By Ron Pestone
My book, THE BOOK OF ELM, COMMON SENSE SUBCONTRACTING WITH ELM JOB COSTING has finally arrived. I have spent over 50 years in construction and if I have learned anything it is that the three things you need on any project if you want to make a profit is a good estimate, a client who pays his bills and a tight grip on Equipment, Labor and Material. I have seen many good contractors over the years fall by the wayside because they failed in one or all of these three major areas.
In my book I have addressed all three of these important areas but have put a special emphasis on getting a tight grip on Equipment, Labor and Material. As anyone in the business knows if you don’t know how to estimate the work, simply don’t go into contracting until you do know how. And the knowhow needs to be a lot more than you get from books. You need to get your hands dirty, you need to slog in the mud, fry on a steel deck, etc. In short you need to know estimating from the field because that is where it all happens. Once you have the estimating down pat you will at least know what the work you are bidding is worth.
Next, work for clients who pay their bills. In this business reputations are earned. When a guy or a company has the reputation of a non-payer they’ve earned it. Believe me; if they haven’t paid the last couple of guys, they aren’t going to pay you. All contractors, and I include myself have the super ability when they are in the hunt for a job to convince themselves of anything. You need to fight that strong impulse to take a job from a non-payer because you have convinced yourself that they will pay you if you do an outstanding installation and you need to fight it every day in the same manner an alcoholic fights alcoholism. Its one day at a time and the only right answer to that desire to take that job is, No thanks.
Despite some occasional slips the majority of contractors in the business get passing marks in estimating and working for the right people.
It’s the third area, getting a grip on Equipment, Labor and Material on each and every job where most contractors fall short. Some contractors just ignore this area, and they produce their jobs hoping for the best. Others purchase elaborate job costing systems that are either aimed at General Contractors or are cost coding based. These contractors scream and threaten the field continually pushing for more production hoping that the fear will be enough to make the job turn a profit. Almost always all these methods fail and by the time the contractor realizes the job is a loser the horse is long since out of the barn.
About 35 years ago when I was a mechanical contractor I was getting tired of committing my company’s resources to projects only to turn over a merger profit. I came from the field; I had slung enough pipe to know my estimating was ok. I had been around long enough to know who to stay away from and except for the occasional slip I stayed away from the non-payers so I was ok on that front. It was evident that the answer had to be getting a tight grip on the Equipment, Labor and Material. Truth being, like so many other contractors I walked my jobs every week, I apprised how well the jobs were doing by what I was looking at and by gut feeling.
Back then the major computer around was the IBM mainframe and no way in hell I could understand how they worked let alone afford one. Shortly after came the the PC and the estimating programs they spanned. At that time I could estimate faster by hand then any of the programs out there so I never purchased any of those programs.
What we decided to do was to generate a job costing program by hand and we produced a variety of spread sheets as big as a bed sheets but eventually we generated one that worked very well. The problem was the amount of hours needed to generate the program and then update it every month made it impractical and as a result it eventually fell by the wayside. The major lesson I learned from that exercise was that a system had to be very simple and had to take minimal man hours to implement and update or once the novelty wore off, the system was going to be abandoned.
In my years at The New York City School Construction Authority I sat with many contractors who were trying to tackle job costing. General Contractors were quite successful with their programs because GC’s had minimum labor so their job costing system was really a different kind of system. General Contractor job costing systems didn’t work for subcontractors because so much of sub’s contracts are labor and it was the labor more often than not that put their jobs and therefore their profits in jeopardy.
Then there were subs that had complicated computer software systems that were based on cost coding. For the most part these systems were over detailed, listing every nut and bolt that had to be installed in a subcontractor’s contract. In addition these systems required the foreman to list what each of his men had installed every day; in short the foreman became a bean counter. The foremen and the field people hated these systems and the data they produced was questionable at best. Part of the problem with the majority of these systems was that they were produced by software programmers and executives who had no real understanding of the field. They failed to realize that what they were asking their foremen to do was the last thing any foreman on earth wanted to do. Foremen have a special relationship with their men; they know who is good and who is having a good or bad day. They socialize with their men and their families. They know their likes and dislikes and their dreams and nightmares. Asking them to write a report card out each day for each of their men would be like asking a guy to make snowballs in hell.
Years later while I was working as a VP of Project Management for a large electrical contractor I was asked to develop a job costing system for the company. By this time computers and software had come a long way. Once I had the green light to develop a job system I took my understanding and all my previous years of experience in the field and combined it with today’s technology and I developed a simple job costing system that really works and that requires a minimum amount of hours to implement and update.
I have continually refined and updated the system and over a period of years committed it to paper in my book THE BOOK OF ELM, COMMON SENSE SUBCONTRACTING WITH ELM JOB COSTING. I know this sounds like a plug but if you are a contractor, want to be a contractor or know a contractor this book can have immense value.
It is step by step approach that is easy to implement and if followed religiously will maximize profits on any job. The system works for all trades of any size. The book also contains a lot of information about estimating, project management and the hundred other things you should know in this business.
The book can be purchased on our site www.elmpost.com and for a limited time we will ship it free. It can also be purchased at Amazon, and will soon be available in local bookstores
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