For many years governments have used the residential housing market as one of the indicators for gauging how the economy is performing. This may have been reasonable in the seventies and eighties, however it is not necessarily the case today considering the difficult economy in which plumbers and builders are required to perform.

Over the past ten to twelve years profitability in constructing residential houses has gradually declined, for example, builders could be loosing $1,000 per house, while the economy appears to be in good shape due to the large numbers of houses being constructed. In fact plumbers and builders would be slowly going backwards. The new millennium is an excellent time to turn the tide and regain the quality of life we all work so hard to achieve. For too long it has been easy to work on a per point, square metre or a fixed cost per lineal metre/foot. The reason this has worked in the past is due to the high profitability of businesses and large volumes of work available.

To win more work at the right price there are major changes that need to be considered when estimating:

1. All materials must be listed and priced at cost, if one receives 5% discount on pipe 10% on fixtures and 15% on hardware unless the cost price is used it will be impossible to identify the target profit. It then follows that during negotiations with the customer we are unable to identify our actual costs.
2. Labour must be recorded in hours rather than dollar value. (A dollar value is included before the tender/bid is completed). The cost of labour will change over time, while the actual time taken to install a particular item will remain constant, of course such times can be adjusted on a degree of difficulty basis as required from job to job.
3. The secret to estimating lies in building standard rates, as the materials do not change only the cost alters. For example, if a pipe or fixture were to be installed on the ground floor of a building or on the tenth level, it would have the same materials and fixings, the labour alters, as it is reasonable to assume it will take longer on the tenth level than it will on the ground level.

There are other considerations, which will be covered in this series. However, the time has arrived to discard the old inaccurate, unreliable per point and square metre/foot method and start using the standard rates method of estimating, it will give you Flexibility, Accuracy, Consistency and Time Savings. It will provide the opportunity to keep abreast with rising costs and not limit you to the your last job, which in fact, is playing catch up. If you do not get our price right, we will not have a business to manage.