According to the latest report, the electrical services market worth of the United States is expected to reach $122 billion by 2027. Are you an electrical contractor from the USA? Seeking ways to make your electrical business successful? Then you must get an accurate electrical cost estimate for your potential projects.
But the question is how and where you can get electrical estimates. You can get electrical estimating best practices from some reliable estimating partners. But if you have just started your electrical business or cannot afford an estimator then you can prepare an estimate for yourself.
Here in this blog, we’ll discuss a detailed method to prepare an accurate cost estimate, but before going on let first discuss what is an electrical estimate and why it is important.
Why are Electrical Estimates Important?
An electrical estimate tells the total cost that is associated with any electrical project. It comprises electric material costs, labor costs, and costs that are required to perform other electrical tasks.
Suppose you have to go shopping for groceries for the first time and your budget is $200. As this is your first grocery experience, you don’t know if you can buy all the commodities in your budget or not. So, you decide to make a rough estimate to buy all essential items within your budget.
You make a list of all the things that you need with their quantities. Check the prices from the internet or local rate lists. After that you go to the supermarket and by considering their prices decide what to buy or what not.
The electrical estimate is like a grocery list of all the commodities with their quantities and prices. This estimate is vital for every electrical project as it ensures the success of the project. According to the survey, electrical contractors earn 17%-20% profit in their electrical businesses due to accurate electrical estimates.
Now, you have got an idea of what an electrical estimate is and why it is critical. Now move forward.
Steps to Prepare a Good Electrical Estimate
Preparing an electrical estimate is an intricate and time-consuming process but it is an integral part of the success of the electrical project. Here is a detailed process to prepare an estimate.
1. Review the Project Specifications
It is a general misconception that the first step of estimation is to perform quantity takeoff. That’s not true. The estimation process starts with the reviewing of the project requirements. These requirements may include architectural drawings or structural blueprints.
Reviewing these specifications may help you to identify anything that can impact the project in any way. This will also help you to figure out what areas can create more overhead and markup costs, so you can find ways to reduce unnecessary costs.
2. Perform an Electrical Takeoff
After reviewing the project specifications, the next step is to perform electrical takeoff. This step leads you toward an accurate electrical estimate. Your takeoff report includes all the electrical items like counts of wiring, conduits, fixtures, switches, lights, breakers, and other electrical equipment that you need for your electric job.
To prepare a comprehensive electrical takeoff report, many contractors use advanced electrical estimating techniques and tools like Trimble, TurboBis, etc. While some contractors are still using Excel sheets to create a takeoff report. Whatever method is feasible for you, you can use it for performing takeoff.
3. Assign Costs to Items
Once you’ve prepared a detailed electrical takeoff report, then you can evaluate the cost that is associated with each electrical material. Make sure that you use the current material cost so your estimate will be accurate and precise.
We understand that being a contractor it is difficult for you to stay updated with market prices but you can’t overstate the importance of refining electrical cost estimation for materials. We suggest that you send the spreadsheet of the materials list to suppliers and request them to update the current market price of materials.
4. Add Labor Costs
Now it is time to calculate the labor costs for your electric work. The most common method for pricing the labor cost is piece-per-rate. In this method, contractors pay electricians based on their work output. For instance, you may pay $0.20 per square foot for electric work output. So, for a 2000 sq. ft. home, the total cost is $400. Detaild guid about estimating electrical work by square foot.
The second way is to pay the labor on an hourly basis. According to our research, in the United States, the median pay of an electrician is $27.32 per hour. To calculate the total labor cost, determine how many workers are needed for your electric work, identify the number of hours, and then add their hourly rate.
Per Hour Labor Rate x Number of Hours = Total Labor cost
5. Add Markups and Overhead Costs
Profit margin is the difference between the actual product price and the price that you charge the clients. After estimating the total product costs, you need to set up a markup percentage for each product. In the power system, the markup percentage is 8% but in different projects, this can change.
The overhead cost is the ongoing operational cost to run a project. If you have no idea about your overhead cost then certainly you’re not going to make any money. So, make sure that you add your overhead cost to your prepared estimate.
6. Prepare the Final Estimate
Now you have a clear understanding of the project, know your material costs, and evaluate the cost of labor, so you have everything that you need to estimate the cost of your electrical job. Compile all the data in a report so you’ll not be confused in the future.
Also Read: Tips To Estimate Residential Electrical Work?
Tips to Get a Good Electrical Estimate
By following our estimation process, you can prepare an electrical estimate. But to make it accurate and reliable, you must follow some tips that we are going to mention below.
➤ Understand the Scope of Work
A comprehensive and detailed scope of the work is essential for an accurate cost estimate. You should break down the electrical project into specific tasks that further help you in specifying the material and labor associated with each task.
For instance, with the detailed scope of the work, you’ll know how many fixtures and outlets are needed for the particular room, how it is wired, where the lighting will be, etc. Below are some tips that you must follow for a better understanding of the project.
- Get electrical products cataloged from some trusted manufacturers of electrical components
- Search electrical components on the internet
- For getting illustrations of components, use the electrical manufacturing catalog.
➤ Use Advanced Estimating Tools
In today’s world of technological advancement, the integration of modern software and tools is crucial for an accurate electrical estimation. So, during the estimation process, you must use digital tools that mitigate the risks of human errors.
These tools help you to prepare an accurate material takeoff report, evaluate the labor and material costs, and take into account other factors like contingencies, unforeseen events, etc.
➤ Stay up-to-date with Industry Trends
The electrical industry is fast-paced and is continuously evolving. To prepare accurate and precise electrical cost estimates, you must stay up-to-date with industry standards and new technology advancements. By continuously monitoring the changing dynamic, you can make informed decisions regarding your electrical project.
Understand this by a simple example. Let’s say, in the last year, you prepared a cost estimate to change a light fixture in a room, which is $200 including the labor cost. Now a project comes of the same scope, you prepare a cost estimate based on the previous information.
But do you know that this year the price of fixtures increased, and so has the labor cost? This small negligence of not getting the latest market price resulted in losing the bid for a potential task.
➤ Collaborate with Other Professionals
An accurate cost estimate is the foundation of the success of any project. So, don’t leave any stone unturned. To avoid unrealistic, biased, or inaccurate estimates, collaborate with other professionals or your team members.
Communicating and collaborating with professionals not only helps you in enhancing accuracy in electrical estimates but also mitigates the potential risks.
➤ Continuously Update the Estimation Process
In the end, you must regularly update and monitor your prepared estimate throughout the estimation process for new information, changes, or feedback available. You can use different tools and metrics to track the changes and analyze the progress during the estimation process.
By continuously updating and optimizing electrical estimating processes, you can modify your estimation technique and plans to get desired results, as well as communicate with some experts regarding any potential issue at the right time.
Conclusion
The electrical estimate is the building block of a successful electrical project. Being an electrical contractor, you need to master the electrical estimation process to get efficiency and maximum profits for your potential projects.
By integrating advanced technologies, staying up-to-date with the latest industry standards, streamlining collaboration, and with a thorough understanding of the scope of the project, you can get an accurate electrical estimate.
FAQs
What are the common challenges in electrical estimating?
Electrical cost estimating is an intricate process and needs precise attention to detail. With electrical cost estimation, several challenges for estimators include:
- Ever-changing prices of materials and labor
- Accurately predicting unforeseen circumstances
- Incomplete information and inaccurate data
How can I ensure that my electrical estimates are competitive?
Electrical estimation is a complex and time-consuming process. Prepare a competitive estimate is a hard nut to crack, but by following the below-mentioned tips you can get the best estimates:
- Use the latest software for preparing electrical takeoff reports
- Integration with industry standards
- Create a detailed scope of work
- Better communication with clients
What are some common mistakes to avoid in electrical estimating?
Electrical contractors make some common mistakes that lead them to budget overruns and time delays. Here we enlist all of them:
- Underestimate the labor costs
- Ignore the fluctuation of material prices
- Neglect the contingency factor
- Prepare an estimate based completely on historical data
- Overlook regulatory requirements
Read More: How to Run a Successful Electrical Contracting Business?
How can I improve the efficiency of my electrical estimating process?
An efficient electrical estimation process is the key to the success of any electrical project. You can improve the efficiency of your estimating process by the following ways:
- Do a site visit to understand the scope of your project
- Use modern software to get accuracy
- Consider unforeseen circumstances
- Use different electrical markup strategies
