What Every Contractor Needs to Know About Manhours

manhours

1 hour. That’s 60 minutes. Or, 3,600 seconds.

 “It’ll only take an hour.”

 “What’s one more hour?”

This little block of time is the very thing that will make or break your profitability. Here are 5 things every contractor needs to know about manhours, so pay attention.

Know What You Are Selling

Yes, you’re selling convenience or someone’s dream or their solution to some kind of pain. I get that. But, the ‘widget’ you are selling in the manhour.

Contractors sell time. Your entire contracting business revolves around you selling field hours for crews to work.

Productivity Equals Profit

You can sell a job at whatever amount you want. You can be all fired up that you sold a job to make a 55% gross profit. But, what matters is how you produced the job. If you sell a job and estimate it taking 32 manhours to complete and it takes 33 manhours, you are now heading in the opposite direction of profitability. Every manhour it takes longer than the estimated time costs you profit.

Lack of Tracking Leads to No Cash in the Bank

The worst thing in a contracting business is making or losing money and not knowing why. Too many contractors have no idea what their true numbers are or should be because they don’t perform Job Costing after each project.

One contractor I work with was undercharging by 20-30% on each job because the projects were taking longer to complete than what he projected. Because they didn’t Job Cost or have an Operations Meeting each week, he didn’t know it.

The Fastest Way to Profit is the ManHours

The beauty of the contracting world is that as fast as you can hurt your business by not bidding, selling, producing and tracking by knowing your manhours, you can also help your company. Tens of thousands of profit dollars are waiting for you if you get it right.

Every manhour worked costs you money, and if it’s not accounted for, you’re screwed. The good news is when it is accounted for, every manhour is a mini-profit center for your contracting business.

Know Your Production Rates

Knowing how long something takes or should take can be challenging. There are many factors that affect field production. Start each job with a clear plan. Make part of that plan how long the expected time is for each task.

Yes. Each task.

Then, track it in real-time. Have your Foreman track the time and then in your Operations Meeting you compare the estimated time vs. the actual time. Adjust your times and prices accordingly.

Each industry has average production rates (times) published for the most common tasks performed. Look into that to get you started.

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