Job costing is a technique for evaluating performance on individual jobs. It is also a way to maintain historical data, to use to estimate future work. The calculation of costs on a job by job basis helps to take our financial temperature. How is this crew doing? How are we doing on this type of work? If we are using a certain price per hour to estimate and we find that after job costing our rate per hour is much less then we need to find out why we aren’t making our hourly rate as planned. Is it because the estimate is wrong, or is the crew failing to meet expectations? And if things are not performing as expected then we can hopefully pinpoint the areas that need improvement.
Not often mentioned as a beneficial tool to use, the data that comes from Job Costing is a real benefit in estimating special types of work. For example, we usually have an easy time calculating estimates for a 2 coat bedroom repaint, but when we try to estimate wallpaper removal, we might find that the range of hourly performance is greater. What if we have the same type of paper, and sizing etc, but we add the height of a 20 foot tall foyer. Or as so much of our market is 200 year old homes, what do we experience in the various complications. So when we record historical job costing data, it adds to our ability to accurately estimate unusual jobs.
Most people will just do something like this in their heads just to check the pulse of our jobs, formal job costing will open your eyes the first couple of times that you do it. And saving the data will provide long term help in estimating.
Create a simple form:
Job Name:
Estimator:
Contract Price:
Expenses:
Wages:
1) Employee hours worked hourly rate total
2) – - –
Material costs total
Job total
If we take the contract price and divide it by the man hours on the job we get the rate per hour that we achieved on this job. Obviously if we came out pretty close to the rate that we estimated this job at, then we are happy. If this job was estimated at $55/hour and we only managed to hit $35/hour. Then we need to find out why this job exceeded the budget that we established for this job.
By: P E Cavanaugh
Posts Tagged ‘Hourly Rate’
Painting Business Management – Job Costs and Estimating Paint Jobs
April 30th, 2010Painting Jobs – Going Rate, Hourly Rate Or Selling Price
March 9th, 2010
Calculating overhead – Secrets of knowing what hourly rate to charge for your work.
Let me ask you a question. What hourly rate should I price my work at?
Or, What is the going rate for painting work?
I wish I had $5.00 for every time I have heard someone ask that question of another painter.
So what?
Here are two more examples of “so what”.
1 – I am a 35 year old married man with 3 kids, a big mortgage, and my wife is a stay at home mom. I pay all my medical expenses out of pocket. I have two painters and two tucks with all their bills and expenses. I pay for workers comp and liability insurance on our combined payroll. And of course if I get hurt my government won’t allow me to collect disability; because, I am the owner.
2 – I am a 45 year old man living with my wife who is tenured teacher in a big upper class public school. Her job pays all medical expenses and insurance. We bought our home 20 years ago, and the mortgage is small for today’s standards. We are childless and have no major expenses.
Different needs, both business and personal, so what do they charge?
The “going rate”, or whatever that is. The problem with selling our services for the “going rate” is that the “going rate” is someone else’s rate, not your rate. So to ask anyone what the “going rate” is a sure fire way to work for an hourly rate lower than you need.
You should ask yourself what your “going rate” is. That is, what do you need to sell your jobs at in order to do the best job you are capable of and make what you need plus profit. The way to know is to add all your costs including what you need to earn and diving that by the amount of hours worked.
Just add all your costs, for the year and divide by your historical hours worked. That will be your “going rate” not some number thrown out in order to be the lowest bidder. And that is usually what someone else’s going rate is.
The problem with most people in our business when calculating overhead is not including everything.
For example, do you pay yourself to do an estimate? We all advertise “free estimates”, they may be free to our clients; but, they are not free to us. Leaving out things like this will give you a lower number than what is needed. And the greatest challenge of painter/craftsman/ business owner is to learn to think like a businessman before thinking of himself as a painter.
By: P E Cavanaugh
