GET YOUR ESTIMATORS TO STOP PROTECTING THEMSELVES!
We can almost guarantee that many of your quotes are too high. Why? It’s not because you’ve decided to raise prices. It’s because your estimators think they’re protecting themselves (and the plant) by building a cost cushion on the jobs they’re quoting – especially large or complicated jobs.
Why are they doing it? One reason is that most estimators are risk-averse, and some jobs make them nervous. Another reason is that estimators only hear about their estimates when there’s a cost overrun on a tricky job. So if they always get whacked on the left side of the head, isn’t it normal for them to begin leaning just a little bit to the right?
The cushion may not hurt you on some jobs, but we can promise that you’re accidentally losing some really competitive jobs that you should be winning.
When your estimators play it safe to protect themselves, they’re not protecting the company. Quite the opposite, they’re costing you the opportunity to win some jobs that you should be getting. Yes, your cost sheets might look pretty good, because it’s hard to lose money on jobs you don’t get. But more to the point, it’s impossible to make money on a job you don’t get.
Yes, the estimators won’t get beaten up over cost overruns on those jobs you haven’t gotten, but your plant won’t be as busy as it should be, and your income statement will show a big hole…
The cure is simple: convince your estimators not to play it safe. Set a clear standard for them to follow:
- Figure out the most likely costs to produce the job. Play it right down the middle: no cushions and no playing it safe.
- You figure the costs, we’ll figure the price.
Then you have to act as if you believe what you said, and stop beating up your estimators over cost variations on individual jobs. Twenty years of experience has shown us that if you continue to beat them up, they’ll go right back to protecting themselves and hurting you.