What’s the Point of Job Costing?

You’re rolling, growing your business, getting jobs done, making sure the client is happy, and moving on to the next job. You may have come across a Facebook thread where people were touting that you “must” job cost, or you may have seen a free job costing spreadsheet.

So… what’s that even mean?

And why should you spend the precious time you already feel like you don’t have to do it?

Do you know the point of job costing?

Job costing is: the process of taking your original estimates’ numbers and comparing them against the actual numbers when the job’s done.

Typically, it means comparing ‘estimated’ vs ‘actual’ expenses, hours, and profits.

The whole point of job costing is not to geek out over the numbers.

It’s simply to compare estimated vs actual numbers to learn where you went right and where you went wrong on every job.

That’s it.

It’s that simple ….except that it’s not that simple, is it?

Tracking every single expense, tracking all man hours every day, sounds simple enough. But man is it so easy to not get it done. So easy to focus on the production, charge through the job with the pedal to the metal, getting on to the next one.

But if you believe in continuous improvement, learning from your mistakes, and getting better every day, then job costing must be a part of your life.

The point of job costing is to take all your actual hours and expenses after the job is done, hold it up side by side with your original estimate, and scan those numbers.

How close was your original estimate? Does it suddenly become apparent that you didn’t figure enough man hours on that custom seating wall? Or that it took far more time haul out that fill than you thought? Or that this is the 3rd job in a row now where you didn’t have enough stone?

What the point of job costing is not

This is what I mean when I say the point of job costing is not to geek out over the numbers and percentages. It’s to learn REAL LIFE lessons on where you made mistakes on the estimate and give you the knowledge to course correct and be more accurate on the next job. A.k.a actually earning the profit you set out to earn. Because every time you get something wrong on the estimate, guess where it comes from?

Your profit.

And when your profit gets ransacked, you can’t

• make any money
• upgrade your equipment
• pay your guys enough to stick around

you work harder, but your bank balance keeps dropping, and you suffer. …and unfortunately, it’s not just you that suffers. Your team and family do too.

They’re counting on you to make…

• this happens
• it successful
• its something they can build their career on

Not job costing is like shooting at a target, aiming for the bullseye🎯, but then never looking where you hit after the shot.

You could be entirely missing the target, but never know it. You’re not looking.

In real life, you won’t know it until you run out of cash. And by that time, it’s far far more difficult to dig yourself out of that hole.

So again, the entire point of job costing is simply to take your estimate, hold it up against the light of your actual numbers, and ask yourself, what can you learn from it? What should you do differently on the next job? Whether from a production standpoint or from an estimating standpoint. Either way. Both perspectives are valuable lessons that you can learn from job costing.

Your “gut” is not “job costing”

And no, relying on your gut feeling is not job costing. If you just “know” that you made money on this job…. Sorry… you might be right a few times. But you’re also going to be wrong a few times and miss valuable opportunities to learn and course correct. You gotta be able to explain to your 10 year old how and why you made or didn’t make money on that job. Meaning it’s gotta be in black and white, in simple numbers. Estimated vs actual man hours. Estimated vs actual materials. Estimated vs actual equipment. Estimated vs actual subcontractors. Estimated vs actual profit.

To pull this off simply means that you need to track your man hours every day. Keep all your receipts. And track equipment costs.

Sounds simple. And it is simple if you make it a part of your process. Your non negotiable daily habit.