As you can see the actual labor is 12.2% and the estimate was only at 7.0%, which is 5.2% more. 12.2% divided by 7.0% is 1.74. The labor is costing 74% more than what has been estimated.
What does 5.2% translate into for a contractor doing $2,000,000 in sales a year?
$2,000,000 x 5.2% = $104,000 left off the estimate and don’t forget that’s before mark up! At 50% gross margin that would be $208,000 and that won’t show up as net profit at the end of year.
This is a huge difference. To keep this from happening, get your bookkeeper to put a percentage by the most important numbers on your operating statement: material cost, labor cost, gross profit, overhead cost, and net profit.
When you estimate a job, always put a percentage by your material estimate and your labor estimate. This will greatly help you to estimate at what it actually costs you.
Always use your operating statement to run your business, that’s what it is for!
Remember you can’t manage what you don’t measure!
