If you are fairly sure that your finish room is operating at a reasonable level and you still say that your finish department always loses money, then you need to ask yourself a question: Are you charging enough for your product?
The answer to these questions can only come through a fundamental understanding of your finishing system that is then reflected in your estimating system.
The purpose of an estimating system is to help you get to a price that will get you the job and allow enough of a profit margin so that you make money. Use your estimating system as a tool. After you do your calculations you can always adjust your numbers up or down. Remember that there are exceptions in almost every job, so don’t forget to take notes and adjust your pricing accordingly.
A good estimating system will work accurately and quickly. To do so there has to be some flexibility built into the system. If you spend all of your time estimating, that leaves no time for anything else.
I had a wise person tell me that if you got more than about a quarter of the jobs that you bid, then your prices are too low. The concept is to price projects to make you money. Some projects are not worth the misery at any price, so bid them high to discourage the customer. If for some strange reason you still get the job, then it is at least worth your time.
Every business is different. The equipment you have available and the size of the finishing area will ultimately affect the volume of work that can be handled at one time. People also operate at different skill levels and companies require different profit margins to stay in business. Bid the job with an honest estimate of times and costs. Estimating is often figuring out what your competition will bid. Then you have to ask yourself if you think your competition will do it for less and if so, should you lower your price. I think sometimes people have a preconceived idea of what a price should be so they adjust their times or costs to meet that figure. Double-check your figures and if you feel that these are the numbers you need to make money on the job, then quote that price and be willing to let someone else take the job. You should always be willing to let your competition lose money. You are better off spending your time and energy marketing your company and drumming up new business than working on a project that you are not going to make any money on.
Types of Estimating Systems
Estimating systems fall into 3 different categories:
Single multiplier systems
· A multiplier of the cost of the materials
· A percentage of the rest of the project
· A cost per lineal foot
Dual multiplier systems
· A combination of anticipated time and material costs
Intuitive multiplier system
· A toss of the magic dart
There is no one perfect system for every job or every company.
Single multiplier estimating systems do have some short comings.
There are those who like to estimate finishing cabinetry as a percentage of the total job cost or as a cost per linear foot. While these methods might be adequate for moldings or panels, they generally are only accurate enough for casework when it is part of a standard line so that you have gathered enough historical data to estimate your costs accurately. Custom casework might require small but expensive nuances in your finishing system that can easily be overlooked. The purpose of estimating is to insure profitability while keeping the price attractive.
Don’t adequately account for labor-intensive operations. Toning, wash coating and glazing don’t increase material costs by much, and don’t affect square footage, but can add considerably to labor.
Material costs often have an inverse relationship to labor costs. It will take 3 coats of pre-cat lacquer to equal the film build of 2 coats of CV. The total cost of the materials might be close but there is about 30% more labor for applying the extra coat of PreCat.
· Don’t account for the complexity of what is being finished. Considerably more time spent finishing 32 – 1’x1’ doors than 1 – 32 square foot panel.
· Very hard to collect relevant historic data
· The cost of what it takes to build something has no bearing on what it takes to finish it.
I prefer the time and material system. It accommodates the variations in labor and material on an individual basis. You can develop simple spreadsheets or even paper forms that you can fill out quickly. Some design software also has estimating capabilities. Your calculations should be in labor man-hours plus materials so that you can adjust your pricing to suit your costs without having to change all your system calculations.