Far too often, we see construction and manufacturing business owners left scratching their heads as the GP they’ve reported on is a fraction of what it was when costing their projects.
There are a few possible reasons you aren’t achieving your expected profit margins. Broadly speaking, it boils down to either a costing problem or it’s a project management problem.
If it’s a costing problem, there’s a fair chance you aren’t costing your labour correctly.
Here’s why.
Let’s say your labour costs you an overage of $50 an hour. Is that what you cost your project labour at? Of course not.
You need to allow for super, so that’s another $5.50. Hang on, there’s workers comp as well, maybe even payroll tax. Let’s just round it up to $60 an hour.
That should cover it.
Except it doesn’t.
Because if you stop there, you’re not allowing for….
- Public holidays
- Annual leave
- Sick leave
- Smoko breaks, toilet breaks, wander round looking busy breaks
- 45 minutes Jonesy spends looking for the tools he knows he left somewhere, but can’t find
- The 25 minutes Henry and Davo spend arguing about whether Parramatta will win the NRL and why Melbourne will be hopeless this year
- The list goes on
Let’s face it, 100% productivity only happens in your dreams.
So if you want to get your real GP somewhere near where you think it should be – check your labour costings.
Download our simple workbook to calculate your real labour cost here.
Partnering with Quantum Advisory allows you to focus on what you do best – running your business – while leaving the financial aspects in capable hands. Contact us today to experience the benefits of working with Quantum Advisory.
