|
We
provide the best estimating software you can find. Can we tell you
how to estimate so that you'll win every job and make money every
single time out?
NO.
But
we certainly can share the ideas, tips, tidbits, hints, reminders,
and checklists that we've seen in the nearly 30 years that McCormick
Systems has been around. We can also draw upon resources -- such as
industry-veteran trainers Erle Howard and Dick Manrod -- who have
even more experience.
With that, what follows is the first installment of a regular
feature . . . things to remember as you are estimating, submitting
prices, and bidding jobs.
Be careful -- right about now --
in
working with General Contractors.
When the economy is good, they're always
working two to three jobs ahead. But when the economy starts to
dry up (as it may be right now) . . . for some GCs, that might
mean their cash flow is drying up. NET RESULT: The EC doesn't
get paid.
Understand your costs. That includes
overhead.
At your office, when someone goes home and
leaves the lights on, what happens? Your electric bill is
higher. The light bill, then, is part of your overhead. So is
just about everything that happens at your office -- the rent
(or rent you should be paying yourself, if you own the
building). The cost of the people who work in the building. The
money you paid for the desks, file cabinets, etc. The phone
bill. The cost of the computers (and, yes, even the cost of
McCormick Systems software!).
Did you give your estimator a vehicle? That's
overhead! If you don't include such costs in overhead, there's
only one place from which the $$$ will come . . . your bottom
line!
Our classic example happens in training
classes. We ask "What should we put in terms of overhead?" in
our classes -- and the typical answer we get back is on the
order of 10%, were you to average it out. Yet the real
overhead for most electrical contractors runs closer to 20%
(some higher).
Overhead is a COST. You will, in fact, pay
that electric bill when the lights are left on. You pay overhead
costs (which means, they are real!) -- and if you don't somehow
include the correct amount in your estimates and bids . . . you
won't get it back.
Know your on-the-job cost history.
Develop your own Red Flags.
Business doesn't provide you with advantages,
but you can create your own. You have job cost records. You can
use them to develop rule-of-thumb numbers or detailed
information on job performance. This information is in your
computer! Use it.
What are we talking about? Let's say you are
doing a number of schools. At the "macro" level, your costs have
been running $45 per square foot on these jobs. This is not a
guess, or a ballpark number, or one you pulled out of the thin
air . . . it's the actual cost that your company has experienced
on real jobs.
Let's say that's the case -- you've done four
school jobs, and they've all come in around $45/sq. ft. Now,
you're bidding another school job. Somehow, the cost per sq. ft.
has come in at $32. This is a red flag.
You know that -- somehow -- your estimate (and the bid you're
about to submit) is off-base vs. your experience. Perhaps there
IS a reasonable explanation that you can find. But maybe there
isn't.
You'll be better off if you look for that
explanation -- whether you find it or not!
Consider this rule: BID THE JOB, NOT THE
MARKET
The market isn't always right.
You might not win a job, but if you estimated it correctly --
and included the proper amounts for overhead and profit -- and
someone else won the bid . . . all that means is that someone
else took a job below cost. Let that guy have it!
When times begin getting tough, it is
difficult to keep this uppermost in mind. But if you are to be
profitable, you must resist the temptation to go below your
costs.
As you well know, you can't control the
market price . . . you can't figure out why a low-balling
competitor is taking jobs at those prices. The temptation will
be to lower your figures. Before you submit the bid, take a good
look at your price. Ask yourself: If I submit this bid, and I
end up winning . . . do I really want this job at that low
price?
You might be asked to cut costs.
Measure twice, cut once!
Here's a hard fact: You can cut the cost on
paper, but if you can't cut it in real life . . . the amount you
cut comes out of your profit. For example: Don't think that you
can cut that $100K cost from overhead to satisfy a customer and get a job. Your overhead spending is fixed! Maybe you can
find a way to buy the materials a bit cheaper; perhaps you can
find a way to do the job smarter and faster, and shave some of
the labor.
But when you make a cut in a negotiated price
or a competitive bid, and it's a reduction you can't actually
make when push comes to shove -- the amount you cut comes right
out of your hide!
SAVE THE DATE - April 2-5, 2008
DATE: April 2-5. LOCATION: Tempe Mission
Palms Hotel, AZ
1
-- We hope you've received info on the User's Conference from us. If
not, we can e-mail it to you -- call us at 800 444 4890 or e-mail us
at lmccormick@mccormicksys.com.
2
-- The schedule so far:
Standard and Advanced
Windows Training Classes are set for Monday & Tuesday, March 31
and April 1.
The Masters Golf
Tournament goes off Wednesday morning April 2.
Opening Reception:Wednesday April 2, in the evening.
Main Conference Sessions are Thursday and Friday -All day .
Our computer lab stays
open Saturday April 5th until 12 noon!
Stay tuned for more detail on your best 2008 opportunity to learn
from McCormick's people and network with your fellow contractors and
estimators!
Guest
Commentary: CONSTRUCTION OVERVIEW
(basic facts on the construction industry,
as
provided by the Associated General Contractors of America)
Construction is a significant source of jobs. The
industry provides jobs for 7.6 million employees—more than 5% of the
total nonfarm workforce. In contrast to the steep drop in
homebuilding, nonresidential construction employment grew at least
0.9% from November 2006 to November 2007. This estimate is probably
understated, since many “residential” construction employees are now
doing nonresidential work, even though their employers are still
counted as residential contractors.
Construction jobs are good-paying jobs. In November 2007, seasonally adjusted hourly
earnings in construction averaged $21.27 per hour, 21% higher than
the average for all private industry nonsupervisory workers.
Construction makes a disproportionately large
contribution to GDP. For the past eight quarters, investment in
private nonresidential structures has grown faster than gross
domestic product (GDP). Construction spending totaled $1.16 trillion
in October 2007; nonresidential was $647 billion (56%).
Construction is a substantial purchaser of U.S.
manufactured products. In 2006, shipments of construction materials
and supplies topped $500 billion—nearly 11% of total U.S.
manufacturers’ shipments. Shipments of construction machinery
totaled $36 billion—11% of all U.S. machinery.
Materials costs are a major problem. From
December 2003 to October 2007, the producer price index for inputs
to construction jumped 28%, twice the 13% rise in the consumer price
index.
The typical construction firm size is very small.
In 2005, there were 788,000 construction establishments with 6.8
million paid employees. Thus, average employment was less than nine
per establishment. (An establishment is a permanent business
location. Most construction firms have only one establishment.) More
than two million additional construction firms had no paid
employees—mainly self-employed individuals but also partnerships and
holding companies
Small business is big in construction. In 2005,
91% of construction establishments had fewer than 20 employees. Only
1% had 100 or more.
Construction is a low-margin industry. Internal
Revenue Service figures for 2004 show that the 722,000 corporations
in construction had net income (less deficit) of $47 billion, or
3.7% of total receipts of $1.3 trillion. That was considerably below
the all-industry average margin of 4.9%.
Construction is a high-turnover industry in terms
of entering and exiting firms. Census data prepared for the Office
of Advocacy of the U.S. Small Business Administration shows that
99,000 of 630,000 construction firms with employees in 2004 (16%)
opened since 2003, while 77,000 firms closed
The 2007 Construction Industry Annual Financial
Survey, conducted by the Construction Financial Management Assn. (www.cfma.org),
included responses from 756 companies. The net margin before income
taxes in the latest fiscal year averaged 2.7%. The median return on
assets was 8.8%.
Read All About It!
-- coverage of contractors who use McCormick Systems
An article in the October 2007 issue of EC&M tackled electrical contracting and estimating. Here is
a particularly relevant excerpt:
For
contractors like Tri-City Electric Co., Davenport, Iowa,
estimating software that's been steadily improving has
helped bolster its preference for keeping all estimating
and bidding work in-house. Tom Lanum, chief estimator
for the 400-person company, says the software it uses,
from McCormick Systems, Chandler, Ariz., has made its
staff of about a dozen dedicated estimators more
productive and able to easily handle all the work the
company wants to bid.
“Software
has made estimating much easier, especially with some of
the networked products that allow us to put multiple
estimators on projects as needed,” Lanum says. “The
speed and networkability of the software and hardware
means several estimators can work on a project
simultaneously and bring an estimate in a timely
fashion.”
With its
extensive materials databases and computing power, Lanum
says most top-shelf estimating software is able to
generate highly accurate and reliable takeoffs, as well
as solid bid numbers that consistently reflect the
company's bidding style. In addition, the network
functionality meshes with Tri-City's approach of getting
project managers more involved in the bidding and
estimating process. That objective might be more
difficult — not to mention more costly — if outside
estimators that typically charge by the hour were
spearheading the estimating work.
Commonwealth's Firestone also praises the improved
collaborative capabilities built into estimating
software. Also a McCormick user, Commonwealth has been
able to increase the turnaround time on bids and quickly
bring manpower to bear on estimating jobs. Across the
company, about 55 employees (mostly estimators and
project managers) can access the software and easily
merge their work. That ability to quickly mobilize staff
across multiple office locations is especially valuable
as bidding periods have become more compressed.
“The time
frame to put together estimates is being cut, because
everyone wants things built faster,” Firestone says. “It
used to be you had a month to bid a job; now it's two
weeks, even on some of the larger ones. Some may even
come in on a Monday with a Thursday deadline. A
network-based software product is conducive to working
in that kind of environment.”
See Us In Orlando!
January 14-17, we'll have booth #1206 at the BICSI Winter
Conference. More
information.
McCormick 2008 Calendar --
Dates For
Your Planning
We'd like to talk with you. Please consider coming to see us at the
shows listed below. And plan to be with us in Tempe for the annual
User's Conference!
Jan. 14-17, Orlando, FL -- BICSI Winter
Conference. More
info.
Feb. 27-29, Las Vegas, NV -- Electric West
Conference & Show. We're in booth #400. More info.
April 2-5, Tempe, AZ -- McCormick Systems
Conference '08
Pre-Conference training
classes (standard and advanced) -- March 31 & April 1
May 7-9, Las Vegas, NV -- ABC Construction Education Conference Elect/Mech
Sept. 29-Oct. 2, Las Vegas, NV -- BICSI Fall
Conference.
Oct. 4-7, Chicago, IL -- NECA Show
Oct. 30-31, Atlanta, GA -- IEC Electric Expo.
|
