This is newsletter #20 in the series. If you have missed prior newsletters, and are enjoying the series, we encourage you to take advantage of the discount offer for the complete Electrical Estimating Program. Click on the coupon at the bottom of this page.

Estimating is both a science and an art form. To produce an accurate estimate, you have to crunch numbers (a science) but you will need to exercise judgment (an art) to apply the numbers to the reality of the job and your company. Sometimes using your judgement contradicts the “science.”

Be open to your impressions and feelings; you have them for a reason. If something about a job doesn't seem quite right, look into it. Don't allow the amount of money you can make on the job to influence your decisions. Your goal is never overcome “pang in your gut feeling,” but to find out why it is there.

Companies don't bid on jobs to get work or revenue; they do so to make a profit and to maintain cash flow. If a job doesn’t meet your normal profit targets, you may be better off turning it down. If it's profitable but will create cash-flow problems, you will have to determine if you can handle those problems, and if doing so is worth the profit you will make on the job. Every business transaction has risk, which is the justification for profits. To be successful you must evaluate and control the risk.

Nail down exactly what the job is going to consist of, and don’t take one on that you are not confident you can do in a timely and competent manner. When you see the dollar signs, you may be tempted to take on a job that you are not actually capable of doing. Resist that temptation so you can preserve your reputation and your assets.

You can’t complete a reliable estimate without a drawing and specifications review, so we will explain what that means, and then we will explain how to do a take-off to develop the bill-of-material so that you can ultimately determine the cost of the job.

To bid a job, there is a sequence of steps you must complete before you can do the next. If any step is completed incorrectly (or skipped) the subsequent steps will be wrong. If you hurry through one step to get to the next, the results will be unreliable and you will have wasted all of your estimating time.

Pre-Bid Checklist
Because there is always a limit to your energy, time, and money, you can’t estimate all the jobs that are presented to you so ask yourself these questions before you decide to bid the work:

• Am I qualified to estimate this project?
• Are the contractor and/or owner’s scheduling expectations realistic?
• Can I make money on this job?
• Can I manage this job so that it is profitable?
• Do I have enough time to properly estimate this job?
• Do I have the financial resources for this job?
• Do I have the proper tools and equipment to complete this job with profit?
• Do I have the workforce to handle this job?
• Do I want the job?
• Do I want to work with this person or organization?
• Do we have the skills to do this job effectively?
• What is the likelihood of winning the job if my price is competitive?
• What risk does this job present for our company?
• What does my gut say about this project or the contractor and/or owner?

You don’t have to bid every job that is offered, just bid the ones that you believe you have a chance of winning while maintaining a profit margin that meets your needs.

Just Say No!
If you have decided that you are not interested in bidding a given job, immediately communicate this to the appropriate individual and remain firm in your decision. When you decline to bid a job, consider giving the potential customer a competitor’s telephone number. You will accomplish two things by this action: you will not waste your time, and you will keep your competitors busy with work you don’t want.

Basically, it comes down to the reason an electrical contractor is in business, and that is to make as much money as possible while providing a valued service to your customer. You don’t have to bid every job offered, just bid the ones that you believe you have a chance of winning while maintaining a profit margin that meets your needs.

Financial Resources
Only bid jobs where the anticipated cash flow (you might not get paid on time) provides the funds you need for payroll, material, and overhead. Don’t become too excited about any particular job; you have worked too hard to get where you are to lose it all because the other party either did not pay you on time, or didn’t pay you at all. Consider the financial effect of a job before you bid it. If you can’t financially manage it, then don’t bid the job. It only takes one job to erase years of hard work and profit or worse, sink your business!

Many contractors ignore this advice. If you are not convinced, make an appointment with a loan officer at your bank to discuss general business and financial management. Be sure to ask, “What is the number one reason a business fails?” The answer will be, “Failure to manage cash flow.” If you do see a cash-flow crunch coming, talk to your banker before you need the money.

Listen to Your Gut Feelings
You can’t always prove that something is wrong. However, you don't always need proof to know that you should not take a certain job. For example:

• The customer has an unrealistic completion date. Many contractors bid on such jobs, thinking “we will make it work” (ignore the risk). What happens instead is the job becomes a money-losing fiasco.
• The jobsite gives you the willies. The place is cluttered, and workers don’t wear any Personal Protective Equipment (PPE). Do you really want your crew out there?
• The customer insists on a design that contains several Code violations. Either the design has not been properly reviewed, or the customer is trying to get away with something. You know you can’t bid on the job as is. When you mention the errors, the customer doesn’t seem concerned.
• The plans are incomplete and they engineer promises you there are no major details missing. The owner or contractor don’t want to allow you to write a contingency for the missing details in the contract.
  

If you get a bad feeling in your gut when you are in communication with a potential customer, it is a sign that something is not right. Trust your instincts and don’t allow greed to override that feeling in your gut. Make it a practice to only work for customers you like, who have a good reputation in the industry, and who respect you and your staff.

Before you expend any energy estimating a job, do some research on the individual or company; run a credit check and talk with other trades and your suppliers about their reputation for paying bills in a timely manner. Ask who did their electrical work in the past and try to determine why they are no longer doing the work.

There is nothing wrong with telling a potential customer, “We don’t wish to bid on this job.” If you refuse to bid, you don’t have to give a reason even if they ask. It is not your place to teach them to be civil, to have a safe working environment, to behave ethically, or to correct whatever problem they have. If they insist on a reason, just tell them there is not a good match between their needs and your company. Don’t worry that you will be passing up potential income; you may just be passing up a significant loss.

Many electricians feel obligated to bid a job, even when it is not likely to be profitable. If you don’t think you are going to make money on the job, don’t bid on it. Remember why you are in business, and that it's better to be honest and up-front than to make excuses or pretend to be interested when you are not. Bidding on jobs where you can’t make a profit just increases your overhead .