What is an estimate?
An estimate assesses the probable total cost of an upcoming project. An effective estimate accomplishes three main things for painteres:
- Identify all tasks and phases that you must complete to finish the job
- Measure the scope of these work items
- Assess the likely cost of each task and phase
Estimating is crucial for securing jobs, whether you’re competing with other bids or dealing directly with a client. This process involves creating a precise cost estimate based on the project’s specifications and requirements, ensuring profitability for your hard work.
However, estimates don’t fall by the wayside once work actually starts. For example, they help you control costs as a job progresses. This is even more important for contractors that consistently job cost.
Setting a cost target or budget based on your estimate allows you to compare the actual cost of work against your initial target amounts. This lets you discover where you need to take corrective action to control material prices and bring productivity levels up to where they need to be to maximize profits.
Stages of creating an estimate
- Quantity take-off
- Recap of quantities: All the work items, number of tasks, and specifications
- Pricing: Prices for your labor, materials, equipment, sub fees, and additional costs are entered against the quantities to determine the estimated cost of the contractor’s work
- General expenses: Anticipate costs of project overhead and added to estimate
- Summary and Bid: All the estimated prices are summarized, markup is added, and all bid docs are created and compiled. Then, it’s merged into a bid.
The survival of a painting contractor who gets work through lump sum contracts or firm price bids often rests on the accuracy of their estimates and the efficiency of their execution. Unsurprisingly, detailed estimating is necessary for creating a winning bid in a highly competitive trade.
Why do accurate estimates matter?
- Cost control
- Better bids
How to prepare
Crafting an accurate estimate requires you to interact with a plethora of individuals and a mass of data, especially if you’ve been job costing consistently.
You can only do this effectively, however, if you’re starting with a great process that allows you to standardize procedures, tasks, and operations. Your standardized processes should include bidding. For this reason, you must create a systemic approach to facilitate an accurate bid for every job.
Only target profitable jobs
Many times throughout the year, especially when business is slow, you’ll be tempted to bid on unprofitable jobs. Avoid this temptation at all costs. If you’re going to go through all the time and effort to craft an in-depth estimate, bid, and project plan, be absolutely sure that this job will be a profitable one. Job costing is a surefire way to understand what job types, scopes, and job sizes are profitable for your business. Lean on that data to target the right jobs for your crew.
Avoid taking on risky jobs or working for unfavorable rates, as this will only lead to financial problems. Prioritize profitability by carefully reviewing past jobs and choosing only those you can confidently complete under budget and on schedule.
Source bid information
The success of your bid hinges on the ability to obtain information about the project or projects that are out for bid. This information is the source of your estimate. Without it, you’re shooting in the dark.
You’ll need to understand if the jobs you’re after are public, private, closed, or open. These classifications will change how you source your info. Private bids, for instance, will require an invitation from the project owner, while you can access public bids from several sources like trade journals or government agency websites.
For a more in-depth look at the bidding process in full, check out our guide on the entire bidding process for a full rundown.
Review the documentation
Once you get a hold of the bid documents, you shouldn’t waste any time reviewing the instructions to bidders section. These instructions are vital for gathering the information necessary to complete the rest of your bid and estimate.
Ideally, you’ll review every bid document. However, For larger or more complex projects, that might not be possible. In that case, focus on the information that is pertinent to your portion of the project or your direct responsibilities. This includes the “front end” of the specs, which usually contain clauses that’ll impact the cost and payment of the work to be done. For example, if there is a 60 or 90-day payment period, you’ll need to account for this in your estimate by including finance charges or a larger contingency fund.
In short, the more you can examine the better. Don’t overlook anything that seems unusual. It’s all too easy to end up with a bruised ego and a diminished bank account because you underestimated the cost of a low-grade material or completely misunderstood expectations. If you’re unsure about anything you’re seeing, speak up, and don’t shy away from firing off an RFI.
Ask questions (make an RFI list)
If you’re left guessing on anything, it’s best to go ahead and send out an RFI. Just be sure that your question isn’t already answered in any of the project plans or contract documents.
When to use an RFI:
- Ambiguous designs
- Inadequate or incorrect materials
- Missing information
- Unexpected issues/obstacles
- Inconsistencies in installation requirements, work site conditions, or timelines
Getting the answers to these questions is vital to creating an accurate estimate–so don’t assume anything. Take your time, be thorough, and ask as many questions as possible. Your goal is to clear up any unanswered questions from the contract documents.
If you need help creating an RFI, check out our RFI template for help building a convenient and professional RFI.
Site visit
Setting up a standardized process and ensuring overall estimate accuracy is crucial for successful project completion. This includes:
- Personally visiting the job site equipped with a list of specific questions and a thorough assessment of the site’s condition and any potential obstacles
- Properly considering all aspects of the project, such as ceiling height and necessary tools and equipment
- Factoring in any potential rental costs for specialized tools, with an additional $1k allowance in the contract.
For painters, it’s especially important to check for any environmental requirements, as non-compliance can be costly. Don’t forget to bring a good camera (an iPhone will do) and capture detailed photos of everything. This will save you from having to make multiple trips to the site.
Perform a quantity takeoff
A precise estimation begins with a quantity takeoff. This involves breaking down the project into quantified tasks, phases, or work items. By dissecting the job specifications, you can identify specific activities and responsibilities. From there, you can break the job into smaller pieces of predefined work items that correspond to your duties on the job.
When putting together your takeoff, ensure you’re including descriptions and dimensions to accompany your takeoff items. Include the length, width, height, and a line or two on the item itself. Descriptions should have enough detail to help price the work item but be short enough to get the gist of the task in just a few sentences.
Estimate the cost of painting materials
Now that we’ve compiled the following information:
- Identified a profitable job
- Reviewed the documentation
- Performed a material takeoff
It’s time to create individual line items for each major job cost:
- Total cost of materials
- Total cost of labor
- Total cost of equipment
- Total cost of subcontractors
- Total miscellaneous costs
These line items make up the bulk of your estimate. After estimating job costs, you must also factor in profit and overhead to determine your sales price based on your markup and margin strategy.
Interior vs. Exterior jobs
While everything we’ve discussed so far applies to any type of job, estimating interior and exterior jobs requires different considerations and approaches. As a painting contractor, it’s important to understand the differences between these two types of jobs to accurately estimate the cost and time required for each.
Surface preparation
One of the main differences between interior and exterior painting jobs is the surface preparation required. While both types of jobs involve some level of preparation, exterior jobs usually require more time and effort due to exposure to weather elements and natural wear and tear.
This includes cleaning, scraping, sanding, and filling cracks and holes on the exterior surfaces. In contrast, interior surfaces are typically in better condition and require less preparation, with the exception of some high-traffic or heavily damaged areas. Ensure to account for any added or reduced prep time in your labor and material estimates.
Materials and equipment
The type and amount of materials and equipment needed for interior and exterior jobs also vary. Exterior painting jobs may require special equipment, such as scaffolding or ladders, to reach higher areas. In contrast, you can usually complete interior jobs with basic tools such as rollers and brushes. Exterior paints also need to contain more durable and weather-resistant properties in comparison to interior paints.
Labor and time
The labor and time required for interior and exterior painting jobs also differ. Exterior jobs are usually more time-consuming and labor-intensive due to the larger surface area and more extensive preparation.
The weather conditions can also significantly affect the time needed to complete an exterior job, as rain or extreme temperatures can delay the painting process. Interior jobs, on the other hand, are more flexible and most contractors can complete them within a shorter time frame.
Accessibility
Accessibility is another factor to consider when estimating interior and exterior painting jobs. While exterior surfaces are generally easier to access, reaching certain areas, such as higher levels or difficult corners, can be more challenging. On the other hand, interior jobs may require moving furniture or working around the homeowner’s schedule, which can add complexity and time to the project.
Surface differences
Frankly the painting surfaces will impact the estimation process. Exterior surfaces are usually made of wood, stucco, or brick, which can be more uneven and require more coats of paint. Interior surfaces, on the other hand, are typically smoother and may only need one or two coats of paint.
Cost differences
The cost of materials and labor also differ for interior and exterior painting jobs. Exterior jobs may require more paint and specialized equipment, making them more expensive. In contrast, interior jobs may cost less in terms of materials, but the labor costs can be higher due to the more intricate and detailed work required. In conclusion, estimating interior and exterior painting jobs requires a different approach and considering various factors.
Exterior jobs are more time-consuming, require more materials and specialized equipment, and are at the mercy of weather conditions. On the other hand, interior jobs are generally easier to access and require less preparation but may have higher labor costs. As a painting contractor, understanding these differences is crucial in providing accurate estimates and delivering high-quality results for both projects.
Don’t forget to include your salary in the equation
As a contractor, remember that owning and running a business requires significant risk, hard work, and plenty of determination. For this reason, you, as the business owner, should always be the highest-paid person in the company. You should strive for a salary of at least $60,000. Of course, the goal is to make much more than this, but if you’re not quite at this level, don’t fret. As you focus your efforts on improving efficiency and profitability, your bank account and your personal take-home pay will grow in tandem. A rising tide lifts all boats.
But how does this factor into pricing construction jobs? Calculating your desired salary can actually help determine the sales volume needed to support it and maintain financial stability. To determine this number, divide your salary goal by .08. This will give you the sales volume at which you, as the owner, would receive 8% of all sales as payment. For example, to receive a $60,000 salary, a sales volume of $750,000 is needed. As your business grows, you can increase your take-home pay to 9% or 10%+.
This overall sales volume number should serve as a foundational financial goal for your business. Keep this top of mind when managing every aspect of your business. This number is vital for keeping your business financially healthy. Use it as the basis for pricing jobs, managing cash flow, bidding strategy, and overall business decisions.
Time to build your paint job estimate
Estimating material costs
Two popular methods exist for estimating costs in the painting industry:
- Unit pricing
- Square foot pricing
Using unit pricing, painting contractors break down costs into units and assign a fixed rate per unit. This results in a base labor rate that you can apply to the entire project. In essence, it’s a system where you’ll assign a price for each task, such as painting a wall, ceiling, or trim. Whatever the task may be, the unit price is all-inclusive, such as $75 for one coat of paint on a standard-sized wall or $150 for one coat on a standard-sized ceiling.
On the other hand, you’ll calculate square foot pricing by multiplying the total area of work by the labor rate per square foot. This method is great for quickly estimating costs in the initial planning stages, as it utilizes historical data. However, it’s not the best way to estimate commercial jobs since many factors outside square footage impact cost. Moreover, square foot estimating is best reserved for industry vets with a ton of experience to back up their numbers. Before you can confidently rely on this method, you must be able to answer tough job questions intuitively, such as:
- How many painters are needed for this type of job?
- How long does it take them to paint a 2,500 sq ft. house?
- How much paint does this type of job require?
- How much extra do you need to set aside for tools, equipment, or other costs for this type of job?
Once you know the efficiency of your crew and have years of historical data to back up cost assumptions, the square foot method will open up as a viable option. Until then, you need to track, organize, and evaluate your job costing data so that you can answer the above questions.
Example of square foot pricing:
| Size of house | Body color (Gallons) | Trim color (Gallons) | Total (Gallons) | Total cost (@ $50 per gallon) |
|---|---|---|---|---|
| 1500 sq ft. | 8 | 2 | 10 | $500 |
| 2500 sq ft. | 12 | 3 | 15 | $750 |
| 4000 sq ft. | 20 | 5 | 25 | $1,250 |
In the painting trade, costs can be deceiving. Tracking materials costs isn’t as simple as writing down the retail price of every gallon of paint you buy. Factors such as sales tax or disposal tax are often easy to miss.
Ensure you’re including the entire ecosystem of costs that surrounds every ounce of paint. Including these often overlooked costs will go a long way toward improving the accuracy of the material costs on your estimates, which will, in turn, create a stronger bid.
For small purchases like brushes, rollers, and tape, tracking expenses over 3-6 months and then calculating an average percentage to allocate those costs across all jobs is acceptable. For instance, you’d label these small purchases as “sundries” or something similar and put aside 1-5% of the total costs for those purchases.
It’s easy to fixate on the visible numbers on the shelf, but material costs should ideally make up no more than 15% of total job costs.
Request quotes from suppliers
Start this process as early as you can while performing your takeoff. With a list of all the materials needed, you should have what you need to start having these conversations. Be sure to research current market prices for every material on your list. Prices may vary depending on the manufacturer, brand, and quantity purchased.
Consider contacting two or three suppliers you deal with the most. However, don’t limit yourself when comparing prices. Be sure to check the prices you review against a standardized comparison.
A gallon of paint will range anywhere from $15 to $80, depending on the brand, quality, and contractor discount. This discount is your biggest opportunity to take advantage of your strong relationships with suppliers. If you lack this kind of relationship, this should serve as the push you need to focus on building better supplier relationships.
For instance, a typical customer may spend $60 for a gallon of paint, while an experienced contractor may be able to secure the same gallon for $40 or even $30. This largely hinges on the relationship between the contractor and the paint store and the volume of paint purchased every month. Opening up these conversations and working to secure these professional partnerships is always worth your time.
Estimating labor costs
Labor will likely be your biggest expense (as a percentage of revenue) for every job–usually accounting for 80-85% of total costs. For this reason, crafting a winning/profitable bid hinges on how well you can estimate labor costs.
Labor burden entails the total cost that an employee has on your business. To understand the “full cost” of an employee, you need to consider the cost of wages, benefits, taxes, worker’s compensation, insurance, employer-specific taxes (FICA), and other labor-related expenses. All combined, these account for a worker’s full labor burden. If you need help gathering all of this head first to your payroll reports and workers’ comp and health insurance policy information.
Factors that will influence labor costs will include:
- Extent of prep-work
- Job site conditions such as difficult access points or steep surfaces
- Type of material (metal vs vinyl siding, color, number of coats needed)
- Crew size and experience
Once again, consistent job costing will be of immense help as it will clue you into past performance on similar jobs and reveal where you could have improved efficiency or altered scheduling for a more productive job.
Accounting for additional job costs
Equipment
Equipment costs can vary depending on whether you own or rent it. Attribute direct costs (e.g., rental and fuel costs) to the job for rented equipment. Direct costs, in contrast, are usually minimal.
However, if you own the equipment, you must consider additional expenses such as depreciation, insurance, and maintenance, as well as the costs of loading, transporting, and unloading it. To accurately determine costs, we recommend acquiring the help of an accountant who can analyze and convert these costs into an hourly rate.
Subcontractor fees
Take into consideration any fees associated with additional subcontractors needed for the job. For example, you may need another team to work drywall or electrical. Put together a clear subcontractor agreement outlining the scope of work and price.
By bringing in extra subcontractors, you can save money and focus on your main strengths. This will help you avoid taking on tasks beyond your capabilities. However, it’s important to carefully evaluate if their services are necessary to meet the project deadline. If so, carefully review bids and include these costs in your budget planning.
You certainly can’t ignore these costs, nor can you spread them across other categories or add them on top of other costs. For this reason, you should separate these costs into their own cost category.
Misc costs
These additional costs, such as indirect costs, are not included in labor, materials, equipment, and subcontractor fees. Although they may not have as much financial impact as direct costs (i.e., labor and materials), they’re equally crucial to factor into your cost breakdown. If left unchecked, these costs can quickly accumulate and jeopardize the profitability of a job.
Miscellaneous costs:
- Permits
- Bonds
- Insurance
- Financing fees (loans/interest)
- Contingency funds
Identify a targeted profit margin & markup
You want to win the bid, but your ultimate goal as a business is to generate a profit. To do this, you must narrow down a profit margin goal and apply the appropriate markup percentage to secure job profitability. To help find a suitable profit margin, take the expected revenue for the job, subtract costs, and then divide that number by the projected revenue. Then, multiply that number by 100 to find your percentage.
You can use a margin/markup table to simplify this process even more. Margins and markups interact, meaning you can use one to help you determine the other.
| Markup | Margin |
|---|---|
| 5% | 4.70% |
| 10% | 9% |
| 15% | 13% |
| 20% | 17% |
| 25% | 20% |
| 30% | 23% |
| 33.33% | 25% |
| 40% | 28% |
| 43% | 30% |
| 50% | 33% |
| 55% | 35% |
| 75% | 43% |
| 100% | 50% |
Formulas:
- What you plan to charge – Cost = Profit
- Profit / Cost = Profit Margin
- Overhead + Profit = Total markup
Let’s say you’ve crunched the numbers and set a profit margin goal of 43% for this job. Now, assume you’re spending $2,000 on paint, materials, labor, and additional expenses. Using the formulas and chart above, you’d need to charge $3,509 at a markup percentage of 75% to achieve that profit margin goal.
Final thoughts
Estimating is not guesswork. It’s a mix of retrospective analysis combined with precise forecasting. It takes time and dedication and forces you to understand your business down to the most minute detail. The more you put into improving your estimates, the more you’ll get out of it. It will enable you to handle job costing with more intent, improving your ability to control costs. It will deliver cost numbers with pinpoint accuracy, allowing you to craft accurate and competitive bids.
It’s a precise practice fundamental to the financial success of any painting business. For this reason, it’s essential for you to carefully and methodically navigate the complexities of your business to craft accurate and effective estimates. Therefore, contractors must dedicate time and effort to estimate each painting job accurately. This approach ensures accuracy and secures profitability, an essential factor in long-term success.
Confidently estimate your next job with Knowify
Knowify enables a paperless, efficient, and better way to calculate job costs for every project. Through real-time reporting and revenue, cost, and profit margin monitoring, you’ll have a surefire way to collect the intimate knowledge about your business that you need to sustain long-term growth.
Even better, Knowify seamlessly integrates with QuickBooks, saving you hours of double-entry work. Send your invoices to track revenue or your time entries to process payroll to the accounting system without worrying about keeping both systems in sync. Knowify is the ultimate business management software to connect the estimating and bidding part of your business to the accounting side.