Estimating electrical work — particularly in the context of new construction projects or extensive commercial service jobs — involves many steps and moving pieces. Creating an accurate estimate includes a thorough review of project specifications, determining precise quantities of equipment, materials, and labor needed, and pricing bids correctly to achieve desired profit margins.
Within each step, there are different challenges to navigate and nuances to consider. So, in this post, we’ll walk through the main steps of the electrical estimating process as a resource for electrical contractors, project managers, and electricians to reference prior to creating an estimate — to ensure they execute each step optimally.
In addition, before we wrap up, we’ll share some of the ways that ServiceTitan’s electrical contractor software can streamline important aspects of estimating and electrical project management (such as maintaining accurate material and equipment costs, job costing, purchase order management, progress billing, and more).
Table of Contents
Want to see how ServiceTitan works to streamline your electrical business operations? Schedule a call to get a free, live, one-on-one walk through of the features we describe throughout this article.
1. Review the Bid Request
Electrical estimating typically begins with reviewing a bid request put out by the general contractor. At a high level, you’re seeking to understand:
What is the builder or client requiring of you?
Are you willing and able to meet all of their parameters?
The following are some key factors to keep in mind.
Are There Unique Project Requirements That You Need to Account For?
In the construction world, there are all sorts of different scenarios in which developers or general contractors will choose or need to require certain parameters from their subcontractors. And these details are extremely important to pay attention to during bid review because they can have nontrivial impacts on your bottom line.
Some examples of these include:
Liability insurance: Does the builder have specific liability insurance that you need to carry? If you don’t have that insurance, are you willing to invest in it? And how does that affect the pricing of your bid?
Warranty periods: What is the warranty period they’re requesting? Understanding this is essential for being able to determine the reserve you’ll need to hold to pay for that.
Change orders and adjustments: What are the builder's policies when it comes to change orders and adjustments throughout the course of the project?
State regulations: Does the state in which you’re bidding the project have specific requirements related to journeymen on the job, or certifications that you or your electricians need? And can you meet those requirements?
Miscellaneous requirements: Are there any other miscellaneous requirements that might affect your costs? For example, if you’re working on a project at a school and all of your electricians need to have background checks — are you pricing your bid to account for those costs?
If you aren’t exceptionally thorough in your review of the specifications of the bid request, it is easy to mistakenly agree and become contractually obligated to do certain things that you either weren’t prepared to do or didn’t account for in your bid pricing.
What Are the Expectations Around Project Pacing?
You also need to take pacing into account. What is the builder going to expect for your pace? How many starts per week and for how much time? And can you keep up with that?
If you jump into a job with a production builder and they want the job done in one day but you’re only prepared to do it in four days, that spells bad news (stress, potential loss of an account, loss of future jobs with that contractor, etc.). So, ensuring you can manage the pacing of the job before you create and place a bid is essential.
What Is the Duration of the Project? And Is There Flexibility to Adjust Your Bid If Costs Change Over the Course of a Longer-Term Project?
Part of your fact finding when you’re bidding for a job should be how long you’re anticipating this job will take. You have to be more careful with a job that’s going to take three years than a job that’s going to take three months because you have more volatility in your labor force, gas prices, material costs, taxes, etc.
So, an important topic to clarify before developing your proposal and bidding on the project is: If the project takes place over a longer time period, will the builder allow you to adjust your prices accordingly as your costs change? How tightly are they going to hold you to the confines of your estimate? And can you plan to have price increases at specific dates?
This is something you can and should consider writing into your contract.
Who Is Supplying the Materials?
We see a lot of situations today where builders or developers are choosing to supply the materials for their projects. Often this will be framed as something that saves you money. However, all they’ve really done is take away some of your markup. And if you are not careful, this can cause you to lose money.
Why? Because developers often want to purchase the materials but have them shipped to you, leaving contractors on the hook for receiving costs, warehousing of the materials, delivery costs, and other expenses associated with the materials.
So, this is another essential factor to pay attention to when reviewing a bid. If a developer says they’ll supply the materials, you need to make sure you ask them exactly how that will be handled, which parties will be responsible for which costs, and then factor that into your bid pricing accordingly.
What Billing Structure Are You Expected to Follow?
Understanding what’s expected of you when it comes to billing is another important factor to keep in mind. Is the builder okay with a simple process of invoicing each time an electrician visits the job? Or are they expecting progress billing or AIA style billing, for example? Because the latter will drive up your overhead costs.
Progress billing is more difficult and labor intensive, and requires a higher skilled and higher paid employee to manage that process. And, therefore, you need to account for that in your pricing.
2. Review the Drawings and Plans
While an electrical bid request provides a blanket specification for the project you’re bidding, you may have multiple sets of plans that need to be reviewed. For example, if you’re working with a production home builder, they might have 20 models with 20 sets of plans that your estimating staff needs to review and submit on one proposal to be considered for that project.
When reviewing plans, contractors sometimes get in trouble when they don’t consider specific design features that may cause them to use additional wire or less wire than they’d normally expect for that square footage. For example, if there’s a staircase in the middle of the house that they need to work around.
So, in addition to doing an accurate takeoff (discussed next), a key thing to keep in mind when reviewing plans is looking for unique features that might cause the designs to vary from your standard practices. Failing to account for these can cause issues on the job and diminish profit margins.
3. Perform a Quantity Takeoff
Part and parcel with reviewing the plans is performing an accurate takeoff to determine your counts of wiring, conduits, outlets, switches, lights, panels, breakers, and other equipment or electrical materials you’ll need for the job.
When it comes to performing quantity takeoffs, many contractors use estimating solutions such as Trimble Accubid, TurboBid, or other electrical estimating software to manage this process. Others rely on custom built Excel spreadsheets.
Using a takeoff software solution is definitely an advantage. But regardless of how you do your takeoff, having a construction estimating system that works for your company and ensures you get your counts right is really important.
4. Estimate Your Material Costs
Once you’ve determined your material counts during takeoff, you can add up those materials and their associated costs to get your material cost estimate. The most important aspect of calculating this correctly is ensuring that your material costs are up to date, but many electrical contracting businesses lack a good process for this.
A common method is to send an Excel spreadsheet with their material pricing to their supplier and request that they make updates so that it reflects current pricing. However, these spreadsheets often aren’t updated for every single job, and therefore many contractors end up pricing services based on out-of-date information.
Ideally, you should update your spreadsheet prior to calculating your bid for each project. This is one area in which electrical contractor software such as ServiceTitan can provide significant value.
For example, with ServiceTitan’s electrical pricebook — which integrates directly with top industry supplier catalogs for HVAC, plumbing, and electrical — every line item that’s added to an estimate automatically reflects the most up-to-date pricing from the supplier. Thus, there’s less room for error when calculating pricing for your materials and subsequently your final bid (and much less work involved in managing and updating your pricebook).
5. Determine Your Labor Costs
Next up is determining your labor costs. There are two key factors to keep in mind during this step:
What pricing system are you using?
Are you paying employees or subcontractors?
What Pricing System Are You Using?
For construction work, the most common method of pricing labor in electrical is the piece-rate system. Rather than paying based on labor hours, which makes it difficult to control costs, contractors will pay based on work output of their electricians.
For example, they may pay $0.10 per square foot for whoever is doing the rough-in. On a 1,500-square-foot house, that would be a $150 flat rate for the installer, which incentivises them to do it as efficiently as possible to increase their own hourly rate. Then, the electrician who comes in for the second phase of the project to install fixtures would be paid a separate piece rate, and so on.
In commercial service, a best practice for pricing labor is to calculate a billable labor rate for profitability, and then use that in pricing flat-rate services.
Are You Paying Employees or Subcontractors?
A second factor to consider when determining your labor costs is whether you’re paying your own employee or using a subcontractor.
If you’re paying your own employee, you have to provide trucks, gas, liability insurance, and all of the other tools they need to do their work. Whereas if you’re using a subcontractor, you have to pay them more than you would your own employee, but you don’t have the additional burden of supplying all of their vehicles, equipment, tools, etc.
Both models are prevalent in electrical contracting, and it’s up to you to figure out which model suits your business. Regardless of which model you choose, it needs to be considered in calculating your labor costs to account for enough burden that will allow for profitable pricing of your estimate.
6. Understand Your Overhead Costs and Percentage
It is difficult to overstate the importance of knowing your overhead costs — the ongoing operating expenses of running your business, such as office staff and executive payroll, rent, insurance, utilities, software, etc. If you don’t have an accurate sense of what your actual overhead is and a process to account for that in your bid pricing, then you’re not going to make money.
So, it’s essential to know your overhead percentage — the percentage of your annual revenue that goes toward paying all of your fixed and variable costs, which ideally are broken out in your profit and loss statements — and apply that in your pricing calculation for the bid.
7. Price the Estimate for Profitability
Once you have determined and added up the three core aspects of your project costs discussed above (labor, materials, overhead), you can calculate your final bid price. The most common methods for this are the multiplier method and the divisor method.
With the multiplier method, you simply multiply the total estimated project cost by your desired net profit margin. So, if your estimated project costs are $100,000, and you want to hit 20% net profit, the calculation would be:
Bid price = Costs x (1 + Profit percentage) = $100,000 x (1 + 0.20) = $120,000
Alternatively, with the divisor method, you divide your total project costs by the inverse of your desired profit margin. Using the same example, the calculation would be:
Bid price = Costs / (1 - Profit percentage) = $100,000 / (1 - 0.20) = $125,000
As you can see, the divisor method is designed to add a little bit more money to your bottom line. It is generally the preferred method because it can help to maintain profitability in cases where unexpected costs are incurred.
With that said, it is important to understand and consider what your market can bear when choosing your method of pricing. For example, if you’re bidding on a project in a region with very high competition, you might choose to use the multiplier method to remain competitive.
8. Create and Deliver Your Proposal
At a base level, creating a proposal is first and foremost about outlining the scope of work that you are going to provide. And of course, you should follow basic best practices such as using spell check, making sure your proposal looks branded and professional, and ensuring all of your documents are attached.
Beyond that, here are a few other considerations to keep in mind as you develop your proposal.
Include the Right Level of Detail
A good proposal strikes a balance of providing enough compelling detail to communicate the value in what you can offer the client without giving away your competitive advantage. If the builder were to show your proposal to a competitor, you wouldn't want them to be able to glean too much information about how they could compete with you.
Submit in the Format Specified by the Client
Different developers and contractors have different formats in which they want you to submit your proposal. So, when reviewing the bid request as discussed above, it’s also important to note and follow the format that they specify for your submission.
For example, some customers may request that you upload your proposal through an online portal. If that’s the case, you shouldn’t just send a PDF proposal to their email — that might automatically rule you out of getting the job.
Likewise, different customers may request that proposals are broken out in different ways. These are requests you’ll want to be sure to follow.
Make Sure to Follow Up
Finally, following up on your proposals with the point of contact is incredibly important. It shows initiative and care. Proposals are often received more favorably this way. And you’ll close more jobs in the long run.
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How ServiceTitan Helps Streamline Electrical Estimating and Project Management
To demonstrate how ServiceTitan’s electrical software can support contractors in estimating and project management, we’ll walk through some of our construction management features that have been designed specifically for HVAC, plumbing, and electrical contractors in this section.
Note: We’re currently pursuing integration partnerships with takeoff software solutions. So, in the near future we’ll offer an even more streamlined solution for construction estimating.
The Project Overview Page
The first step to building an estimate is to create a new project, which will generate a project overview page.
This page allows you to:
Enter in all of the basic project information (project name, contact information, customer phone number, etc.).
View at-a-glance project job costing and expense details that update automatically throughout the course of a project.
Initiate key project actions such as generating a new purchase order, application for payment, invoice, and more.
The data displayed in the project summary and expense tables are all based on the estimate you create at the beginning of the job. So let’s look at how that works first.
Create Accurate Estimates
Once all the necessary information has been reviewed and collected, users can click “Build Estimate” from the project overview page to begin this process.
The estimate page allows you to begin adding all of the specific tasks, equipment, and materials that will be needed to do the work. Users have the option to draw from pre-built job estimate templates or build estimates from scratch.
For example, if you have a standardized quote template for a commercial electrical installation, you can use that as a base and then adjust the fine details accordingly to save you some time during estimate creation.
Tasks, materials, and equipment can all be tagged with color-coded project labels to organize the project details and make everything easy to visualize.
Once an estimate is complete, it can be printed, emailed, or exported in PDF format and sent off to the client.
Initiate Requisition and Purchase Orders within Your Estimate
When the estimate is sold, all of the details you’ve set up in the estimate are automatically integrated into the rest of the project management workflow. For example, you can initiate a requisition of equipment and materials right from within your sold estimate.
You simply click “Initiate Requisition” in the top right corner of your estimate, and then select the equipment and materials you want to order.
For example, at the beginning of a project, let’s say you want to start the process of ordering your permits and materials for your electrical work, you can select those items right from your estimate, which will lead you through a workflow to create the purchase orders you’ll need.
In the purchase order workflow, the line items are automatically populated from your estimate. And you can simply select your vendors and shipping locations for each material to complete your order details.
Then, you can save that order to create a transaction, and send those purchase orders off to your vendors — without ever leaving ServiceTitan.
Automate Project Tracking and Job Costing
As you move throughout the course of a job — creating purchase orders, logging labor hours, processing change orders, receiving progress payments, and so on — your project summary and expense tables make automatic calculations that take all of your project’s progress into account.
So, instead of constantly needing to update a series of spreadsheets every time labor costs and material costs are incurred, this is done automatically for you in real time based on work that’s completed and entered into the system.
If we continue with our example from above, and you’ve made your initial purchase order of permits and electrical materials, your project summary table is updated to reflect those expenses:
Furthermore, you can view a more detailed breakout of your actual costs versus your budgeted construction costs.
This will automatically update as you accumulate expenses from materials, equipment, and labor hours. And it will display your margins in dollar and percent form to help you track your job costing and profitability throughout the course of your project.
You can also access a table breaking down your expenses in further detail:
You can click into any line item and see the exact source of where that expense came from (e.g., which technician logged those hours, or which purchase orders and vendors a given set of materials came from). This allows you to easily check your numbers and feel confident in the sources of your data.
When it comes time for sending applications for payment and invoices at each stage of progress billing, this can also be easily accomplished from the project tracking page menu:
Easily Create Applications for Payment and Invoices
The initial estimate you created also informs and populates your continuation sheet in your application for payment:
No more reinventing the wheel for every asset that needs to be created throughout your project. When you want to send a payment application, you can easily generate one by selecting the billing period and the percent of each line item you want to bill for.
Then, you can generate a PDF payment application with the details automatically filled out, and send it off to your client for review. The detail of the continuation sheet makes for a defensible bill that’s much easier to defend in the event of pushback from construction companies or general contractors. As a result, subcontractors are able to get paid faster and avoid cash flow issues.
When applications are accepted, it’s just as easy to generate and invoice for that progress payment. And, when payments come in, you can update your accounts receivable through our QuickBooks or Intacct accounting integrations.
Get a Personalized Demo of ServiceTitan Electrical Software
If you’re interested in learning more about how ServiceTitan can help you manage and grow profitability in your electrical contracting business, schedule a free call with us to see a personalized demo of the features and functionality we’ve discussed throughout this post.
ServiceTitan Electrical Software
ServiceTitan is a comprehensive electrical business software solution built specifically to help service companies streamline their operations, boost revenue, and achieve growth. Our award-winning, cloud-based platform is trusted by more than 100,000+ contractors across the country.
