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The accuracy in which you estimate the cost (and profitability) of your construction work will either make or break your business.
Even small jobs take time, so understanding how to forecast costs and stick to budgets is just as important as the work itself.
Luckily, with some old-fashioned experience and an adherence to some fundamental tenets of accurate cost estimation, you should get a feel for the process.
Know Your Overhead Costs
What are overhead costs? Entrepreneur.com sums it up nicely:
The indirect costs or fixed expenses of operating a business (that is, the costs not directly related to the manufacture of a product or delivery of a service) that range from rent to administrative costs to marketing costs.
With that said, if your business isn’t taking into account its day-to-day overhead in how it quotes clients, then you’re going to find yourself struggling to stay in the green.
While many of your overhead expenses have no direct involvement with your clients, they’re an essential aspect of your business.
Without these details, you’d have no demolition to provide, so it stands to reason that these expenses should be worked into your bids.
Know Your Project Costs
Even more important than your overhead is accurately accounting for your project costs.
The construction industry, especially demolition, do not provide their services in a vacuum.
If you’ve been in this industry long enough, then you’re well aware of the various expenses you incur before you even break ground on a site, much less raze a structure.
And when all is said and done, there are expenses incurred after-the-fact that you need to account for as well.
Permits & Special Licensure
Permitting and licensure are expensive.
But…
Guess what’s even more expensive?
What's even more expensive is not having the correct permits or licenses after the fact.
Before you quote a potential project, understand what you need to safely and legally perform the forecasted work.
Those expenses should be well-understood before you create your quote.
Most importantly, they should be part of your quote to your client.
There is no reason you should be on the hook for a permit or special license on behalf of a customer.
Hauling & Landfill Costs
Where does all of the material go after a structure has been demolished?
The answer to that question can vary, but one thing is universal—no matter where it goes, it will probably cost you money to get it there and to dump it there.
When calculating the cost of a project, make sure you understand who is on the hook for hauling and disposing of debris.
If you’re the responsible party, then you need to work those expenses into your quote in one way or another.
Most of all, you need to understand the cost of that service before you agree to be accountable.
Disposal costs vary widely depending on the region and the type and quantity of material you have to dispose of.
The easiest avenue to accurate disposal estimation is by getting a few quotes from local dumpster rental businesses.
Equipment Allocation & Costs
There’s only so much you can do with your hands when it comes to demolition.
Eventually, you’ll need to enlist the help of some hardy power tools to assist you with heavier demolition projects.
However...
Consider your tools carefully and account for them in your quote!
Try to be clever with your tool choices.
For instance, consider buying or renting gas-powered jackhammers for the job instead of the standard hydraulic variety.
Doing so is one of the easiest cost-saving measures you can take because they’re more portable, create less noise, and do not require a cumbersome (and dangerous) air compressor to use.
By choosing the right tools, you can widen your profit margins by completing larger jobs in less time with less expensive equipment.
Undergo a Thorough Jobsite Inspection
You may have a lot of knowledge and intuition from your time in the industry but no one will do as thorough a job at inspecting a job site as an actual inspector.
You’ll want the inspection to focus on hazardous materials such as asbestos—these are the types of materials that can turn a seemingly straightforward job into a total nightmare.
Not only will you go severely over budget if you find asbestos in a structure, but you risk the health of your crew by not having a thorough understanding of the site.
Leave Zero Gray Areas
As a demolition expert, you may find yourself hyper-focused on portions of a project that are your bread-and-butter.
This may leave you feeling extremely confident in your ability to calculate costs and create an accurate project estimate for your clients.
However...
Ask yourself to be held accountable for what you’re not sure of and try to force yourself to focus on those components the hardest.
You may find that the gray areas in your knowledge and expertise are what is holding you back from greatness.
If you only focus on what you’re good at, then you’ll be routinely surprised by those parts of the job that you’re not as familiar with.
To put it simply—if you find yourself to be continually unfamiliar with local permits, then make yourself an expert on that subject.
Or...
If you’re always finding yourself complaining about your crew’s responsiveness, consider streamlining your equipment.
Think out-of-the-box; the gas-powered jackhammer is just one way to innovate.
Accurate Quotes Come from Accurate People
If you’re the kind of person that works off-the-cuff, then the demolition industry might not be the industry for you.
Much of our work looks chaotic, but there’s a careful order to the process that anyone in the business understands.
But your attention to detail shouldn’t end at the boundaries of the job site.
Instead, bring that same fervor into your office work.
After all...
Accurate quotes come from accurate people—you should know your costs inside and out and be willing to account for them.
Let your great work and happy clients justify the expense of thorough, generous accounting; it’s the only way to sustain your demolition business.
Chris Galloway is the owner of US Hammer Jackhammers and Postdrivers. He’s been a contractor his whole life, owns a rental equipment company, and runs it all out of Woodland, California.
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