Not all jobs are created equal. A decent sized job may look attractive, but it may not necessarily be so. Jobs with a high labour component will keep you busy, but will limit your total gross profit achievable.
The following are 2 extreme examples to illustrate the point, courtesy of John Teder, consultant to the HVAC industry in the US:
|Job #1||Job #2|
|Labour Cost ($30/hr.)||180||480|
|Materials Selling Price (45% GM)||$3,636||$2,727|
|Labour Selling Price ($90/hr.)||540||1,440|
|Total Job Selling Price||$4,176||$4,167|
|= 48%||= 52%|
|Total margin for 1800 hrs||$598,806||$246,042|
Moral of the story….Calculate the Gross Profit(Margin) per Hour when looking at jobs. Focus on jobs with a higher per hour gross profit and you will much happier with your end of year results.