Using Production Rate Based Estimating Is Mission Critical…

Precision and efficiency are crucial, this is one area that can significantly impact profitability and project success. Service contractors often struggle with finding the best way to price their jobs accurately and efficiently. Many default to a more general, intuitive approach that relies on experience or gut feeling. However, one method that consistently proves superior is estimating based on production rates. This method not only leads to more accurate estimates but also optimizes project workflows, boosts profitability, and fosters long-term business growth.

I know we have talked about this before but here’s why estimating using production rates should be the go-to method for service contractors.

Accuracy and Consistency in Estimating

A key advantage of using production rates in estimating is the level of accuracy it brings to your estimates. Production rates are determined by calculating how much work can be completed in a specific time frame, factoring in variables such as labor, materials, and tools. By basing your estimates on these rates, you take the guesswork out of the equation. Instead of relying solely on subjective factors like a gut feel on how long you think a job might take, you are using objective, measurable data.

This method ensures consistency across your estimates. Whether you're working on a small residential project or a large commercial job, production rates give you a framework to create reliable estimates each time. Over time, this consistency builds trust with your clients. They know what to expect, and you know your estimates will closely match the actual cost and time involved.

Imagine working on a painting job where your production rate shows that you can paint 200 square feet per hour. By applying this rate, you can estimate the exact number of hours and the amount of paint you’ll need to cover a specific space. This not only makes the job more predictable, but it also helps in communicating precise timelines and costs to your client, reducing the likelihood of surprises down the line.

One other major benefit of using Production Rates is onboarding new estimators. With solid production rates in place, bringing on a new estimator can be done in a much shorter amount of time. You can think of your production rates as all your knowledge and experience put into a framework that requires the new estimator to measure, count and observe the scope of the job. 

The measures and counts of elements of the potential project are applied to the production rates and the cost and price can be generated from just that input. The main teaching/training you need to do is to help the new estimator understand the things to observe that might affect the production rates. 

Unusual heights, existing obstacles to accessing the site and other “exceptions” that may require an experienced estimator’s input to provide exception pricing based on those items. The good news is that with modern software, the estimator can take photos of all aspects of the job site and make note of exceptions that might affect the cost and price of the project.

Improved Job Costing and Profit Margins

Estimating using production rates directly improves your job costing process, ensuring you don’t underbid or overbid on projects. When you estimate a job too low, you run the risk of diminishing your profit margins or, worse, losing money. If you overbid, you may scare off potential clients, thinking your prices are too high.

Production rates help you find the sweet spot. By incorporating detailed, data-driven metrics into your estimates, you can account for all job variables: labor hours, material costs, and overhead. This allows you to set a competitive yet profitable price, which ensures you’ll cover all your costs and maintain healthy margins.

For example, in the roofing industry, you might calculate the square footage of the roof and use your production rate to determine how many shingles you can install per hour. By knowing this, along with material and labor costs, you’ll create an estimate that accurately reflects the true cost of the project without leaving money on the table.

This method of job costing also provides a clear structure for analyzing where your profits come from, giving you the insight needed to tweak your operations for even better results. Over time, you can refine your production rates based on past project data, improving efficiency and profit with each job.

Efficient Project Management

Estimating using production rates doesn’t just improve accuracy and profitability; it also enhances project management efficiency. With a clear understanding of how long each part of the project will take, you can plan and allocate resources more effectively. This means you can schedule labor, order materials, and even plan for contingencies with greater confidence.

Production rates allow you to break down projects into smaller, more manageable tasks, assigning specific resources and timeframes to each task. This leads to smoother execution on-site, with fewer delays and interruptions. For example, knowing how many square feet of drywall your team can install in a day helps you align labor schedules, ensuring the right crew is on-site at the right time. When all parts of the project move according to plan, it leads to on-time, on-budget completion—something clients love.

Enhanced Client Satisfaction and Reputation

One of the biggest benefits of using production rates is the enhanced client satisfaction it can bring. When your estimates are more accurate, and your projects run smoothly without delays or budget overruns, clients are more likely to recommend your services to others. Satisfied clients mean repeat business, referrals, and positive reviews—all key elements to growing a successful contracting business.

Production rate estimating positions your company as professional and reliable. It demonstrates that you run a well-organized, data-driven operation that can handle projects of all sizes with precision and confidence. This level of professionalism helps you stand out from competitors who may still rely on outdated or less consistent methods like best guess.