Job Costing is necessary for business growth, but why don't many business owners do it? Here's some MAJOR advantages to actually taking the time to do this.

So, “How much did you make on the last job you did?”If your answer is: “I don’t know…”You’re in trouble.Here’s why. When you Job Cost each job, you are given a strategic advantage in so many ways, and my aim is to help name a few to show you how valuable doing this is:Sales Advantages:Let’s say you sell a job for $10,000. In this job, you identify you spend $3000 in materials, and $4000 in labor. You’re operating at a 30% Gross Profit Margin.The more you job cost, the more you’ll locate your company “Par” for labor, and materials…this helps you gauge the “health” of your business.Now, let’s say you do another similar job in size, and let’s say for the sake of comparison, it’s $10,000. But, this time, you spend $5000 in labor, and $4000 in materials. Now, you’re at a 10% Margin….This allows you to easily go in and see exactly what went wrong, again, did you under bid it? Did someone drop the ball in terms of project management? Did you make a mistake in your estimation in terms of how long or what hurdles this project would take?It helps you narrow down your blind spots in your estimation and production processes…Most people say: “Well, I have an accountant, and they tell me my P&L.Here’s the issue with that, it’s usually bi-yearly or yearly, so, by the time you realize you’re at a 20% margin, you have no idea why, and you could’ve pivoted and made some slight adjustments to bring yourself to a 30% margin.Marketing advantages:The greatest advantage to Job Costing for me, was identifying exactly how much my teams could accomplish production wise (at maximum) in a span of 1 month.This was really important, because when it came time to spend money on marketing, I could identify exactly how many jobs I needed, and after doing Job Costing for the duration of the month, I then could see how much I needed to spend on leads in order to hit those thresholds.This allowed me to target a budget for my leads instead of blindly paying for them…Another benefit was, this allowed me to justify the cost of my leads, I would look at the entire month, let’s say a month was ($80,000) in produced revenue, I would then look at how much I spent on leads, which averaged about $4,000 and easily justify that expense (Duh!)But, if someone isn’t doing this, they may say…”$4000 in leads! I need to scale that back!” Which would be a big mistakeProduction advantages:Job costing allows you to offer bonuses for performance. You can separate your jobs based on “crews” or “teams” and if you’re religious in your approach to calculating costs attributed to jobs, you’ll be able to identify which team is operating at maximum efficiency.After identifying your “Par” you’ll be able to set benchmarks for your project managers to follow - let’s say our company “Par” is 17% for “Paint Cost”….I will go to my project manager and offer a bonus if he’s able to get to 15% for the month.This will challenge him to be creative with use of our products, and limit waste.In the same way, I can do this exact thing with Labor Cost, and incentivize him to be cautious with excess time on the clock for the other team members…Now, yes, I know there’s many industries where you cannot attribute direct costs to jobs, however, in the Sweaty industry, more often than not, you’re able to.These are MAJOR advantages that you should be aware of! I put together a Podcast on this topic, if you’re interested in hearing more ways I use Job Costing to my advantage in my House Painting Business. Thanks for reading! see hubwealthy.com/wealthy