Accurate estimates can help you get a project faster in this competitive business world. Estimates should be made in such a manner that it stands out from others in terms of rates, calculation, and organization. There are variations in the types of estimates used in various business enterprises. Companies use specific types of estimates depending upon the type of products used or the stage of the project.
In this article, we will discuss each type of estimate in detail with appropriate examples for better understanding. Scroll down to know more!
Providing estimates is a critical part of the contracting business. Achieving utmost accuracy in estimation can help your potential clients to figure out an appropriate budget and it sets your proposal up for success.
So, let’s see what are the main types of estimates followed by most of the business!
Types of estimates with example
The types of estimates are mainly categorized depending upon the type of project to be used in. Here are some of the most common types of estimates.
1. Preliminary estimate
Preliminary estimate is also referred to as a rough or approximate estimate that is generally preferred quite early in the process. This kind of estimate helps you to determine how much to charge your clients, the project’s feasibility, and the budget to complete. As this is made at the beginning of a project when very limited information is available, hence, it only provides a ballpark idea about the project expenses.
Preliminary estimates should involve accurate estimation techniques as it is designed in the initial stage of the project and many unknown figures will be involved. One must remember to add the labor costs, material costs, and other information that might come up during the project life.
Example:
Roofers asked to rework the roof that was worked on a few months back. In such cases, roofers would implement their old estimates to create preliminary estimates.
Similarly, contractors remodeling bathrooms will also create a preliminary estimate for their customers.
2. Detailed estimate
Detailed estimate as the name suggests includes all the detailed information of every item necessary for a project. A business can convert a preliminary estimate to a detailed estimate by adding the data like quantity, cost, rate, specifications, drawings, calculations, etc. A detailed estimate is created where there is the availability of incredibly detailed updates of the project. This is more of a planning tool that helps to figure out the business finances and project expenditures.
Example:
Road or sanitation projects by the local government involve detailed estimates. This includes project drawings, calculations, company bids, and much other significant information.
3. Quantity estimate
As the name suggests this estimate serves as a detailed data chart specially for a construction business that provides the itemized list of products with quantity and price for each. It is a key estimating tool for construction companies that offers the clients a basic idea about the project requirement. A well-experienced estimator will figure it out from the drawings or specifications to complete the estimates.
Example:
Road construction by local government or any private company would create a quantity estimate to provide the quantity of asphalt and other materials required for project completion.
Similarly, a painter would implement a quantity estimate for repainting the interior of the house. He would estimate that he would charge around $3-$4 per square foot. And if the project involves 4000 square-foot then the estimate would be around $12000-$16000.
4. Bid estimate
This is more specific than traditional estimates which are offered to potential clients to win the project. This is provided to the customer affirming that how much will the project cost them including the best price available to outbid the competitors. This method is pretty competitive as multiple companies participate in this and it needs an accurate estimate with exact data to win the project. This method is a big hit when it is a win-win situation, otherwise, it would be a complete waste of time.
Example:
Mostly government or corporate projects implement a bid estimate. Even a landscaper can also execute a bid estimate for redoing the backyard of the client’s house to outbid the competitor.
5. Project Management estimate
Next and the final type involves the estimate form used in project management. There are four main types in these. The usage of each type depends upon the project type and the information you have in hand. Here are the various forms of project management estimates:
Historical estimates:
It is the easiest way of estimating for a current project if you have a similar experience in the past. You can very easily draw the data from the previous project to create the estimate. But the flip side is that the accuracy is often termed as analogous which depends upon the accuracy of the project to which it is referred. Due to the lack of accuracy of these kinds of estimates, it is generally used to create preliminary estimates only.
Example:
A contract might refer to a bathroom remodel estimate done a month ago to create a similar estimate for the current project. This will help him to draw the project budget easily without any hassle of collecting the obvious data.
Parametric estimates:
This method is much simpler than any other form. It involves including data from historical estimates to create relationships among variables. This involves a simple calculator to create the estimated cost. Either entire or partial projects can be estimated using this method and are far more accurate than historical estimates.
Examples:
A contractor building a shed in the backyard of the client. He is aware that the kind of work requires $100 per square foot. Therefore, he calculates for 100 square feet and estimates $10000 for the project.
Top-down estimates:
These kinds of estimates are quite different yet similar. This is used much earlier in the project when the data are not available. Once the information is retrieved the present values are replaced to get the actual estimate. This is mostly implemented for decision-making or strategy-building purposes and is also known as work packages.
Bottom-up estimates:
This is one of the most accurate types of cost estimates and involves sufficient data and time to do so. This is used in such cases where the project is estimated gradually. Contractors estimate the most basic work first and then proceed to the complex one. Which is added altogether at the end to get the entire estimated amount.
Example:
Supposedly, for a web designing project the work is divided into three basic parts and estimated accordingly, like:
- Graphic designing: $40 for 30 hours work = $120
- Copywriting: $20 for 20 hours work= $400
- Web developing: $30 for 60 hours work= $1800
- Total estimate= $120+$$400+$1800=$2320
As you now know the types of estimates, you must also know how to write an estimate and the project estimation techniques for better clarity. Check out our article on the related topics!
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Bottom line!
Cost estimating might be tricky sometimes and requires efficient techniques to do so. Your customer would expect a professional estimate with utmost accuracy and you need to deliver one to win the project. An accurate estimate means fewer surprises that will help with cost management.
