A contractor's journey to self-mastery requires discipline, integrity, and respect. Welcome to Hammer and Grind. And welcome to the Hammer and Grind podcast, the podcast built for contractors to help maximize profits and get you off the tools before burnout or bankruptcy happens. I'm your host, Brad Hebner, and I'm here to help you on your journey to self-mastery. Make sure you check us out on our social media platforms, TikTok, Instagram, Facebook. Just search for Hammer and Grind Podcast and you'll be able to find me there. Consider joining my free Facebook group called the Contract Your Profit Blueprint. I created this free group to give you as much information as possible to help you in your business. I go live in there once a week, tons of content to help you in your business. Now, if you want to accelerate the success, consider joining my paid coaching group called The Profit Club. In there is a great community of contractors all willing to share information and help each other succeed, as well as hundreds of hours of training, coaching calls, everything you need to accelerate your business. If you want to learn more about that, you can find out more information on hammerandgrind. com forward slash The Profit Club, or just send me a message and I'll be happy to share that with you. Now, let's get on to the show. All right, welcome back to the Hammergrind Podcast. Thanks for tuning in to this episode. I appreciate you guys for listening, all of the love and support that you give this podcast and all of my content across all the platforms. I appreciate you. I'm very blessed. Thank you for giving me this platform and this opportunity to share my knowledge with you. Real quick, I want to let you know, if you've noticed some changes in the video, if you watch this on YouTube, I bought a new camera. I'm experimenting with some lights and some changes. So you may notice a little bit of difference hanging there with me as we try to perfect this and make it a little bit better just to give you guys a better experience, a user experience. So I'm all about Kanai, constant and never-ending improvement. And that doesn't change with anything that I do. So I'm always trying to make this better, trying to make the content better, trying to make the... the audio and video better. We got some audio improvements in the works going forward as well. So I just wanted to throw it out there. This episode is about the five estimating mistakes that cost me money. And it took me years, guys, years and years and years to figure this stuff out, probably because I was too stupid. Too much pride, too much ego, didn't want to get help, thought I could figure it all out. The whole contractor ethos, if I can build a house, I can build a business. The big lie that we all believe. I was susceptible to that. I believed in myself too. So I want to give you five things that I learned that I was doing wrong when I was doing estimates. And I haven't talked a whole lot about estimates. I don't really get a lot into the actual estimating side of business. But I am on this podcast, so I hope you enjoy. Do me a favor. Let me know on whatever platform you listen to this on. Let me know if any of these things apply to you. I want to hear back from you. I want to get your feedback. And if you like this type of content and you want more of it, the only way I know that is if you actually tell me. So you have to actually give me feedback so that I know what content to keep producing. I don't have osmosis. I can't read your mind. You have to give me feedback. So I appreciate that in advance. So let's get into this. The single biggest thing that I did that I did wrong, I should say that I didn't do, is I didn't do job costing. Now, I've talked about job costing before, but I want you to understand how this affected the estimating process. Job costing. If you've never heard that term, and there's other types of terms out there in the industry, I can't even think off the top of my head what they are. I just always know what it's job costing. And that's simply at the end of the job, looking at your estimate versus the actuals and figuring out where the differences were. In other words, where did you fall short or were your estimates on? Were you on time with your numbers? Were your material numbers correct? labor guesstimates correct. This is what job costing is. But even more than that, job costing is figuring out why. So you can look at your estimate and your actuals and say, well, I bid $20,000 in materials and my actual was $25,000. It's a $5,000 loss, assuming you didn't do a change order. Why? Where did I fall short with the $5,000? What caused that? That's the job costing. That's the detective side of it, where you're going to figure out what went wrong. You're going to dissect it. Now, if you say, I don't have time for that, Brad. I'm super busy. I don't have time to do job costing because that was me too. Guys, you have to make this a priority. There's a reason why every single military, law enforcement, first responder, every single type of organization that performs an action does an after-action report. They debrief. SEAL teams go out, they execute on a mission, they come back and they debrief. They do an after-action report. They say, what happened? What went right? What went wrong? What can we do better? This is what you need to do on your jobs. Now, there's different ways you can do this. What I would do is I had a job costing report. I would put all my stuff in and then I had a separate page that I could print out. I just used an Excel or Google Sheets formula. So the one page was for me, it had all the information and then it would transfer that information to a third page that I could print out. It was formatted to print out that I could take it to my team and it wouldn't have all of the information. So it didn't have all of the hard numbers, like how much profit and how much materials were and all that stuff. It just had... the percentages and it had like how many hours, man hours. So if I figured a job for 40 man hours and we came in at 50 man hours, it would print out the difference and it would show like, hey, we were 10 hours over. Then I could go to my team or at least my lead guy, depending on your setup and say, hey, what happened on this job? I show them the paperwork, shows that we bid 40, we hit 50. I did have the material cost on there as far as overages. So it would just show like, hey, we were over $500 on materials. It didn't say how much the materials were versus the actual. It just said the difference. So if I did a $20,000 material job and I was $2,000 over, the sheet would just say an overage of $2,000 on materials. It's enough information to go, what happened? Where did we go over on materials? Now, the level of information that you give your team is up to you. I've heard arguments all across the board of you should share everything, including how much money you're making, down to don't share anything at all. I tend to lean more towards the share as much information as you're comfortable with. That may not be what you're paying yourself, but it could be how much your company's making. What I shared was a percentage. So I told my team, we're trying to get a 50% gross profit. And so based on the numbers, it would spit out a percentage. And so maybe on this particular job, we only had a 42% gross profit. That's an 8% under where we wanted to be, our target. And that can go to my team and say, look, we're 8% short where we wanted to be. What happened? Or if you're a one-man show, I don't care. You can do the exact same thing. where did we fall short or where did I fall short in my estimating? But you have to do this. It's easier when you're a one-man show not to do it because all the information is live in your head. But what you're not doing is looking at the data from an objective perspective on paper and comparing it. You may say, oh, I wanted to do 40 hours. It took me 50. And that's because I had to make several trips to the store. You know that intuitively because you did it, but you're not looking at it objectively and understanding what caused it. What caused you to have an extra 10 hours over? What caused you to have to go to the store? So think about it like even though you might be the one doing the work, you need to look at it on paper because it removes that bias that you have of the one who did it. Remember this, data is what we need to run a business. The more data that you can collect, the more information you have to be able to make the correct decisions. If the only piece of data that I gave you was that, or that you had, was that you bid a job for $50,000 and it cost you $60,000 to build it, well, what does that mean? What's the data? Does that mean you were way over an hour? Does it mean you under... misbid the materials. What does that mean? So the more data you have, the better. So job costing was the single biggest thing that I didn't do that was costing me money because when you do a job and then you job cost it, it tells you what's wrong. The next time you do that job, you know what corrections to make. You now have data to make corrective actions. So if I bid a job for five days, it takes me six days. The next time I do that job, I'm going to bid it for six days. Right? Because I did the job costing. I looked at the data. If I do that same job again, and it took me six and a half days this time, even though I bid it for six, I'm going to go back and look what changed this time. Well, this time, something else, a new factor, a new dynamic, a new element. Trying to think of the word, I can't think of it. Sometimes I forget basic words. I think I'm getting old, guys. Anyways, there's a new set point. There's a new thing that came in, a new dynamic element that changed something that you didn't have in the first time you job costed. So now you take that new dynamic that's added and you make a new adjustment. So the next time you do that job, you bid it for six and a half days. And then you do that. And for the next three times you do that job, it comes out perfect at six and a half days. And you're like, okay, I have this dialed in now. Now I know six and a half days is the sweet spot for this job. But let's say the seventh or eighth time you do this job, it takes you eight days. Wait a minute. This last six times we did, the last five times we did, it was six and a half days. What changed? You need a job costed. Now there's a new thing that changed, a new element that comes in that you've never experienced before. A new dynamic, right? This one could be access. Maybe all the other six, seven jobs you did, you had easy access to the location. But this particular job, you didn't have easy access. It was on a main street. You couldn't park out front. You had to park in the parking lot down the street. It added an hour a day of setup and teardown time. That's a new dynamic that comes in. It's a new situation. Now you need to factor that in. That may not require you to automatically start adding eight days now. But what it can do is during your estimating process, your on-site visits, you're looking or you're asking for what kind of access you have. So now that's just a simple, I need to add an extra question to my line of questioning, which is how much access do I have? Prior to that, you never needed to know about how much access because it was never an issue. This is why job costing every single job is important. Even if you're doing it 100 times and it comes out perfect every time, you should still be job costing every job. So taking that information now that you can make decisions. For nine years, I didn't job cost. I had nine years worth of data that I never looked at. It's crazy to think about how dumb I was back then with my business and not understanding the power of this. But when I started job costing, it was the single biggest change that the impact that it had on my business as far as estimating and more profits. So job costing is number one. Number two, I'm guilty of this, especially when you're doing free estimates. And that is not taking good enough notes when you're doing a site visit. I'm super guilty of this, especially when you're doing free estimates because you may have four or five estimates a week and you're running around trying to get these estimates done and you're going in there and you're taking your measurements and getting the information, not taking good enough notes so that when you get back to the job, to your house or your office or wherever, and you're estimating the job, you look at... Maybe you use a... You drew out a floor plan, you took some measurements, but you didn't get... the measurement of one of the rooms, or you didn't get a measurement of a closet, or you didn't get one wall measurement, and now it's throwing stuff off. That one measurement could add 5 to 10 to 20 square foot of material. And so if you don't have that measurement, and then you're like, oh, I need eight sheets of drywall to do this bathroom or whatever it is. But in actuality, you need nine sheets. Right. Because there's an extra 10 to 15 square foot that you're not factoring because you didn't want to go back out there. So you just guessed. You just guessed at what that length was. And it was a nine foot wall instead of an eight foot wall. Little things like that add up quick. And I'm super guilty of this because I just want to get in and get out. I got to get to the next estimate. I don't want to waste a bunch of time here. It doesn't seem like they're going to be the right fit. This was obviously before I learned how to pre-qualify people over the phone. But I would get in there, try to get in as quick as possible, get out, forget five or six different things that I needed to know. It's important when you're doing estimates to have some kind of bid sheet, depending on what you do. If you're a painter, you could have a simple document, a Word doc, that just says how many square feet of walls, how many square foot of ceilings, how many linear feet of trim. You could make it very simple. depending on what you do. If you're a remodeler or you're doing a room addition or you're doing a big landscaping project, that's going to require a lot more information. But what I started to do later on was create bid sheet templates depending on different things. So if I was going to go do a bathroom remodel, I had a checklist of things that I needed to make sure that I got that information. I collected that data. So number two is just not taking good notes. And there's lots of tech out now that make it so easy. There's apps like Canvas that you can 3D scan a room. There's MagicPlan and all these different apps that you can use in different technology and laser measures and all these things that make it super easy to figure out all that information. But if you're in a hurry because you're doing free estimates still, it can come back to bite you in the butt like it did for me many, many times. Number three, and this may not apply to you, everyone listening, but number three is waiting too long to do the estimate after the site visit. So I would go out and I would do a site visit with a client and then it might be two weeks before I have the opportunity to do the estimate. And then all of a sudden, all that knowledge that was in my head is gone because I may have looked at five other jobs since. I've worked on a job, done a bunch of other stuff. And so now that information is not fresh in my mind. This piggybacks back on not taking good enough notes. But really, it's about doing it quick while it's fresh in your head. So if you go out and do a site visit, I would recommend within like two days of completing the estimate. Again, depending on what type of work that you do, waiting too long can hurt you because you will misremember stuff. Things that you will think like, oh, yeah, this is only going to take me probably a couple of hours or five hours. And then when you're trying to re-remember that information because you didn't take good notes, you're like, oh, it should have been five hours. But then you're thinking in lag time and you're misremembering. So you're thinking three hours now and it should have been five. So number three is waiting too long to actually fill out the estimate, to do the estimate. Number four. This is a big one and I'll probably spend quite a bit of time on this. But number four is when you are actually estimating how many hours or how many days it's going to take you to do the job. Now, depending on what you do, again, some of you use hourly. You figure your time hourly. Some of you figure it daily. Some of you figure it where you have a square foot amount. or it's just like whatever it is. If it's a deck and it's a 200 square foot deck, you take that times $20 a square foot and that's your numbers. It does depend on how you figure this out. Especially if you're doing square foot pricing or stick pricing, it's going to change it a little bit. But again, job costing, right? This is where you're going to know this. But the number one thing that I did wrong and I see people doing... This is probably the single... most common thing that people do wrong in estimating. And that is underestimating how long it's going to take you to do it. Not the production hours. They don't usually get the production hours wrong. It's the non-productive hours that they get wrong. So a lot of us will factor a job based on what I call 100% effectiveness. So there's a piggyback on this, and that is we bid the job how we would do it, not so much how our team is capable of doing it. And I don't care how good your team is, no one's going to work as hard as you because they don't own the business. And you just need to accept that as reality. Nobody's going to work or care as much as you do because they don't own the business. There may be an exception out there, but it's very far and few in between. So when we're bidding jobs, If we're not doing the work, but we're bidding the jobs, we're still bidding it based on how we did it two years ago. I could install a door in three hours. Two years ago was the last time I did it. But I remember I could do it in three hours. Well, your staff is not going to be at 100% effectiveness compared to you. Even if they're at 100% effectiveness of their skill set, that's still usually less than yours. One thing you need to understand about labor is that right off the top, you should just assume that all of your labor is going to be at an 80% reduction of where you are automatically. You could do a job in four hours. It's going to take them four and a half, five hours. Just off the top. So one part of this, part A, is we're bidding jobs based on how fast we can do it. But let's... take that off the plate for a second. Let's say you know the production rates of your guys. You know how fast they can do stuff because you have enough data. You still need to factor in that production time is not the same as time on job, time on the job site. So you have non-productive time and you have productive time. So when you're looking at a job and you say, I can do this job or I think this job is going to take 40 man hours, five days, one week. 40 man hours is based completely on doing the actual task, swinging the hammer. But that's not reality of how job sites go from day to day. When you get there, you have setup time. You have screw around time. You have talking to the customer time. You have... tear down time at the end of the day. You have the little bit longer lunch breaks. You have the, I got to stop and figure this out because I got to use some brain power here to lay out this wall or this floor or whatever it is, lay out the tile. You're not factoring in some of that nonproductive time. And so that's one aspect of it, but also just the effectiveness time. So even at 100%, you're thinking it's going to take you 40 man hours. It's really an 80% effective rate. So you need to add, by default, you need to add 20% of your labor in terms of time to your estimate. So an easy formula is just whatever hours you have, like say 100 hours, you just take it times 1.2. It's going to add 20% of time to the job. So if you think it's 100 man hours, it's really going to be 120 man hours. If you think it's 40 man hours, it's really going to be 48 man hours. And so not factoring in this nonproductive time or the effective rate, what ends up happening is a 40-hour production job usually takes six days to complete. Five days is what you're estimating, but it really takes six days to complete. Because you're not factoring in the wildcard. You're not factoring in the customer coming home and not liking something and then having a one-hour conversation with them. Or your lead guy having a one-hour conversation with them. So a lot of times, we bid things in days and not factoring in the hours. If you're not getting eight hours of productive time every day, you're really only getting like... six and a half to seven hours of productive time every day. So really, a 40-man-hour job is easily a six-day job. And we don't factor that in. So like I said, when you're using effective rates, add 20% to your labor. Right now, this isn't like 20% markup of your total. I'm talking about hours. If you're factoring by the hour, if you think it's going to take 100-man-hours, you need to make it 120-man-hours. If you think it's going to be five days, if you bid by the day, you would add 20% of whatever that is. I don't know. Five times 1.2 is... That ain't right. I'm doing some calculations here. It's six, which doesn't seem right. So I guess six days. Yeah, it's six days. So a five-day job is going to take you six days. That's a 20% increase. Like I said, I'm terrible at math, guys. I mean, I suck at math. So that's why I got into construction because I was terrible at math. Anyways, I think you understand that you should add a 20% increase to your total hours. Don't add 20% on top of the cost. If it's $2,000, don't add 20% of dollars to that. Add 20% to your time that you're using to figure out how long it's going to take. Okay, lastly, number five is not factoring in or not including planning and admin time. So one of the things that you're the owner of the company, right? And you have a foreman and some journeyman, apprentice, whatever. You have a team that's doing the job. And you're running around each day checking on them. So you go to the job site in the morning to check on Chris, who's your foreman and his team and what's going on. And you're just going to stop in there for 10 minutes to check on them. But then while you're there, Chris is like, Hey, I'm glad you're here. I got a couple of questions about the job, this, this, this, and this. And then the customer is there too. And so it ends up, you end up staying there for an hour, hour and a half. So you're tied up for an hour. Chris is tied up for an hour. The rest of your team is slowing down because Chris is not there to make sure they're doing their job. And so really, it may seem like, Oh, you know, I just, it's my time, which is free. Because I'm not working on the job. I just have free time. But really, it's not free time. And it's not just your time. It's an hour of Chris's time. And then now your rest of your team's productivity dropped to like 60%. So it's like an extra 30 minutes of wasted time for your team. It's an hour for Chris,30 minutes of wasted time for your team, plus an hour of your time. That's like two and a half hours. But you're not factoring in your time. Everything you do in your business should be accounted for and have an hourly rate associated with that. Because you need to know what tasks you're doing in your business that are the most effective. You shouldn't be doing low-level tasks. That's a whole other podcast. But when you're factoring in your jobs, your time for your jobs, you got to factor in the project management side of it. You got to add that to that. And even if you're the one doing it... And you're doing it at night, sitting on the couch in your underwear, watching TV, and you're doing it on the side. And you're like, that's free time. It doesn't really cost me anything. So I'm not going to add that in there. No, that is management time. So you need to have supervision and or management time factored into your estimates. Because if you hand off that position to a project manager... you're going to pay that time. You're going to pay someone else to do that time. So you might as well start charging for it now and getting paid for it because your time is not free. Get out of that mindset of your time is free. It's not. Your time should be spent on high-value tasks in your business. And if you're spending it on any capacity of a job, then it should be billed to the customer. That even includes admin. If you have a secretary or office manager, or an estimator, or anybody else who's associated with that job. Maybe you have an admin assistant who helps get the paperwork together, helps put the schedule together, and they don't spend a ton of time. Maybe they only spend a total of two hours on a typical bathroom, an hour in the beginning, an hour at the end of the project doing some admin stuff. It's still time that's costing you, and your customer should pay for that. So track how much time your admin staff uses and then apply that to the job. So you may have two hours of admin time and five hours of supervision time or project management time, whatever you want to call it. I don't care. And then plus your labor of doing the work. So you have to add in all of this extra planning and admin time to your estimate. Now, some of you right now might be crapping your pants saying, Brad, these are all great things. I haven't been doing it. I need to start doing it. But you're going to have a quick realization of like, now that $20,000 job that you're bidding, even at a 40% gross profit, now you're adding 5,6,7 man hours or 20 man hours because of the 20% addition to your productivity and your admin. Now, all of a sudden, that $20,000 job just became a $25,000 job. And you're like, Oh, there's nobody. No way nobody's going to pay $25,000. Well, first of all, you're not even at 50% yet. What happens when you go to 50% and now it's actually going to be instead of being a $25,000 job, it's going to be like a $35,000, $40,000 job. And I don't know the math off the top of my head of what that converts to. But now you're really crapping your pants. I'm telling you right now, guys, that's what you have to do to have a successful business. 99% of you, actually 96% of you are undercharging. The reason I know that is because 96% of you go out of business. The number one reason they go out of business, they don't make enough money. They get burnout because they're working six, seven days a week,16 hour days to try and pay their bills or they go bankrupt because they can't even pay their bills. That's the reason why. So that's why you need to make sure you're getting a 50% gross profit. You need to make sure you're factoring in your estimates correctly and job costing when it's over to fix those mistakes. And you need to learn how to sell jobs. That's all I have for this episode in terms of the five mistakes that cost me money. If you just fix these five things really in your business, you're going to have exponential growth in terms of money because you're fixing all of the leaks in your business. or a majority of the leaks, at least in the estimating side of the business. So if you can fix these leaks, these are probably the biggest, single biggest leaks that you have in your boat. You fix these, now you're going to be able to sail a little bit faster. You're going to be able to get there a little bit quicker. And if you need help with the other things like sails... or the marketing or how to price properly. I'm more than happy to help you. Just shoot me a message and I can give you some information. I have lots of resources available. And like my free website, I mean my free Facebook group. Guys, if you're listening to this and you're not in my free Facebook group, why not? What's keeping you from joining my free Facebook group where I have a ton of free information? Plus, you can network with other contractors. If you're a podcast listener, what's keeping you from joining my free Facebook group? It's called the Contractor Profit Blueprint. Go check it out. Links are in the show notes. If you're listening to this show, you should be in my free Facebook group unless you're just not on Facebook. Maybe you hate Facebook. You're not on there. I understand it. Then follow me on TikTok. If you're not on TikTok, follow me on Instagram. If you're not on Instagram, I don't know what you're doing because you should have accounts for those for your business. But if you're not on any platform and you only listen to the podcast, then I would say try to get as much information as you possibly can. Shoot me an email directly if you want some help with some information to help you with that. More than happy to give you some free content that I've produced and some advice. And that's the end of the show, guys. You know where to find me on the social media platforms, TikTok, Instagram, Facebook. Search for the Hammer and Grind podcast, my free Facebook group, the Contractor Profit Blueprint. And as always, remember until next time, guys, profit is not a dirty word.
