Job costing versus quoting, and why the difference costs you

Ask a trade owner which of their job types makes the most money and you'll usually get an answer delivered with real confidence. Ask how they know, and the confidence goes. The answer is nearly always the bank balance, a rough feel, and the memory of 1 job that went well.

Job costing is the practice that replaces the feel with a number. It's the least glamorous item in the whole guide to growing a trade business in Adelaide, and on a busy business it's usually the fastest one to pay for itself, because it finds money that's already been earned and is leaking out somewhere specific.

Quoting predicts, costing verifies

These are 2 halves of the same loop, and most trade businesses only ever run the first half.

Quoting happens before the job. It's a forecast: your most informed read on hours, materials and conditions, turned into a price. Quoting properly is a discipline in its own right.

Job costing happens after the job. It's the actual: what the work really consumed once it was finished, put next to what you charged for it.

Without the second half, the first half never improves. You keep quoting from the same instincts, and the instincts keep being wrong in the same direction, because nothing ever contradicts them. A business that costs its jobs is not more careful than one that doesn't. It's better informed, which turns out to matter more.

What actually goes on a job card

You need 5 categories against every completed job, and a job number that everything can be tagged to.

1. Labour hours, by person. Actual hours on site, including the ones nobody wrote down. The apprentice's time counts. Your time counts, at a cost rate, even though you don't pay yourself by the hour.
2. Travel and vehicle time. Time between the yard and the site, and between sites. It's paid time and it's often the biggest unrecovered cost in a domestic service business.
3. Materials and consumables. Not just the big supplier invoice. The 2 trips to the trade counter, the extra fittings, the blades and the silicone.
4. Plant, hire and disposal. Scaffold, EWP, the skip, the tip run and the tip fee.
5. Subcontractors. What you paid them, against what you charged the customer for their portion.

Then a sixth line that isn't a cost but changes the reading: rework. Hours spent going back. Track those separately or they hide inside labour and you'll never see the pattern.

The 4 costs that never make it onto the card

The reason a job that "went fine" still loses money is almost always sitting in this list.

• Quoting time on jobs you didn't win. If you quote 4 jobs to win 1, the 3 losses are a real cost of the job you won. A business with a low strike rate carries a lot of unbilled hours, which is why pricing electrical work has to account for quoting volume specifically.
• Callbacks and warranty work. Time you're never charging for, spent on a job that closed 6 weeks ago.
• Waiting. Site not ready, other trade not finished, materials not delivered. Paid hours, no output.
• Admin attached to the job. Ordering, chasing, scheduling, invoicing, then chasing again. It's not overhead, it's job cost, and it scales with the number of jobs, not their size.

That last point is the one that reframes everything. Small jobs carry nearly the same admin load as large ones, which is why a business full of small jobs can be flat out and still thin.

A worked illustration, with round numbers

The following is an illustration with round numbers, not a market benchmark and not a figure from a real business. All amounts are ex GST.

A domestic bathroom job, quoted at $12,000.

Nothing dramatic happened. The job wasn't a disaster and the customer was happy. 26 extra labour hours and $410 of extra materials took the margin from $2,300 to $200.

Now the useful question, and it isn't "who's to blame". It's: where did the 26 hours go? If the answer is the tiling took longer than the tiler said it would, that's a quoting input to change. If it's 3 return trips for fittings, that's an ordering process to change. If it's a variation the customer asked for and nobody charged, that's a conversation to have earlier next time.

Costing doesn't tell you what to do. It tells you where to look, which is most of the work.

The 3 patterns you'll find

Cost 10 completed jobs and you'll almost certainly find at least 1 of these.

The small job problem. Jobs under a certain value lose money once travel, setup and admin are counted. The fix isn't to stop doing them, it's usually a minimum charge, a call-out fee, or batching them geographically by day.

The large job problem. Big jobs look profitable in the quote and land thin, because variations weren't charged, the site had more waiting in it, and the price was sharpened to win the work in the first place.

The 1 customer problem. A single client, often a builder or a property manager, whose work fills the schedule at a margin nobody has looked at in 2 years. That's the most uncomfortable finding and the most valuable one.

Whichever pattern turns up, the response usually runs back through the hourly number the business is built on, which is what working out what a tradie should charge per hour is for.

You don't need software to start

Job management systems make this easier and most trade businesses eventually buy one. You don't need it to begin, and buying it first is a common way to spend $200 a month (ex GST) and still not cost a job.

Start with a spreadsheet and 10 jobs. 5 columns, 1 row per job, plus a column for what you invoiced. Get the hours from timesheets or the calendar. Get materials from the supplier statement, coded by job number, which is the only genuinely fiddly part and the one worth asking your bookkeeper to set up.

The habit that makes it stick is doing it at a fixed time, not when you get around to it. Friday afternoon, 20 minutes, the jobs that closed that week. If it isn't in the calendar it won't happen, because the tools will always be louder.

Turning numbers into a decision

Costing is only worth doing if something changes as a result, and the changes are usually 1 of 4 things: put the price up on a job type, stop taking a job type, fix the process that's burning the hours, or have a harder conversation with the client who's absorbing them.

That's also where an outside set of eyes tends to earn its place. Most owners can read their own numbers well enough. What's harder alone is deciding to act on what they say, especially when the answer is to charge a long-standing customer more or to let a job type go. A coach doesn't do the costing for you. They ask what the last 10 jobs said, and then they ask what you're going to do about it, which turns out to be the part that changes anything.