How to Create a Unit Cost Estimate From Scratch — Step-by-Step Guide

Introduction

For small contractors and trade professionals, estimating accurately is the difference between profit and loss. But building an estimate from scratch especially using unit costs can feel overwhelming.

A well-prepared Unit Cost Estimate lets you break down every piece of a job by labor, material, equipment, and overhead. It’s more precise than lump sum guesses and gives you confidence when submitting competitive bids.

In this blog, we’ll walk through how to create a Unit Cost Estimate from scratch step-by-step.

What Is a Unit Cost Estimate?

A Unit Cost Estimate is a method of estimating where each element of a construction project is priced per unit for example, per square foot, linear foot, cubic yard, or piece.

Rather than estimating the entire project as one lump sum, you break it down into measurable units and assign a cost to each.

This includes:

• Unit price of materials

• Labor cost per unit

• Equipment use per unit

• Subcontractor quotes per activity

The total cost of the project is calculated by multiplying these unit prices by the quantities derived from your takeoff.

Why Use Unit Cost Estimating?

Unit Cost Estimating offers several advantages for SMBs:

• Helps avoid underbidding or overbidding

• Makes estimating repeatable across similar projects

• Easy to update when material or labor rates change

• Improves transparency for clients and GCs

• Facilitates accurate invoicing and budgeting

If you build decks, install HVAC, or pour concrete regularly, having your own unit cost library is a game changer.

 Step 1 – Start With a Quantity Takeoff (QTO)

Before you can assign costs, you need quantities.

Review your construction drawings and calculate quantities for each work item:

• 400 square feet of drywall

• 100 linear feet of fencing

• 50 cubic yards of concrete

Use takeoff software like PlanSwift or Bluebeam to speed up the process and ensure accuracy. This is the foundation of your Unit Cost Estimate.

 Step 2 – Break Down Each Work Item

Once you have quantities, break each task into:

• Materials

• Labor

• Equipment

• Overhead

• Profit

For example, for 100 linear feet of 6-foot chain link fence:

• Materials: Posts, fabric, gates, concrete

• Labor: Hours required by two installers

• Equipment: Post-hole digger or auger rental

• Overhead: Your business operating expenses

• Profit: Your markup

This breakdown lets you analyze each component and fine-tune pricing.

 Step 3 – Assign Material Unit Costs

Look up current material prices through:

• Vendor catalogs

• Online price guides like RSMeans

• Quotes from local suppliers

For example:

• Chain link fabric: $2.50 per linear foot

• Line posts: $15 each

• Concrete: $125 per cubic yard

Make sure to include delivery fees or fuel surcharges.

 Step 4 – Calculate Labor Costs Per Unit

Estimate how much time it takes to complete one unit of work, then multiply by the crew’s hourly rate.

For example:

• 2 workers install 100 feet of fencing in 8 hours

• Labor rate: $40/hour/person

• Total: 2 x 8 x $40 = $640

• Unit labor cost: $640 / 100 = $6.40 per linear foot

Track productivity over multiple projects to improve your labor assumptions.

 Step 5 – Include Equipment and Tool Costs

Even if you own your equipment, it still costs money to use through fuel, wear, and depreciation.

Examples:

• Auger rental: $75/day

• Ladder or scaffolding use

• Generator fuel for remote sites

Allocate these costs per unit of work based on expected usage.

 Step 6 – Add Overhead and Profit

Overhead includes your business operating expenses that aren’t job-specific:

• Insurance

• Office rent

• Estimating software

• Admin payroll

Let’s say your annual overhead is $60,000 and you plan to install 10,000 feet of fencing this year. Your overhead per linear foot is $6.

Profit is your markup typically 10–20% depending on market and risk. Add this to your unit cost.

 Step 7 – Compile the Final Unit Cost Estimate

Now add it all together.

Example for 1 linear foot of chain link fence:

• Material: $3.50

• Labor: $6.40

• Equipment: $0.75

• Overhead: $6.00

• Subtotal: $16.65

• Profit (15%): $2.50

• Total: $19.15 per linear foot

Multiply by your QTO (e.g., 100 feet) to get a total project cost of $1,915.

How to Store and Use Your Unit Costs

Once you’ve built your first Unit Cost Estimate, save it!

Use Excel, Google Sheets, or estimating software to create a library of:

• Work activity

• Unit of measure

• Material, labor, equipment breakdowns

• Overhead and markup assumptions

Update this monthly or quarterly to reflect price changes.

This will save you time on future bids especially for repeatable projects.

Mistakes to Avoid When Estimating Unit Costs

• Using outdated material prices

• Forgetting to include small tools or equipment

• Underestimating labor hours

• Not factoring in delivery fees or surcharges

• Ignoring project-specific complexity (e.g., terrain, access issues)

Double-check your math and assumptions. Even small errors can erode your profit margin.

Why Outsourcing Can Help

If you’re pressed for time or juggling multiple bids, consider outsourcing estimating to a professional team.

At VASL, we provide:

• Accurate QTO and MTO

• Unit cost breakdowns by trade

• Estimates in your preferred format

• Support for roofing, drywall, fencing, HVAC, and more

We help you win more work without burning out your team.

Final Thoughts

Creating a Unit Cost Estimate from scratch may take effort upfront but it pays off every time you bid.

It helps you:

• Stay competitive

• Avoid underpricing

• Control your margins

• Improve client confidence

Whether you estimate in Excel or with software, building your own unit cost estimate library is a smart move for any contractor.

Need help building or reviewing your estimates?

 Email: saman@vasl.team
 Schedule a call: Book here
 Learn more: VASL Estimation Services