Unlocking the Battle of Costs: Variable Costs vs. Fixed Costs in Construction Estimating

3 min read

As a seasoned residential contractor, I've come to understand the nuances of cost calculation in the construction world. And let me tell you, every project has its unique challenges. In my decades of experience, there’s one conversation that never seems to fade away - the one about Variable Costs vs. Fixed Costs.

What Are Fixed and Variable Costs?

Remember my first renovation project? I had taken on this quaint little suburban home, with the excitement of a kid in a candy store. As I started crunching numbers for the estimate, I quickly realized the importance of fixed costs. These are the expenses that stay consistent regardless of how big or small a project is. Think of it as the price of entry. Whether it's rent for your office space, monthly subscriptions for software like Bolster, or salaries for your permanent staff - they remain pretty much constant.

Variable costs, on the other hand, are the ones that keep us contractors on our toes. These costs change depending on the scope of the project. Materials, hourly wages for temporary workers, and equipment rentals are some of the big ones here.

Why Does the Distinction Matter?

I'll share a personal anecdote. A client once asked me for an estimate for a simple kitchen renovation. Now, I had all my fixed costs laid out, but I forgot to account for some variable costs, like special tiles she wanted. I learned the hard way that not factoring in every variable cost can lead to unexpected dips into your profit margin. On the other hand, if you only consider variable costs and neglect fixed ones, you could end up wondering why you're not making as much profit as you should.

Having good construction estimating software is crucial. And I've found that the tools offered by Bolster can help in this regard.

Strategies to Navigate Costs

1. Understand Your Fixed Costs: These might seem like a 'given', but it's important to periodically review them. Are there subscriptions you no longer need? Is there a way to negotiate better terms on your lease? Question every fixed cost and see if there's a way to reduce it.

2. Be Detailed About Variable Costs: Just like that story I told you about the special tiles, ensure you capture every minute detail. Using specialized software like Bolster can help streamline this.

3. Stay Updated: Costs aren't static. The price of lumber or a particular kind of paint can skyrocket without much warning. Stay informed. I often consult Bolster’s blog to keep up with industry trends and pricing updates.

4. Don't Forget About Unforeseen Costs: I remember working on a vintage home and discovering structural issues mid-renovation. Talk about unexpected expenses! Always have a buffer. And if you're wondering how to handle such unforeseen issues, Bolster has a great article on it.

5. Use Software to Your Advantage: I can’t stress this enough. The construction world has evolved, and so have the tools we use. Platforms like Bolster offer a range of solutions, from calculating overhead costs to generating interactive quotes.

In Conclusion

Variable and Fixed Costs are two sides of the same coin. As contractors, understanding and navigating these costs can make the difference between a profitable project and a disappointing one. Embrace technology, stay updated, and always be prepared for unexpected surprises. After all, in the construction world, every day is an adventure.

For more insights and to up your estimating game, explore Bolster's treasure trove of articles. Trust me, it’s worth it!


Construction