Estimating vs Reality: Why You’re Losing Money on Every Restoration Job
Are your jobs busy, your trucks full, and your calendar booked—but your profits still aren’t there?
You're not alone. Many restoration contractors are losing money one job at a time—and the culprit is often hidden in plain sight: estimating errors. Whether it’s a missed line item in Xactimate or underestimating labor hours, the difference between what you think a job will cost and what it actually costs is often wider than you realize.
Let’s break down why so many restoration businesses lose money—even when the estimates look good—and what to do about it.
The Hidden Problem: Estimating Errors in Restoration
Restoration work is fast-paced and unpredictable. When the estimate doesn’t fully account for reality, profit disappears quickly. Common restoration estimating errors include:
Missing line items in Xactimate
Using generic pricing that doesn’t match actual labor or material costs
Underestimating time and labor for complex drying or demo
Not accounting for overhead or labor burden
Forgetting change orders or failing to track scope creep
Xactimate is a powerful tool—but only if it’s used precisely. Even small gaps can cost thousands over time.
Xactimate Accuracy: The Estimate Is Only Step One
Restoration owners often assume that if the estimate is “approved,” the job must be profitable. But Xactimate accuracy depends on:
Selecting the right line items (not just “close enough”)
Adjusting pricing to match your region and current material/labor rates
Documenting everything to support scope and supplements
Including overhead & profit (O&P) appropriately
If your team rushes through estimating—or you rely too heavily on program pricing—you’re probably undercharging.
The Real Test: Job Costing
Here’s the fix: Compare your estimate to your actual costs—every single job.
Job costing is how you find out whether a job actually made money. It requires tracking:
Revenue billed and collected
Labor hours (including payroll taxes & benefits)
Materials and subcontractors
Equipment usage and maintenance
Overhead allocations (rent, fuel, admin)
When you compare actual job costs to the original Xactimate estimate, the truth about your profitability becomes clear.
How to Close the Gap Between Estimating and Reality
To improve accuracy and protect your bottom line:
Implement Job Costing Reports: Use software or spreadsheets to track every job’s revenue vs actual expenses.
Audit Past Jobs: Look back at 3–5 recent projects. How did actual costs compare to the estimate?
Train Your Estimators: Focus on line item accuracy, correct O&P usage, and supplement documentation.
Use a Labor Burden Calculator: Don’t estimate labor without accounting for taxes, workers comp, and PTO.
Update Pricing Frequently: Regional and seasonal shifts in labor and materials should be reflected in your pricing.
What It Looks Like in Practice
Imagine you estimated a water mitigation job at $5000. On paper, it looks great. But after job costing:
$1,700 in labor (including taxes and benefits)
$400 in materials and consumables
$300 in equipment maintenance and fuel
$2000 in overhead allocation
Your actual profit? Only $500, not including delays, call-backs, or unpaid line items. Multiply that by 10–20 jobs a month, and the margin erosion adds up fast.
Final Thoughts
If you’re consistently asking, “Where did the money go?”—you need to stop trusting estimates alone and start tracking job costing restoration data. Estimating is the first draft of profitability. Reality is the final version—and it’s often very different.
Want to see how your estimates stack up against reality?
We help restoration contractors implement job costing systems and identify profit leaks.
👉 Book a call with Kiwi Cash Flow