Virtually every job contains elements about it that we enjoy, and others that we absolutely dread. The tasks we like to do are usually the things we’re good at and think of as easy.
If you’re an experienced contractor, you could probably install an irrigation system while tapdancing with a blindfold on. But when it comes to figuring out all the tedious calculations involved in costing out such a system…well, if you’re like me, you’d rather have a root canal, unless you’re the kind of person who enjoys doing that sort of stuff.
Most likely, you’re not. After all, you chose this profession because you like being outdoors and working with ‘real’ things. If you’d wanted to be a CPA, you’d have become one.
However, as much as you may dislike it, estimating jobs and bidding based on those estimates is essential to what you do. And how well you do that may very well mean the difference between success and failure. If you were awarded a job and installed the best system for that site, but missed some things in your estimate, you probably lost money.
You can see how important proper job costing is. It all starts with inputting the right data. This is true whether you use a take-off sheet, or one of the irrigation software programs on the market that include estimating.
There are so many things to take into account: exactly how much and what size pipe you’ll be using; how many elbows and tees will be needed; how many sprinkler heads and valves you’ll need to order. How many manhours will it take to dig around the existing hardscape? Are you going to be putting in soil moisture sensors, rain sensors, a new controller? Finally, what’s your tab for all those items?
Then there’s the vehicles and machinery, like trenchers: which ones, and how many. Oh, yes, there’s also their wear and tear and depreciation, so don’t forget to factor that in. And, the fuel. And the overhead—rent, utilities, insurance, advertising, salaries and wages, worker’s comp, bonds and permits. Did you add the value of your time, and your salary?
Finally, there’s how much profit your company needs to make. Nothing should be left out. Whatever you fail to put down on that take-off sheet is money you’ll be leaving on the table.
But perhaps the trickiest part of all this is figuring out your labor costs, determining how many people you’ll need to do the job, and how much time it’ll take them to do it. Not costing out the labor right is where a lot of contractors lose money.
You may have estimated that you could complete a job in three days with five workers. But it actually took five days. If you paid those workers ten dollars an hour, that’s 16 additional hours per person, or a total of 80 additional hours that weren’t accounted for. Multiply 80 times $10, and you get $800 of profit lost.
After you factor in any additional costs included in the labor burden, you may find that you’d spent another $500. Add that to the $800, and these miscalculations just cost your company $1,300.
But we can learn from our mistakes. Review your original calculations, and see where you went astray.
Maybe you thought the crew would work a little faster, or perhaps there were other unforeseen problems that slowed things down—the ‘X’ factor.
This ‘X’ factor is that wild card that you couldn’t have predicted, no matter how carefully and precisely you estimated. For instance, a sudden obstacle in your way. “If there is a ledge or rock under the ground, that makes everything more difficult,” said Dennis Hoffman, president and owner of Grasshopper Irrigation in Reading, Massachusetts.
“The pipe won’t go under the ground as far, so you have to talk to the homeowners, and see how they want to proceed.” Hoffman’s been lucky, in that most of his customers, while not pleased at changes in estimates, have been understanding.
Account for everything in your estimate “The slang term for Waukesha is ‘Rockesha,’” said Mike Todd, president and owner of Milwaukee Lawn Sprinkler Corporation in Menomonee Falls, Wisconsin. Eons ago, a receding glacier deposited lots of rocks and boulders in his region. Todd protects his company by addressing the problem head-on. “If we’re going to be working in an area that’s known to be rocky, we’ll put a ‘rock clause’ into the contract.”
It simply states that if a sprinkler system can’t be installed with conventional equipment, the condition will be brought to the attention of the owner, and additional compensation will be determined. In 38 years, he’s only had to invoke the clause three times.
“Estimating is the science of projecting costs into the future, based on your company’s capabilities and goals,” said Kurt K. Thompson, owner of K. Thompson and Associates, LLC, an outdoor water-use training, evaluation and planning company. “It’s certainly based on your costs, but also your capabilities, your equipment, the skill and knowledge of your employees and your production methodologies.”
Of course, every contractor has his own method of coming up with estimates, based on his—and his company’s—priorities. And everyone has his own idea of what’s most important, based on his own experience.
“The three biggest things I look for in costing out a job are: what’s the water pressure, how many zones are there, and how many heads am I going to need?” said Hoffman.
Water pressure is crucial, said Bronson Patterson, owner of Four Seasons Landscape and Irrigation in Huntsville, Alabama. “You have to test the water pressure at the meter. That will dictate the size of your valves and the pipe you use.”
Pressure also determines how many heads can be put into a zone. Hoffman, who has 20 years of experience installing irrigation systems, concurs. “After I survey the area, I always take a water pressure test, to see what the flow rate is, in gallons per minute.”
Different parts of a city can have different water pressures. Hoffman says it’s even more variable than that. “Everybody’s house is different; it’s always different.” He says that even though you may have installed an irrigation system for the lady next door, you can’t assume that her neighbor will have the same pressure.
Hoffman asks a series of questions. Does the homeowner want different zones for different beds? Does he want rotary heads for bed areas, or drip irrigation? What are the sunny and shady areas? How long will the job take and what is the cost of the materials?
When all is said and done, after you’ve gone over the estimated bid a few times—checking and doublechecking to make sure you’ve added in all the costs—you should always add some percentage to the project, just in case you missed something, or miscalculated. Call this the ‘fudge factor.’
Should you do unit pricing?
There is some controversy over the practice of unit pricing—counting the number of heads, for instance, then assigning a multiplier. Some contractors do it, but others think it’s a good way to go broke.
Thompson is among those who don’t like it. “Unit pricing has a place, in terms of using it as a ‘check figure,’” he said. “But those unit prices have to be up-to-date and confirmed by doing a post-mortem jobcost analysis after a job is finished.”
No two jobs are alike, so you need to make sure that the unit price that you’re basing your check-figures on are current and accurate for the job you’re bidding. “I’d never come up with anything more than a ball-park figure based on unit pricing,” said Thompson. “It needs to be a ‘cost-up’ kind of calculation, or you will die a long, lingering death.”
‘Costing up,’ he explains, means that you start with your costs, such as materials, labor, what you’re paying any subcontractors, and every thing else that costs you money, and build your unit prices up from that. It should really be done for every job. When the project is finished, you take a look at those unit prices again to kind of give you a ‘sniff test.’ What about beating the competition with the cheaper bid? “We call that ‘buying a job,’” said Thompson. “There’ll be times when we have to do that, because we need the cash flow, or need to keep our guys working, so we’ll bid them at prices that are lower than we’d normally like. But cost-up pricing allows you to compare that price to the market, and judge where your more aggressive pricing should be.”
But, Thompson warns, Murphy is a cruel taskmaster—the ‘X’ factor once again. “His Law will come up and bite you, almost without exception, every time you buy a job. That’s when your trencher will break down, there’ll be a rain delay, or you’ll hit a utility. So that little job that was supposed to take a couple of days stretches into a month-long deal, screwing up your entire production schedule.”
Costing up can protect you a bit here. It allows you the security of knowing how low is too low, and gives you the luxury of deciding when you should take a job at a lower bid. “I used to price out my jobs per head, especially when I started out,” said Hoffman. “But I learned that you’ve got to take into consideration whether or not you have to go under a walkway or a driveway—some hardscape—that’s the biggest thing.”
He tells new contractors to avoid the mistakes he’s made. “But there are still guys in my area that price by the head. Those are the low-ballers. They don’t get enough for their jobs, so they have to take shortcuts.”
There is a way to build in a cushion against unexpected expenses. Once Patterson finishes an estimate, he goes back over it to see if he’s missed anything. Then, he adds in another five to ten percent.
Commercial estimating: it’s complicated
Things get a little more involved when working in the commercial arena. It’s much more detail-oriented, for one thing. There’s paperwork, jobsite meetings, and coordination with other tradespeople.
Patterson, who does both commercial and residential work, agrees that the commercial world can get a little tricky. “They may specify a certain type of valve or sprinkler head. Even with all my experience, sometimes I miss something.”
Then there’s the little matter of getting paid. Commercial work typically has no down payments. You may have to buy bonds: a bid bond, just to bid on a job, and a performance bond, once you get it. Special insurance may also be required. All these costs must be factored into your bid. If you missed an item or two and didn’t factor them into your bid, that loss comes right off the bottom line.
Computers can help
Fortunately, it’s 2017, and there’s estimating software available that can save you tons of time and money. “A lot of calculations have to be made when you design irrigation systems,” said John DeCell, president of Software Republic in Hockley, Texas. Why not let a computer do them?
DeCell, a former irrigation contractor, began developing the software back in the 1980s, when he tired of spending three to five hours manually drawing out and adding up proposals. The program he developed, Pro Contractor Studio, will figure out materials takeoffs, distribution analysis, pipe-sizing and hydraulics, and can come up with a proposal in 45 minutes.
PRO Landscape from Drafix Software in Kansas City, Missouri, is another software company for our industry. In addition to designing, it has an excellent program for costing out an irrigation system, and includes databases for the components.
“When estimating with a drawing by hand,” said company president and CEO Pete Lord, “a contractor may start guessing about how much pipe he needs. Our software can take out the guesswork.”
“For example, let’s say you run pipe down a property line and over to the driveway. It’ll tell you that it’s exactly 63 feet, seven inches of pipe, just by drawing a line. You can then specify that it’s one-inch PVC and how much it costs per foot.”
Other irrigation-estimating software includes Irrigation Design Assistant (IDA) from Water Manage- ment Specialists in Moody, Texas, and ProLand Estimate from Sunwest Landscape Software in Surprise, Arizona.
There’s also AutoCAD, the original computer-aided design program. However, its drafting software was developed for architects and engineers, not landscape professionals. It’s also more difficult to learn and quite expensive.
Another advantage of having a computer-drawn design and all the accompanying calculations is that it shows a potential client exactly what he’s buying. It looks impressive, and can separate you from the competition. But, as with any computer program, remember it’s ‘garbage in, garbage out.’ You have to input the right data first.
Finally, the profit
After everything else, after all the hard work, comes your net profit; the cherry on top. Patterson adds 35 percent to the top of all his estimates to assure that he gets one. Nobody can tell you how much you can ‘fudge’ on a particular proposal, or how much profit you should make on any job.
Profit can get overlooked, especially when you’re trying to underbid the competition. You may think you’ve built in a healthy profit margin when you really haven’t. Stay mindful that everything you miss will come out of your bottom line.
If you’re feeling overwhelmed at this point, remember that costing-out gets easier the more you do it. Stay flexible, so you can ‘roll with the punches,’ but not to the point where you lose perspective. If you account for all your expenses, leave room for the ‘X’ factor, and remember to add enough on the top for a decent profit, you’ll be successful.