By Andrew Houston
August 1, 2016 – Do you work overtime nearly every day to get more sales because you believe the only way to get more profit is by working 10x harder than everyone else? Does it sometimes feel like you’re working for nothing? If you’re just hoping things will change for the better, I have to be blunt… they won’t.
Hoping for profits is a bad strategy.
There are literally dozens of strategies for increasing your profits. In fact, all areas of your business can be improved; it’s just a matter of getting the right knowledge, awareness and skills for that strategy.
When a profit strategy is applied properly, I guarantee you won’t have the same mindset as before. You won’t have to work 10x harder than everyone else because you’ll be able to see the opportunities that have always been right in front of you.
One of the top ways for taking back control of your profits is job costing, which is a very important strategy to implement in your business. Here’s why:
Job costing allows for accurate estimates
Making a profit starts way before your crews step foot on a jobsite; it starts the moment you do an estimate. The best way to provide profitable estimates and to protect yourself is by using previous data to calculate costs on labour, material, subs, equipment rental and any other variable costs that affect your profits.
Historical data also informs you of your losses and gains on previous projects.
When estimating labour rates and hours, make sure you consider the level of project difficulty for your crew, and how much time may be required to look after them onsite. You should also be mindful of indirect costs such as taxes and benefits.
Take your time to provide accurate estimates that help you stay profitable.
Job costing gives you a status update
One of the main purposes of job costing is to create a better schedule so you can manage your crew more effectively. You need to know exactly what the crew is doing on the project: how they start, run and finish a job directly affects your profits.
CLICK HERE to download a handy one-page tool called “Maximize Control” to see how well you’re doing at each phase.
Tracking each phase indicates where you are within your quoted budget. A schedule and job cost calculation will also indicate your progress with the project and whether you’re on track (and so you can make adjustments along the way). Make sure you’re tracking the status of the project by creating reports and setting up Red Flag alerts in the system to spot potential issues before they happen.
(The “Maximize Control” tool will give you insights on where to find cracks in your process.)
Job costing gets you more details from the field
Job costing is about creating actual cost categories (e.g. service, lighting, rough-in, etc.). Once created and shared with the crew, the information coming in from the field will be more relevant. The timecards will not just include time in and out, but also what tasks they performed that day.
In addition, those who have access to the budget in the field will also include actual costs to-date information in their invoices, inventory receipts and timecard. This field information will provide you with a better measurement of the actual costs associated with the categories you created.
Job costing will make you profits
It’s all about the details when it comes to job costing. You save money when you stay on top of the profits you want to make on each project. Job costing is especially useful when you are tight on cash because you will be gathering actual costs associated with your project.
This way, you are always aware of how much cash flow you have on-hand, and when you need to bill your clients so your cash doesn’t run out. The ability to predict cash flow and know where the money is going can determine how successful and profitable a project will be to your business.
Where do you learn more?
Job costing allows you to manage your jobs more thoroughly because it provides a complete picture of costs, but the system demands you look into every detail: from labour costs per task to costs per cost category on a job, to the performance of each crew member. The biggest benefit of job costing is that it puts you in the driver’s seat of maximizing your profits.
Electrical Business Magazine knows that your success is their success, so we are conducting an online seminar with me, Andrew Houston, of Profit For Contractors, on August 23, 2016, at 2 pm EST. The goal is to help business owners like you with topics such as job costing and any other areas in your contracting business that need improvement.
During the webinar, I will discuss how to plug the profit leaks in your business, provide insight on how to enhance your team’s efficiency by 50%, and show you how to get back 15 hours/week while increasing sales.
It’s all about giving you the right knowledge, awareness and skills to take your business to the next level. CLICK HERE to Register.
Andrew Houston is the owner and founder of Profit for Contractors. He has been consulting to trades business owners for nearly a decade, helping them improve their business skills so they can achieve their personal and business goals. A graduate of George Brown College, Andrew achieved Industrial Controls Licensed Electrician as well as Electronics Engineering Technologist. Visit www.profitforcontractors.com.