Ask most contractors how their business is doing and they'll tell you about their revenue. "We did $800,000 last year." Great. What did you keep? Usually a long pause follows that question.
Revenue is what your customers paid you. Profit is what's left after you paid everyone and everything else. Those two numbers can be wildly different, and the gap between them is where most businesses quietly bleed out.
What Job Costing Actually Is
Job costing means tracking the actual cost of each individual job: labor hours spent (at your fully-loaded labor rate), materials used, any subcontracted work, and a share of overhead. Then you compare that to what you billed. The difference is your actual margin on that job.
This sounds obvious. Most contractors don't do it. They track total revenue and total expenses at the business level and assume the average is fine. But averages hide disasters. You can have some jobs running 40% margin and others running negative, and the average looks okay until suddenly it doesn't.
The Fully-Loaded Labor Rate
This is the part most contractors get wrong. Your tech makes $28 an hour. But what does it actually cost you to have that tech on the job? Add payroll taxes (about 7.65%), workers comp, health insurance, paid time off, and a share of your vehicle and tool costs. Suddenly $28/hour might actually cost you $42-48/hour fully loaded.
If your flat rates or T&M rates are built on $28/hour, you're losing money on every hour of labor. Calculate your fully-loaded rate for each position and use that number in your job cost calculations.
How to Start Doing This
You don't need complex accounting software to start. A simple spreadsheet works. For each job: what did you bill, what did parts cost (actual receipt), how many hours did it take (actual time, not estimated), what's your fully-loaded labor cost per hour. Multiply hours by rate, add materials, divide into your revenue. That's your margin.
Do this for 20 jobs. You will find patterns you didn't know existed. Certain types of jobs are more profitable than others. Certain customers take twice as long as average. Certain techs are faster or slower in ways that affect your margins. That information changes how you price and schedule.
WerkOps tracks job time and materials automatically so the costing math doesn't require a spreadsheet marathon at the end of every week.
Put this into practice with WerkOps
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Written by
Dina Good
Founder, WerkOps
Dina grew up in the trades. Her father was a contractor, then a building inspector, and the job site was her classroom long before any formal one was. She went on to own her own contracting company, which is where she first felt the pain of running a skilled trade business on bad software and worse spreadsheets. A love of data pulled her into programming, and the two worlds eventually collided into WerkOps - software built by someone who has actually been on the truck.