7 Estimating Mistakes That Are Costing You Money

Introduction

After talking to thousands of contractors, we've identified the most common estimating mistakes that silently drain profits. Some of these might surprise you.

Mistake #1: Underestimating Labor Time

This is the #1 profit killer. Contractors consistently underestimate how long jobs actually take.

The Problem: You think a job will take 4 hours, but it actually takes 6. That's a 50% error that comes directly out of your profit.

The Fix:

• Track actual time on every job for 3 months
• Compare to your estimates
• Adjust your labor rates accordingly
• Add a 15-20% buffer for unexpected issues

Mistake #2: Forgetting Your True Labor Cost

Your labor cost isn't just the hourly wage you pay (or pay yourself).

What You're Forgetting:

• Payroll taxes (7.65% employer portion)
• Workers' comp insurance (varies by trade)
• Health insurance
• Paid time off
• Training time
• Drive time between jobs
• Unbillable time (estimates, admin, etc.)

The Reality: If you pay a technician $30/hour, your true cost is likely $45-55/hour.

The Fix: Calculate your labor burden—the true fully-loaded cost of labor. Use this number in all estimates.

Mistake #3: Not Accounting for Overhead

Every job needs to contribute to your overhead costs, or you're losing money even when you're "busy."

Overhead Includes:

• Rent/mortgage for shop or office
• Vehicle payments and maintenance
• Insurance (general liability, auto, etc.)
• Tools and equipment
• Software subscriptions
• Marketing and advertising
• Phone and internet
• Accounting and legal fees
• Your salary (yes, you need to pay yourself!)

The Fix: Calculate your monthly overhead, divide by billable hours, and add this to your hourly rate.

Example: $8,000 monthly overhead ÷ 120 billable hours = $67/hour overhead recovery needed.

Mistake #4: Racing to the Bottom on Price

When you compete on price alone, you attract price-sensitive customers who will leave you for $50 savings.

The Problem:

• Low margins leave no room for error
• No budget for quality materials
• Can't afford to fix callbacks
• Constant stress about cash flow

The Fix: Compete on value instead:

• Faster response time
• Better warranties
• Cleaner work
• Professional communication
• Quality materials

Customers who value these things will pay more—and they're better customers.

Mistake #5: Not Including a Profit Margin

Covering your costs isn't enough. You need profit for:

• Emergencies and slow seasons
• Equipment replacement
• Business growth
• Your retirement
• Paying yourself what you're worth

The Fix: Add a minimum 15-20% net profit margin to every job. This is AFTER covering all costs including your salary.

Mistake #6: Inconsistent Pricing

Do you charge different prices for the same job depending on your mood, the customer, or how busy you are?

The Problems:

• Leaves money on the table
• Creates legal risk (discrimination)
• Confuses your team
• Makes estimating take longer

The Fix: Build a pricebook with set prices for common services. Adjust for complexity, but start from a consistent baseline.

Mistake #7: Not Following Up

Studies show that 80% of sales require 5+ follow-ups, but most contractors give up after 1-2.

The Reality:

• 44% of contractors never follow up
• 22% follow up once and stop
• Only 8% follow up 5+ times
• That 8% closes most of the business

The Fix: Set up a follow-up system:

• Day 2: Quick check-in email
• Day 5: Phone call
• Day 10: Email with limited-time offer
• Day 14: Final follow-up

EstimateBuilderPro can automate this entire sequence for you.

Calculate Your True Hourly Rate

Here's a quick formula:

Target Annual Income: $100,000 Overhead: $8,000/month × 12 = $96,000 Billable Hours: 1,500/year (realistic for most contractors) Profit Margin: 20%

($100,000 + $96,000) ÷ 1,500 = $130.67/hour $130.67 × 1.20 (profit) = $156.80/hour

Are you charging this much? If not, you're leaving money on the table.

Key Takeaways

1. Track your actual labor time and adjust estimates accordingly
2. Calculate your true labor burden (not just hourly wages)
3. Include overhead in every estimate
4. Compete on value, not just price
5. Always include a profit margin
6. Use consistent pricing with a pricebook
7. Follow up on every estimate at least 5 times

Take Action Today

The best time to fix your pricing was years ago. The second best time is today.

Start your free trial of EstimateBuilderPro and use our pricing calculator to determine your true hourly rate. Your future self will thank you.