Gaining confidence in your construction bid estimating skills can take a long time. I spent years building and sending estimates while feeling one of two ways: “They’re never going to pay this much,” or “One small issue, and this isn’t going to be worth it for me.”
It can be challenging to run a successful business, often requiring you to thread the needle between being competitive and staying profitable but never knowing if you’ll succeed at either. But once you understand your actual costs (like, really understand them), have the right business tools on hand, and know how to build in a safe yet reasonable buffer, you’ll be able to stand out from the competition during the construction estimating and bidding process.
Know Your True Costs — All of Them
Without a doubt, one of the most common causes of bad bids or estimates for remodelers and contractors comes down to their true costs: They simply don’t know them. There are two types — direct and indirect — you should account for.
Direct costs are the easy ones. These include your materials, labor, and subcontractor pay — basically, any costs you incur directly to complete the job.
The real challenge is identifying and accounting for all of your indirect costs. They’re the ones associated with doing business, such as:
- Fuel costs
- Utilities and phone bills
- Office staff salaries
- Insurance premiums
- Equipment depreciation
- Storage or office fees
- Office supplies
- License renewals
- Any rent you might pay
Think of indirect costs as the bills you pay to keep the doors open.
Then, there are the unforeseen challenges that may pop up on a project. Whether it’s a plumbing or electrical issue, sudden jumps in materials pricing, or other delays, you need to plan for them.
A good rule of thumb is to add a contingency buffer of about 10%-20% to your bid. This helps ensure you can maintain your profitability, even if something pops up, while remaining competitive with other bids.
Tools and Templates for Accurate Estimates
Whether you are a one-person show or have a small team, it should go without saying that standardizing certain aspects of your business will improve accuracy and efficiency. When it comes to pricing projects, consider investing in estimating software and bid templates.
Estimating software can be a major game changer for smaller outfits. These tools can help new contractors learn how to estimate remodeling jobs consistently, using their own real data instead of guesswork. This includes estimated costs vs. actual costs, timeline data and delays, and other trends across projects. Using these programs, companies can create faster, more accurate bids based on project type and other real data.
Templates allow contractors and remodelers to write the actual estimate faster while reducing errors. With a standard form, you can create clear, itemized estimates quickly. This can help reduce confusion and ensure you cover all the important information. The more organized your estimates are, the more professional your bids will look — and that goes a long way toward inspiring client confidence.
Balancing Competitive Bidding With Profitability
There’s a phrase I learned way too late in my contracting life: the race to the bottom. It happens when competing contractors continually underbid their jobs. Each contractor undercuts the next, driving the price lower and lower until smart contractors walk away. It’s an awful strategy and a difficult way to make any money at all.
Instead of slashing prices, focus on using effective bidding strategies. For instance, a cost-plus or fixed markup system guarantees profit. As the costs go up, so does your profit in relative terms. And if you’re transparent about what goes into your numbers, clients will see you’re actually pricing carefully, not just throwing out random figures.
Highlighting value beyond price is another way to stand out. For example, proving you have insurance by including a copy in your bid packet shows the client you’re legitimate and take your work seriously. In the end, they may consider your bid more valuable than a similarly priced bid from a contractor who doesn’t include any credentials. That trust factor can help tip the scales in your favor.
Risk Management and Bonds
Larger jobs, especially those involving commercial work, might require bid bonds. These construction bonds act as a guarantee that the contractor will honor the bid price. This effectively locks them in, reinforcing the importance of creating an accurate bid. But even when not required, bid bonds can inspire customer confidence, and if you’re good at estimating, you don’t have to worry about being locked into your bid.
Liability insurance and professional coverage also play into risk management. Let’s say you accidentally put your ladder through a picture window, shattering it. Liability insurance will likely cover the damages, so you don’t need to pay for a large, custom window out of pocket. This not only protects you but also shows clients you’re operating responsibly, which could help your estimate float to the top of the consideration pile.
Communicate Clearly in Your Bids
New contractors who keep their eyes and ears open quickly learn that clients appreciate transparency more than almost anything else in the bidding process. The approach is simple: instead of giving a lump sum with very little explanation (which customers often attribute to hidden costs), provide a line-item breakdown. List out labor, materials, subcontractor fees, permits, and other expenses so they can see them and understand how they impact your price.
Yes, it takes more time, but it’s worth it. Clients can see exactly what they’re paying for, building trust even if your bid isn’t the lowest on the table. Transparency often wins repeat business and referrals from people who prioritize honesty and clear communication. Plus, when clients feel they understand the bid, they’re less likely to challenge the final invoice, which can help you get paid sooner.
Staying Profitable With Smart Construction Bidding
Better construction estimating and bidding isn’t about ensuring you’re the cheapest price. It’s actually about creating a system, using the right tools, understanding trends, and building customer trust — all of which can lead to better profitability. By knowing your true costs, using reliable data and tools, balancing value with competitiveness, managing risk, and communicating clearly, you can land more jobs while protecting your bottom line.
The next time you prepare an estimate, take the time to sharpen your process. Be sure to add that contingency, double-check your overhead, and ensure your bid tells the full story. The goal isn’t just to win a single job. It’s to land profitable projects that help your business continue to grow.