Job costing Mistakes that Kill Profits

Understanding and applying job costing data can transform your business's financial health. Start by calculating your true hourly labor cost, which includes wages plus payroll taxes, workers' comp, health insurance, and benefits. This typically adds 25-30% to base wages.

Identify your most and least profitable projects to either stop bidding on the unprofitable ones or adjust their pricing. Develop a markup formula grounded in real data. For example, if 60% of your average job's cost is direct, aiming for a 20% profit demands a 67% markup—not 20%.

Monitor actual versus estimated time to refine your estimates. Building a cost-per-square-foot or per-unit database enhances estimating accuracy. Mastering job costing isn't complex but needs precision. Those who excel can see profits multiply two to threefold by focusing on lucrative work and precise pricing.

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