Episode Transcript
[00:00:00] Speaker A: Foreign welcome back to the Total profit podcast. I'm T2, and I'm here with the man that makes spreadsheets sound dangerous, Tommy P.
[00:00:17] Speaker B: Thanks, T2. Well, we're going to get into not the flashiest topic, but today we're going to dive deep into job costing. If you've ever ended a project and it said, wait, where did the money go?
This episode's for you.
[00:00:37] Speaker A: Job costing is not sexy by any stretch, but it might be the most powerful habit that you build into your business this year. It's the difference between hoping you're profitable and knowing it.
[00:00:50] Speaker B: Yes, job costing is how you measure the real cost of delivering your work. Materials, equipment, labor, working with your subcontractors. It's kind of the whole, the whole ball rolled up into one. If you don't track it, you can improve it.
[00:01:09] Speaker A: I have a boss that used to say what gets measured, gets managed. And that has stuck with me. So most businesses don't do job costing consistently or they wait until tax time or something like that. And by then, whatever leaks you might have, they've already drained the whole tank.
[00:01:28] Speaker B: Leading indication, rather lagging indication for sure. So here's, here's what you want to include in every job cost analysis. It's, it's the actuals, not the estimated labor hours, material costs and supplies. Your subcontractors, any equipment that you rent or use on the project, along with any, any fuel or transportation that would move that equipment, any travel to and from the job, any permits or fees that would be included, all those have to be accounted for. Otherwise they're coming out of your pocket.
[00:02:03] Speaker A: A lot of business owners, if the, if the cost is nominal, like maybe it's a credit card fee or something like that, they don't include it. They just sort of let those things slide. And those are some of the leaks that we've talked about. And if you're a service business, track those tool expenses and the vehicle usage and the admin time attached to the job also.
[00:02:24] Speaker B: Exactly.
You know, step one, estimate it, get it, get it detailed in a bid. Break it down by labor, material, equipment, and figure out an accurate executable timeline.
[00:02:39] Speaker A: And step two is to track, track it during the job. Don't wait. Use job codes, use apps, even a spreadsheet. Whatever works for you, just don't guess.
[00:02:51] Speaker B: And step three, evaluate it. Compare your estimates to your actuals.
Where do we go over and where were we? Spot on. Those, those are critical things and they're motivators when you, when you nail a bid and you see those numbers matched, it's a really good feeling and it.
[00:03:10] Speaker A: Hones your skill set as a business owner as well. You can get closer and closer on your estimate by eyeballing because a lot of those numbers, they start to stick in your head. So once you're job costing on a regular basis, the data will tell you which types of jobs are profitable, which crews are most efficient, and where your own estimating might need some help.
[00:03:34] Speaker B: It's how you price smarter. Next time, schedule better and train your team on the real drivers of profit.
[00:03:43] Speaker A: All right, There are some common pitfalls, however, then the first one that we want to talk you through is really only doing it for big jobs. All right. Those small jobs add up and they are often the sneaky margin killers. Sometimes the small jobs are your best margin ones. But how would you know unless you're tracking it exactly?
[00:04:05] Speaker B: Yeah. And then the, the next pitfall is not tracking your labor accurately. If you have guys that are clocked in for 10 hours on a job, but they're only productive for five, your job costing won't, won't reflect the true issue there and what your productivity is.
[00:04:23] Speaker A: And pitfall number three, doing the analysis but never reviewing it. So the values in using the data to lead better.
I don't know any better way to say it than that really, but do do the analysis but review it in future when you are bidding more jobs.
All right, so this episode today brought to you by performance margin, your all in one system for tracking those job costs, your margins and making smarter business moves every single day. We've got some action steps for you this week, Tommy, you want to cover it this time?
[00:05:01] Speaker B: Oh yeah. Thank you.
So pick one job, just one.
Do a full post job analysis and see how it worked out. See what your estimate was, see where your actuals were and, and see how that comparison goes. And I think you'll be surprised on what, what you're going to find and it'll be easy to start that habit for number two.
[00:05:23] Speaker A: Absolutely. And even if it's messy, just start the habit. Profit isn't a mystery. It's it's a measurement. It's data. It's an actual number. So. So share this episode with your ops manager, your estimator, or your bookkeeper, or all three.
[00:05:42] Speaker B: Communication is key. And remember, take her. Cool.
[00:05:45] Speaker A: Don't get too excited.
[00:05:47] Speaker B: It's all under control and it's going to be fine.
