Cost Estimating
by Tom
Keep an accurate record of the labor hours and material costs you invest in every job. Sooner or later, you will have a basis for parametric (bigger than a breadbox) cost estimating. (Gadget A cost x and Gadget B looks to be about 10% bigger than Gadget A. Therefore the cost of Gadget B should be about 1.1x. This method is easy to do, easy to revise, and easy to defend. Even a big job can be costed in minutes using this method.
Bottoms-up costing – how many pages, how many hours or minutes per page for each labor category, etc – is no more accurate; it just looks accurate because it takes so much calculating to get to the bottom line. The fact is that your page counts, productivity rates, and labor rates are all just guesses, anyway. Any manager worth his or her salt can poke holes in this type of estimate. The first question you hear will be: “Where’s the empirical data that supports these productivity rates?” Moreover, even if you’re using a spreadsheet program, last-minute revisions to a bottoms-up estimate can result in some long workdays.