Cost estimation is one of the most vexing challenges facing contractors today. Since the start of the pandemic, the cost of building materials has fluctuated wildly, with basics like hardwood lumber up 45%, copper wire up 36%, and plywood up an astonishing 210%.
Estimating costs has never been easy. And with supply chain issues making it more complex than ever, it’s no surprise that builders are increasingly looking to tech solutions to cut down on inaccuracies in the estimation process.
We sat down with Donny Wyatt, founder of CoConstruct, to learn how tech solutions can help contractors avoid estimation waste. CoConstruct is a top-rated software solution used by over 100,000 residential custom home builders and remodelers to create rewarding building experiences for themselves and their clients.
Donny shared four key challenges with cost estimation that construction tech is solving:
- Accurately planning projects
- Paying a fair price for building supplies
- Dealing with price fluctuation
- Generating faster estimates with digital tools
Accurately Planning Projects
For many contractors, just knowing what materials are needed to build a home is a challenge, as Donny explains: “What is going into the home? And what do those parts cost? Once you’ve got the plans, you need to look at the dimensions and figure out what you need in two-by-fours, what you need in crown molding. Just getting those measurements is a lot more complicated than it seems, and you can get that data with varying degrees of accuracy.”
This is made even more challenging by the unforeseen issues that pop up as a project moves along. “You’re hammering together real stuff in the real world,” Donny notes. “And suddenly you realize: ‘oh crap, I need to put a toilet in here and there’s a floor joist in the way.’ And you can avoid tens of thousands of dollars in wasted time and money that don’t need to happen, just by applying technology a little better to help prevent those problems.”
Paying a Fair Price & Dealing with Price Fluctuation
Even when contractors have a clear picture of what they need, knowing what they should pay can be a mystery. That’s where construction tech solutions can help cut through the confusion. “Even if you have an accurate price from a vendor, is that a fair price I should be paying?” Donny asks. “And so what seems like a very simple calculation of X times Y equals Z is not as simple as it would seem. There are all kinds of nuances dealing with communication and human relationship that have a tremendous effect on the outcome. With estimation software, when we started to branch into the steps around the arithmetic, there was a lot more that we were able to solve for our customers.”
Construction tech software can also help builders mitigate the risks to their business that come with wild fluctuations in the cost of building materials. “Over the last 18 months, things like lumber prices are just out of control and swinging back and forth,” Donny observes. “So between the time you price a project and sign it, there’s a tremendous amount of financial risk during that period – if you can even get the things you need. And if your project is delayed, that’s another layer of risk. Builders either don’t make what they should, or actually end up contributing money to the cost of the project.
“Do I actually have the latest pricing? Did I get it in an updated fashion? Actually getting the best pricing and products in your estimates so you can do away with inefficiencies in the supply chain – that’s an area where everybody wins.”
Without proper cost estimation, contractors tend to lose out on potential projects. “They don’t know how to accurately plan contingencies and forecast what costs are, so they price projects higher than they actually need to protect themselves. So they’re not getting the contracts that they should.”
Generating Accurate Estimates Faster
Cost estimation is such an overwhelming task that even a leading software platform like CoConstruct wasn’t sure they wanted to tackle it, Donny recalls. “It was so complicated and so scary. I said, ‘okay, we’ll do all these other things… but we’re not touching cost estimation.’ But never say never. Three years later, we built a really great cost estimation module – because we realized our clients needed it. But it just shows how rough it is that I was scared for us to go build the software because it was a complicated task to take on.”
Embracing tech innovation enables contractors to generate accurate quotes faster – and win more jobs. “The more you price projects wrong, the fewer you get and the more projects you have to do in order to hit your target for the year,” Donny notes. “We know that the faster you turn in an estimate, the more likely you are to get a job.”
The construction industry has been slow to embrace digital tools, so it’s important to educate contractors on how digital tools can make life easier for contractors, Donny notes. “A lot of these problems are because they’re doing cost estimates using a spreadsheet that their dad’s friend gave to them that they inherited, and everybody is afraid to touch the estimating spreadsheet because we’ve all made spreadsheet errors, right? Frankly, they’re spending nights and weekends, taking time away from their family to do the stuff that they hate most out of their entire job. But it’s what they have to do to run their business.”
The construction industry is just beginning to discover the possibilities of digital innovation. Forward-thinking founders can help contractors by developing solutions that address key pain points like supply chain inefficiencies and helping builders connect with one another.
And when you have an exceptional software product solving a critical need for your customers, our team at Serent has the skillset to help you educate the market and accelerate your sales. We’ve partnered with several construction technology companies, including CoConstruct and BQE, to develop tried-and-true best practices and insights that deliver.
Learn how we can help construction technology companies achieve their growth potential through our model for healthy customers, exceptional products, and a happy team.