It’s About Profit: Estimating Errors You Should Avoid To Improve Your Trade Business’ Profitability

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Many of us have been there at some point, haven’t we? We put that estimate together with the best of intentions to provide our customers with quality work at a fair cost, only for something to go so seriously awry that the whole thing winds up costing far more than we bargained for.

Sure, we could try and limit the damage to our reputation by taking the financial hit ourselves, but that means a reduced profit, and still doesn’t shield us from the wrath of angry customers when an important deadline is missed because materials needed to be delivered or more labour needed to be carried out. That’s to say nothing of the kind of disputes that arise should you suddenly present the client with a bill much higher than they expected.

Sure, it’s tempting to look at these kinds of situations as completely unavoidable, that nobody could have foreseen or done anything about the kind of circumstances that result in increased costs and reduced profitability.

Yet, here’s the thing – the majority of the time, a tradesman losing money on a job has less to do with some completely unexpected Act of God, and more to do with a simple error in the cost-estimating process.

By taking a little care to avoid these critical estimating errors, you’ll soon make most profit losses and blows to your reputation a thing of the past.



invoicing errors to avoid tradesman

Missing out vital details

You’re in a hurry. You need to get that estimate out as quickly as possible and you’ve already got a ton of work to get through. So, you put together the basic, bare essentials and send it over. Job done, right?

Not exactly.

Including as much detail as you can in your estimate ensures that you’ve covered the cost of absolutely everything, right down to the last nail, meaning no hidden costs arise when you suddenly remember some important component which needs to be paid for.

Just as importantly, it means that you give clients a clear understanding as to the actual cost of your project and avoids potential disputes further down the line.


invoicing errors to avoid tradesman

Failing to check

Here, we’re not just talking about getting the calculator out and making sure your sums are correct. There’s a few vitally important details that you should be checking, double-checking, and probably checking again for good measure.

For one thing, are you absolutely certain you’ve covered everything? Writing down a list of materials and estimated man-hours (more of that in a moment) is all well and good, but think carefully as to whether there’s anything you might have missed.

For another, are you certain that the material costs you’ve included are up-to-date and accurate? If you’re working with the same materials and/or suppliers as a previous project, it can be tempting to use the same prices from that job on your new estimate. Yet there’s no guarantee that those prices won’t have increased since last time.


invoicing errors to avoid tradesman

Forgetting about past mistakes

Though it may not be wise to use past projects as our sole source of accurate cost information, that’s not to say that those projects can’t teach us some invaluable lessons, especially if we made mistakes.

Those mistakes can teach us important lessons about how we should do things differently this time around, and remind us to plan for those circumstances we may have otherwise overlooked.


invoicing errors to avoid tradesman

Being too optimistic about labour costs

Past projects, especially ones that are similar in nature to the one you’re currently estimating, can also provide a good indication of labour costs. Though it could be tempting to put down an optimistic quote in order to keep prices down and thus secure the contract, ask yourself one vital question: is this realistic?

Think about whether or not you or your existing team have all the necessary skills to complete all components of the job. If not, how many subcontractors are you likely to need? How long have similar projects taken in the past and, more importantly, what differences are there to this project that may mean it takes longer?

Whilst it’s crucial that your estimate is competitive, it’s often better to err ever so slightly on the side of caution than to quote unrealistic labour costs that you simply can’t stick to.


Have you made any fatal estimating errors in the past? What impact did they have on your business, and how were you able to avoid making them in the future? Let us know in the comments below, or join in the discussion on Facebook or Twitter.

Tradesman Saver also provides insurance for tradesmen covering a wide variety of professions. For further information, please see our Tradesman Insurance or Who We Cover pages.

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