An estimating technique is an approach to predicting cost or revenue. Using a consistent methodology is important to achieve reliable and comparable results. Firms may have specific policies their personnel have to follow when making estimates to ensure that the approach will be similar no matter who prepares the estimate. This can help reduce problems associated with variances in methodology, like an offer from one mechanic in a shop of a very low price for service while another indicates the cost of a job will be much higher.
When preparing estimates, people can broadly divide them into detailed and approximate types. Approximate estimates offer a rough guess of the cost, based on similar projects, experience, and quick research. They can be helpful for getting a general idea of expenses before proceeding with a more detailed estimate. For people soliciting estimates, they can’t be quoted as firm bids, but may provide a frame of reference. A homeowner looking for a new roof, for example, could ask for an approximate estimate from several contractors to learn more about the range of possible prices.
Detailed estimates require more care in their preparation, because they should be as accurate as possible. They typically include the results of research to determine costs for materials, labor, and overhead. In this estimating technique, the goal is to provide information about real costs for the client. It can become the basis of a bid, in which case the client may be able to lock in the price with a contract. If the project exceeds this price, the client may be entitled to the original bid under the terms of the agreement.
In the preparation of estimates, people can use a variety of techniques. They may compare projects on an order of magnitude to get an approximate estimate. It’s also possible to use formulas in some industries where prices tend to be stable. A detailed case study may be necessary to determine how much work needs to be done and what it might involve. The type of project is also a consideration with estimating technique; calculating costs for new home construction is different than discussing how much is might cost to build a shed, for instance.
Some workplaces with standard estimating technique requirements may have a manual. Personnel can consult it in the course of preparing estimates to make sure they follow procedure and yield accurate, precise, and useful information. Customers can ask about the estimating technique used if they are curious or want a basis for comparison with other estimates for the same job.