By Eric Sprague C & R Magazine 06/26/2024
Full disclosure – I don’t consider myself a finance guy, an admin type, or even a numbers person. I have always been a fairly strong leader and tend to be good with the big picture and implementing systems, but all the little details have never been my strong suit. There are many far more qualified people to talk about numbers than me. However, a passion I developed while owning my cleaning and restoration company was job costing, and I feel very comfortable discussing why job costing is important and how to get your team to implement it.
My history with job costing started at Jon-Don’s Strategies for Success. Right after I opened my carpet cleaning company, I had the good fortune of meeting Chuck Violand, and his teachings changed how I viewed my business. From the minute I left that class, I job costed every single job in our company from that point forward. It made so much sense to me that it was important to not only look at a profit and loss statement but also how job costing could help me better manage my team and my business on a more micro level.
The funny thing is, now that I coach other home service providers, I find that nearly nobody job costs. In my initial consultation with a new client, I will always ask them if they are job costing every job. The response is almost always the same: “What is job costing exactly?” Most people are vaguely familiar with the term but don’t know what it means to do job costing or why it matters. That is when we have to have a chat about tracking our COGS (Cost of Goods Sold) and how those numbers will ultimately affect the bottom line. For most of us, labor is the highest expense in our business, so managing our production on a job-by-job basis can be crucial to success.
Implementing Job Costing
Implementing job costing is never an easy task, especially if you have a team that is not accustomed to doing it. To them, it feels like punishment or micro-management. To get buy-in, we need to explain to the team the “why” and get them on board with the new way we do things, and as always, explain what is in it for them.
When beginning implementation, I always suggest explaining to your team how saving money and being efficient can benefit them. Many companies create a profit sharing system, like the Great Game of Business or a Cost of Goods Sold bonus program. This helps the team want to save money. Regardless of the method, you have to show the team why it matters to both the company and to them. Explain how this will hone in on the pricing over time as you gather data on how much money it takes to do each type of service offered. Help the team understand how the little decisions they make every day can affect the overall job cost. Does anyone other than me lose their freakin’ mind when they find out every tech on the job went to Home Depot together to buy a box of screws? This type of inefficiency will show up in the job costing and can help us train our team to think in terms of efficiency instead of what is more fun for them.
Job costing fosters a culture of accountability for all members of a company. If everything measured improves, then getting everyone on board to track job data will create a much better team environment based on making a profit and getting jobs done promptly.
Talking about job costing is easy. Getting it done every day on every job is more of a challenge. Here are some tips for getting your team to job cost every day:
Explain the Purpose: Start by clearly explaining what job costing is and why it’s important for the business and them. Emphasize how accurate job costing leads to better pricing and the potential for higher profits and more job security.
Highlight Personal Benefits: Make it clear how job costing can benefit them directly. Explain how accurate job costing can lead to more efficient work processes, which in turn leads to increased profits and potential bonuses and profit-sharing opportunities.
Simplify the Process by Providing Easy-to-Use Tools: Implement user-friendly tools and systems for tracking time, materials, and expenses. Our industry has so many great tools that utilize mobile apps that allow technicians to enter data on the go.
Streamline Data Entry: Reduce the burden of data entry by integrating job costing tools with other systems they use daily. The easier it is to enter data, the more likely they are to do it promptly and accurately.
Seek Their Input: People buy into a world they help to create. Before finalizing your job costing process, ask for input from your technicians. They can offer valuable insights into what would make the system easier for them to use and more accurate.
Start with a Pilot Program: Consider starting with a pilot program involving a few technicians who are open to the idea and have the skills to do it easily. When we first started job costing, only my best lead tech and I job costed. As we got better at it and learned how to do it well, we began to train everyone else.
Provide Training and Support: Ensure every technician is trained not just on how to use the job costing system but also on why each piece of data is crucial. They should understand how their input affects job costing and the company’s success.
Offer Continuous Support: Provide ongoing support training as needed. Not every team member will take to doing this documentation as well as others. Be there to give coaching and help. Also, your system may need work. Be open to feedback and willing to make adjustments to the system to address any issues or concerns.
Incentivize Accurate and Timely Data Entry: My guys struggled to do any paperwork promptly, job costing or otherwise. Train them to take a moment to do it in the van before heading off to the next job. If they wait until they get back to the shop and only are doing it because you are calling them out, the data will likely not be as accurate.
Provide Recognition: Publicly acknowledge and reward technicians who consistently provide accurate and timely job costing data. We loved to share job costing and efficiency wins in our daily morning huddles.
Lead by Example: Show that management is also committed to the job costing process. When technicians see leaders tracking and managing costs effectively, they’re more likely to follow suit. I liked to post all job costing numbers in a public space in our warehouse so everyone was involved in the process. Once we got rolling with job costing, my team would rush to the job costing board each morning to see if they made their numbers the day before. It became a fun game for them.
I have seen firsthand the benefits to companies that job cost consistently. They achieved more technician buy-in, could manage each crew to high performance, and were able to gain data to improve their estimating. Give it a try, it is a game changer.
