Part 3 – By Ron Pestone Equipment, Labor, Materials (ELM)
Even the best project managers in the world cannot fix a really bad estimate or the selling of a job too cheap. Forget about the estimating books and the bow tie specialist, you, the owner or your project manager need to know your trade well enough to know what an average journeyman can get installed in a day. Not you, the average journeyman. And you had better taken off the quantities right.
If you did these things right, your equipment, labor, material (ELM) under no conditions take the job for anything less than your cost and a modest mark up. I know it’s easier said than done, but walk if you have to. I have taken my share of work cheaper than I should have and would have been better off walking, but I didn’t and it cost me. When you are close to closing it is really hard to walk away. There is an old saying in boating, “Trust your compass”. Your eyes and mind can play tricks on you but your compass is always true and you will avoid trouble if you follow it. In contracting your estimate is your compass. Do not throw it out the window to land a job. If you took the job off right and extended the equipment, labor and material (ELM) right, that is the cost. And if you cannot get cost and a modest markup let your competition suffer the job.
No one gets unlimited money for their work. If you or your men are not able to produce at a decent rate you are going to lose your shirt. Journeymen who cannot produce quality work at decent production rates need to find another line of work. You need to find this out very early on in a job. If you discover this when you are 70% into a project it is way too late. It’s only a matter of how much money you are going lose. Remember the entire estimate needs to be based on what an average journeyman can produce in one day. Not Superman, just an average journeyman.
You need to have a no tolerance policy for stealing material. Anyone caught taking what is not theirs needs to go down the road at a minimum.
So, wonderful, you know three culprits, so what. What can you do about it? If there is a cure, what is it? There is only one cure I know of and that is to put in place a good construction job costing system. By a good job costing system I mean a simple method where you always know where you are on each of your projects. You need to know where your equipment, labor and material (ELM) are, where your billings stand, your change orders, RFI’s and submittals. And most of all you need to know what it’s going to cost to finish each project. No matter how small or big your construction business is or what people tell you, a good job costing system is a must and is the only true path to continued success. It is the difference between success and failure. If you put one in place no one will ever ask, “What happened to Johnny?” when asking about you.
Picking the right construction job costing system is the trick. It needs to be simple to use, accurate and acceptable to the field. It needs to give continuous clear snap shots of your projects and accurate projections of what it’s going to cost to finish each of your projects.
Now there are a lot of construction job costing software packages out there that are based on individual cost coding and in my opinion while they might work for General Contractors they do not work for subcontractors. They do not work because the people who designed these construction job costing systems do not understand the field and the men and women who work in the field.
Let me make a shameless plug here. If you want a great job costing system that is inexpensive, simple, field friendly and really works there is one out there that I know about. I know about it because I designed it, implemented it and ran millions of dollars of work with it. I have a book coming our very soon with the title of, BOOK OF ELM, VOLUME ONE, COMMON SENSE SUBCONTRACTING WITH ELM JOB COSTING & MORE that explains in detail the job costing system I designed and successfully implemented. The book goes into detail describing the system and has numerous charts to demonstrate the reports you want to see. It is a book written by a construction guy for construction people. The goal of the book is to help every subcontractor reach solid ground and enjoy the fruits of success.
I make no apologies for this shameless plug but I do promise that buying this book and implementing the ELM Job Costing System will be one of the best things you can do for the success of your business. Nobody but nobody will ever ask when inquiring about you, ‘What ever happened to Johnny?” They will know, Johnny is a roaring success.
Remember: We Build The World
Our thanks to all you construction people out there who are helping families to rebuild after Hurricane Sandy