What should contractors take into account when estimating project costs?

When estimating project costs, contractors must consider all costs involved, not just one aspect. This comprehensive approach includes materials, labor, and overhead.

Focusing solely on labor costs would lead to an incomplete estimate, as it ignores significant expenses like materials needed for construction and overhead costs that cover operational expenses associated with running the business.

Similarly, estimating profits without accounting for all relevant costs can result in financial shortfalls, as anticipated profits might evaporate if actual project costs exceed initial estimates. Lastly, internal estimations should not be based exclusively on external client demands; while client preferences and requirements are crucial, they do not encompass the broader financial picture needed for accurate project cost estimation.

By including all associated costs—materials, labor, and overhead—contractors create a more accurate and realistic budget which is essential for successful project management and profitability.