Job costing for contractors: did this job make money?

The job costing formula

Job net profit = price - materials and subs - other job costs - (job hours x break-even rate)

The break-even rate is the key. It is your burdened wage per job hour plus your overhead per job hour, so one multiplication covers payroll taxes, workers comp, rent, trucks, insurance and the paid hours that never reach a customer.

Worked example: a $2,400 electrical job

A two-person shop charges $2,400 for a job with $700 of materials and 16 crew hours, drive time included.

• Counting only burdened wages ($44.65 an hour), the job looks like it made $986.
• At the full break-even rate of $89.47 an hour, labor and overhead cost $1,432, and the real net profit is $268: a 11.2% margin against a 15% target.
• To hit 15%, the job should have been priced at about $2,508, $108 more.

How to job cost without expensive software

1. Know your break-even rate. Work it out once a year from your overhead and crew with the burdened labor rate calculator.
2. Log hours per job, every day. Hours are the cost most owners lose track of, and drive time belongs to the job.
3. Keep receipts by job. Materials, permits and rentals that are bought for one job go on that job.
4. Run the sum when the job closes. Price minus job costs minus hours at break-even. Note the jobs that lost money and look for a pattern by job type.

The hard part is step 2. On trade forums, owners say spreadsheets die after a couple of weeks because nobody keeps logging. The Contractor Job Profit Tracker gives your crew a 30-second phone form and runs this sum for every finished job, with a dashboard of the jobs that lost money.

Common job costing mistakes

• Using the wage instead of the burdened rate. It hides payroll taxes, workers comp and overhead.
• Leaving out drive time. On small service jobs it can be a large share of the hours.
• Forgetting small parts. Wire nuts, fittings and tape add up. Many owners add a small-parts allowance on top of materials.
• Only checking big jobs. Small jobs and service calls are often where the money leaks.

Questions

What is job costing?

Job costing means tracking the money in and out of each job separately, so you can see which jobs made money. For a small contractor it comes down to one sum per job: price minus materials, subs and other job costs, minus the hours on the job at your break-even rate.

Why use the break-even rate instead of the wage?

Because the wage leaves out payroll burden and overhead. The break-even rate already holds both: it is what one job hour has to earn before the business makes a dollar. A job that looks profitable on wages alone can still lose money once overhead is counted.

Should drive time count as job hours?

Yes. Drive time to and from the job is paid time that exists only because of that job, so it belongs to the job. Shop time, quoting and supply runs that are not for one job stay in overhead.

What is a good profit margin for a contractor?

It depends on your trade, size and risk. The trade presets on this site use 10% to 15% net as a starting point, not survey data. The point is to pick a target, then check every finished job against it.

How is this different from job costing in QuickBooks?

Accounting software assigns income and costs to jobs after the fact. This calculator does the same core sum in seconds for one job, with overhead included, so you can check a job before or right after you do it.

Is my data saved?

No. The calculator runs in your browser and nothing you type is sent to a server.