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Discussion Starter · #1 ·
A frequent theme seems to be "How do I estimate dollars, total time, labor hours, task duration, etc if I don't have much experience doing something or doing the estimates?" It comes up a lot in a number of industries, and there are ways of handling it - here's one way:

First, break your project down into tasks and subtasks. It's better if you have at least 5 main tasks of roughly the same size, but not critical. Under each task, have at least 5 subtasks - again, better to have 5 or more, but not critical. Next, for each subtask, pick a number - your "best guess" that you think will be what it takes for that subtask. If you've done it before, great, if you have no experience with it at all, draw on experience with something similar that you have done. Write the "best guess" numbers down for all the sub tasks. Then go back through the list, and do the same thing for what you think is the "least" amount it will take (whether labor, $, days,..). Then one more time through, but this time it's the "most". Don't forget - things can go really wrong, so that is included - custom cabinets arrive, and they aren't waht was ordere, so they have to be built agian and shipped again, you know the possible problems you could run into.

Now you have 3 sets of numbers. For each subtask, use this formula to get an estimated actual number:

("Least" + 4*"best guess" + most)/6

Add them all up, and you're done with the most likely estimate of cost or man-hours or whatever aspect you're estimating. Half the time, you should come in under the estimate, and half the time you should come in over the estimate. Duration is a little different - you actually need to have the dependencies and a hypothetical plan / schedule worked out and use the critical path items.

OK, so now you have an idea of what it looks like from a top level, but how do you work with estimates that are so uncertain? First, look at how uncertain they are. Calculate this number for each subtask:

("most" - "least") / 6

That's an estimate of the standard deviation of the estimates you already came up with. The larger the number, the more risk there is with that part of the project. You'll typically notice that some are a lot bigger than the rest - these are the ones to concentrate on. You want to manage the risk as best you can, so sometimes it's a question of going out and getting more information and sometimes subbing something out is the way to go. It's important to get as much of that risk off your plate by having the contract written correctly - otherwise, you have to include a whole bunch of possibilities in your estimate, and your estimate is going to be way high. Change orders are your friend. What's left is the risk you have to manage during the project.

If done correctly, the standard deviations you came up with will include the uncertainty you have with doing a subtask, so the more experienced you are, the tighter they will be, the less your experience, the more risk. That's as it should be.

A lot more can be done with this technique, but that gets more complicated. It's important when you answer the "best guess", "least", "most" questions you do it in that order, and think "it will take this amount", "it will never take less than this", "it will never take more than this". You can have a person working for you who will be doing the work give estimates the same way for the parts they will do - their estimates should reflect their experience.

Those of you who like underlying math, this is an simplified version of a recognized project planning technique I used for maybe 10 years or so. It assumes the estimates have an underlying beta distribution, and your "best guess" is the distribution mode. The first calculation set corrects the mode estimate to an estimate of the mean, which I slightly cheat in describing as 50% above and 50% below, which is actually the median. In actual practice, the correction to the mode is typically ~10% across multiple industries, which matches up pretty well to people commonly throwing in 10-15% on top of their best guess as padding - it isn't really padding. I use 5 for breaking down into tasks and subtasks, since with less than 5 tasks, you don't really get the advantage of errors in individual estimates cancelling out. Even with 5, one subtask can dominate, so if that can be broken down further, that can improve overall error. The most error prone that can't be canceled out is estimator bias - some people may tend to think everything is very quick and simple, and others will think everything is almost impossible. My experience is these quickly settle out as the person gets experience using the technique.

The human aspect can be interesting - some people have GREAT difficulties committing to a set of numbers unless they are sure of the numbers, but all contractors have to do it to some extent. Once they learn the technique works, it becomes much easier for them.
 

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That's a lot of reading...

But your method is better that the WAG method.

I do a worst case / best case scenario for Jobs I'm not to comfortable with.

Then I double check with cost vs. value report . Just as a back up for
overall project price. We all learn a way that works for us.

If the job is something we haven't done, I would say it's on us not to loose
our shirts on it. Most of the mistakes I've made over the years was from rushing through estimates and missing something obvious.

I want to add that I use the Cost vs. Value as a reference, only.
I understand all our prices are dependent on our own overhead.
 

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I didn't read that...someone else read it and tell me if it's worth reading.
 

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Discussion Starter · #6 ·
I do a worst case / best case scenario for Jobs I'm not to comfortable with.

Then I double check with cost vs. value report . Just as a back up for
overall project price. We all learn a way that works for us.

If the job is something we haven't done, I would say it's on us not to loose
our shirts on it. Most of the mistakes I've made over the years was from rushing through estimates and missing something obvious.
It's pretty easy to set up a spread sheet to do this, and you seem to have almost gotten there on your own. This just takes your intuitive approach one step further.

I always found sanity checks to be valuable for catching goofs - rules of thumb, standard costs, they all have their place:thumbsup:
 

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Interesting stuff, doesn't seem like it would take too long after the first go around. If you kept track of actual time, it would give you some great info quick. You already broke it down to each task.
 

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Discussion Starter · #9 ·
How worthwhile it is to you depends on how important managing your project risk is.

There are professional project managers that do this every time, even on projects similar to ones they've done before and with hard historical data. They just use the historical to see if any adjustments need to be made to estimates, or replace the estimates with actual data if there is enough.
 

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Discussion Starter · #10 ·
Interesting stuff, doesn't seem like it would take too long after the first go around. If you kept track of actual time, it would give you some great info quick. You already broke it down to each task.
Breaking it down the first time is what takes time. The task list can be used over and over again, you just have to make sure it has everything in it.

If you make a first one for a bath remodel, for instance, and make sure everything possible for a bath remodel is in it, you can just skip anything not being done for a particular remodel.
 

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Or....... we could just give a guy the info he's looking for. What's wrong with giving a guy a ball park on man hours to complete a task? If he is a DIY then I get it. What if the mods here required some kind of license or an OP could post his Lic and get an honest answer here. Isn't this forum to help fellow contractors? I can understand not helping your competition but most of us are from different states.

I think it should be us against them, not us against us. If a new guy under estimates man hours who wins, our industry? the new guy? you guys? no the only winner is the homeowner. Michael Stone had it right the biggest giveaway is the deal homeowners get when they hire contractors. You would think they'd appreciate it. Instead because our prices are so out of whack with one another they think were crooks. IMHO
 

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Instead because our prices are so out of whack with one another they think were crooks. IMHO[/QUOTE

Our prices aren't out of whack, Every business owner has his / her
own amount of overhead. The prices only matter to the uneducated homeowner. We educate them, by using our sales process and they choose the contractor that suits them. We have to convince them that it's us.


Another point: When tracking a new job or procedure,(the time it takes).

Don't tell your guys how long you allotted . If you do, it will take that much time or more. :laughing:
 

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Instead because our prices are so out of whack with one another they think were crooks. IMHO[/QUOTE

Our prices aren't out of whack, Every business owner has his / her
own amount of overhead. The prices only matter to the uneducated homeowner. We educate them, by using our sales process and they choose the contractor that suits them. We have to convince them that it's us.


Another point: When tracking a new job or procedure,(the time it takes).

Don't tell your guys how long you allotted . If you do, it will take that much time or more. :laughing:
I agree. Selling the value you are bringing to a prospective client goes beyond simply the numbers of your estimate.
 

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Discussion Starter · #14 ·
Or....... we could just give a guy the info he's looking for. What's wrong with giving a guy a ball park on man hours to complete a task? If he is a DIY then I get it. What if the mods here required some kind of license or an OP could post his Lic and get an honest answer here. Isn't this forum to help fellow contractors? I can understand not helping your competition but most of us are from different states.
I gave demo info for if I'm doing it, with certain caveats. I cannot possibly tell someone how much time and $$$ it will take. It isn't possible at all. I can't even say if the caveats are met - that takes on-site inspection. Coming up with a task list and a list of questions to ask can be done, and experience is a good help.

There's no magic bullet and no golden key experienced people are keeping from others, at least that I'm aware of.
 

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I gave demo info for if I'm doing it, with certain caveats. I cannot possibly tell someone how much time and $$$ it will take. It isn't possible at all. I can't even say if the caveats are met - that takes on-site inspection. Coming up with a task list and a list of questions to ask can be done, and experience is a good help.

There's no magic bullet and no golden key experienced people are keeping from others, at least that I'm aware of.
Look I just think it's helpful when someone can come here and ask people with more expertise than themselves about their experiences doing X. Obviously without seeing the job we can't possibly be hundred percent accurate but I don't think that's what most people are looking for. I think their looking for some guidelines.

I posted a question about decks. I have limited experience with composite and PVC railings. Mike from Ca. was kind enough to state that it takes him a day to do 10 sections of railing. That information is useful to me in estimating my job. I don't care about his prices and I know I will not be able to work as efficiently as someone with his expertise, but it still helps to have some idea of the amount of time it would take to do a certain task.
 

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Discussion Starter · #17 · (Edited)
Look I just think it's helpful when someone can come here and ask people with more expertise than themselves about their experiences doing X. Obviously without seeing the job we can't possibly be hundred percent accurate but I don't think that's what most people are looking for. I think their looking for some guidelines.

I posted a question about decks. I have limited experience with composite and PVC railings. Mike from Ca. was kind enough to state that it takes him a day to do 10 sections of railing. That information is useful to me in estimating my job. I don't care about his prices and I know I will not be able to work as efficiently as someone with his expertise, but it still helps to have some idea of the amount of time it would take to do a certain task.
And you received an answer, so your problem is?

There's a guy I really feel for who inherited his dad's business, and was never taught how he did anything to do with estimates. He has limited knowledge of performing the various trades himself. This type of situation is more common than you may know.

Last I checked, there were a bunch of people helping him out putting together a task list, and what questions he needed to get answered to be able to understand some of the critical factors. Multiple people gave him duration estimates for the total project - not specifically his, but a usual one that the member would do. While it's useful information to him in trying to see whether his estimates are reasonable, that still doesn't tell him how to put together estimates specifically for his jobs if he just really doesn't know what it will take, and that's what he has to do if he's to get going in business without losing money.

Keep in mind, if I get carp for trying to help out people with information, I'm just not likely to do it - no skin off my back.
 

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Discussion Starter · #18 ·
Don't tell your guys how long you allotted . If you do, it will take that much time or more. :laughing:

You just give when you want them to complete their parts. If it didn't have significant extra costs, a lot of times I would try to crash the first 25% of the project. Crash, meaning pull all the dates in sooner. The reason for this is at 25% you can generally accurately predict what your actual costs and duration will be for the overall project, and have additional time to make adjustments to meet schedules and budgets or at least come closer.
 

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I tried reading the OP twice and my eyes glazed over both times. Having said that, this is the business section and the topic is estimating when their is limited experience or historical data. With that in mind I would offer:

When providing a quote which includes a major new task I limit the other variables which means I do this for existing clients with good previous contracts. No new clients, problem clients or competitive bidding.

Materials are the easy part of the quote so the question is always hours and I aim for the maximum. I don't play averages with unknowns. I don't mind losing 1 in 10 or 20 but no way am I losing half the time.

Anyway, the bottom line is with experience, imagination and good problem-solving skills the estimates tend to be close to reality.
 

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Sounds like too much thinking to me!

I get the point regarding using some sort of mathematical equation. This reminds me of the era when I read every book about gambling and I thought I invent a system that could make me rich. It took me about 3 months to realize that regardless of the math you use when you throw the dice knowing the math does not change the risk.

The most important thing you need to know is the amount and value of the risk and the risk is the "what ifs". What would be my cost for each 'what if'.

Personally, we base all our financial decisions on mostly experience and we already factor the 'what ifs' and this percentage that we add already includes new types of projects that we are less familiar with.
 
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