When first starting out, most small construction company owners will do their own estimating, in addition to the actual work on the jobsite. So the question then is when is the time right to hire a full-time estimator? In my opinion, you need to be in business for a while. Hiring an estimator is definitely not something I would suggest you do right from the start. You need to get your feet wet, and see what you can and can’t do.
If you’re able to go in and bid your own work, pick up some jobs, and create some revenue, then you have a much better handle on your entire business. So maybe a year goes by, and then you go back and look at what you’ve done in the past year and try to figure out if it is feasible to hire an estimator, if you need one, if having one would help you grow your business, etc. It’s kind-of a tough situation sometimes to determine what that breaking point is, when you need to make a hire and when you don’t. It’s definitely going to take some financial research to figure out what you can afford and what you can’t afford.
One can argue the case that hiring that estimator will generate enough additional business that that person will pay for himself. A safer approach is to make sure that you’ve gotten to the point where you have enough extra money that you can just hire that guy even if he doesn’t generate any new business.
It’s a gamble either way. I would definitely lean more towards trying to get your finances to the point where you know you can afford to make the hire. One good thing to look at is what an average base cost of an estimator is going to be. Here in our area, there is a vast range of salaries that estimators earn, but in general you’re looking at probably somewhere between $70 and $80 thousand per year to hire a good estimator. On top of that, most are going to want a vehicle and fuel furnished, especially a project manager/estimator.
You’ve got to be able to pay your own salary, pay your workers that you have, pay all your bills – equipment payments, insurance, office expense, etc. Then you need to be able to put some back in your company. After you have accounted for all that, if you’ve got enough money left over to pay another salary, then I’d say it’s a good time to start thinking about hiring an estimator.
A good estimator is going to pick up work for you. Your business is going to start growing if the estimator can do what he says he can. Once that happens, then you’ve got to make sure you are able to stay on top of your jobs, and that the financial stuff works out as close as possible to the way it was estimated. It bears repeating here – if you don’t track your costs, you won’t know if your estimates are good or not. So it is critical to use some kind of program like ProfitDig to track everything.
If you need an estimator bad enough, but your finances are iffy, then it may be a situation where you have to offer them a percentage share of your business. If you can’t really afford to pay him his salary, then you may have to give him some other kind of incentive.
You might say something like, “Hey. I’m going to give you a percentage of our profits. We’ve got a $200,000 budget on this project with no profit overhead. This is just our budget. If you can bring that in under budget, I’ll give you 20%.” Or whatever that magic number might be for you if you come in under budget.
In this scenario, you’ve started out paying the estimator a small salary, with the potential to make much more based on performance. Put a time limit on it. Give your estimator X amount of time to prove himself and to help you build your company. If he can’t do that, you might want to look at hiring another estimator.
Knowing how to properly estimate a job yourself will also help you in the process of hiring an estimator. Not all estimators are proven. The ones that are proven, with the construction industry the way it is today, already have jobs – probably good paying jobs. If you want to get one of those really experienced guys, you have to be willing to add more money to your jobs to account for the extra salary and overhead. Just starting out, that’s going to be tough to do.
So you might be looking at a younger person who is just getting his feet wet in estimating. If you know how to do estimates yourself, then you can kind-of watch over him. Tell him you want to review his bids before they are ever seen. As owner, you should look at what he is sending in and make sure that you feel comfortable that you can make money with how he’s got the project figured.
Assuming you don’t have unlimited resources to just throw money at the situation, it can be tough to find an estimator. I would suggest talking to other general contractors. Tell them you are looking for a good estimator. Put the word out. Word of mouth is always going to be best way to find someone. You’ve got material suppliers who deal with estimators everyday. I’d pick up some of my materials from buyers and say, “Hey. If you don’t mind, I’m looking for estimators. Could you help put the word out?”
If a guy walks into your office and says he’s an estimator, you need to be prepared to ask a lot of questions to evaluate how qualified you think he is. You can kind of throw out a few questions here and there about his work history, where he’s been working recently. Find out what types of jobs he is accustomed to bidding and managing.
If I had my choice, I would rather hire someone who has been hands-on and actually been in the field and done the work. If I’m estimating dirt work, it’s going to impress me that an estimator has been out in the field. He’s loaded trucks. He’s cut grate. He’s figured grate. He knows how long it’s going to take to move this material from one side of the job to the other.
Someone who is fresh out of college who has never stepped foot on a job site is not going to know different terrains and the effects different geographic terrain can have on a project. He is not going to have a good feel for things like the need for extra trucks or extra manpower to move dirt certain distances.
It’s a lot to process going from the field to the office, so I’d rather have someone who has had that field experience even if I’ve got to spend a little time to help them figure out dollar amounts and such. He’s going to know how long it takes him to move dirt and actually perform the work.