Your trade business can be busy and still be losing money

I asked him how he knew whether his jobs were making money.

He told me he had a pretty good feel for it.

He'd been doing it long enough to know.

I haven't forgotten that lesson.

Experience doesn't tell you whether a job made money. The numbers do.

A good job isn't necessarily a profitable job

You can have a job where everything appears to go well.

The customer is happy. The team gets it finished. The invoice goes out.

But did you make the margin you expected?

That's a different question.

• Maybe the job took another 40 hours of labour.
• Maybe materials cost more than you allowed.
• Maybe there were variations nobody charged for.
• Or maybe the quote was too cheap from the beginning.

If you're not checking actual costs against what you quoted, you can keep making the same mistakes without realising it.

And when the business gets busier, those mistakes get bigger.

What you should know when a job finishes

You don't need a complicated reporting system to start getting a clearer picture.

For each completed job, compare:

1. Quoted labour versus actual labourHow many hours did you allow, and how many did the team use?
2. Quoted materials versus actual materialsWhat did you budget, and what did you spend?
3. VariationsDid you charge for additional work, or absorb it?
4. Gross profitAfter the direct costs of delivering the job, how much was left to contribute towards overheads and profit?

Use the numbers to improve the next quote

The real value comes from looking at why a job performed differently from what you expected.

• If labour blew out, was the estimate wrong? Was the team waiting for materials? Was the work poorly scheduled?
• If the materials were over budget, did prices change or were quantities underestimated?
• If you did extra work for free, why wasn't it picked up as a variation?

You want those answers while they're still fresh, so you can make better decisions on the next job.

Before you chase another big contract, make sure you know what you're actually making on the work you've already got.