunities.
2. Strategic planning
Estimates on current and future projects influence budgets and strategic planning. Overestimating gross profits could lead to ill-advised decisions, such as expansion or hiring additional personnel, which may strain financial resources when actual profits fall short. Overestimating project gross profits has a double effect on expenses. Reduced gross profit and costs related to the strategic decisions could lead to an easily avoidable cash crunch.
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