Contractors Should Use This Simple Spreadsheet To See If They Are "Making" Money

Hey, we say all the time that for contractors, the tools of your trade are not hammers, nails, levels, all of that. The tools of your trade—especially in project management—are calculators, calendars, subdivided bank accounts, and spreadsheets. And so I wanted to dive into that today.

There are a lot of contractors trying to figure out job to job. They can look at the end of the year at their P&L, and as long as they see a number on the bottom line, they go, "Well, I must be making money." Then they look at their bank account and say, "Well, there's money in there, so I must be making money." But the reality is, money's always in motion, right? So we don't really know if we're making money unless we do something in the contractor space called job costing.

And you can do this fundamentally anywhere. If you're a retail outlet, you can do inventory costs and actually look at the margins made on products. Because what you don't want to do in business—you're going to have cash flow. There’s going to be either a trickle or a landslide. Cash flow comes in, goes out, it’s in multiple places, and it comes in different cycles or wavelengths.

Some businesses, like ours, are a little more steady because we use a recurring model to engage with customers. But for others, it could be very seasonal, with huge spikes. I used to work at the Charlotte Motor Speedway, where 80 to 90% of their money was made fundamentally over two weekends. Yeah, they had some trickling money in and out, but they had to fulfill that on just two weekends.

So the question becomes: Are we making money? I know we're getting money, but are we actually getting margin for that money?

Starting projects on the right foot is essential for success in business. When you work with clients, there are several layers between the dashboard and the project start sheet that require attention. The project start sheet? Just imagine a spreadsheet. That’s it. It's gauging labor and material—two fundamental aspects that determine whether you're making money: job cost and schedule management.

If you're delayed on the schedule, every day of delay is a day that costs you instead of earning you income. So we tell contractors that your tools are not hammers and ladders—they're calculators, spreadsheets, and calendars. Job costing, which involves tracking materials, labor, and overhead for each job, is incredibly important. It may not be difficult, but it is very tedious. The good news is, the significance of job costing cannot be overstated.

By meticulously tracking your expenses, you gain a clear picture of a project’s financial health and can make informed decisions throughout its life cycle. You know when to bill, when not to bill. And the project schedule is another crucial element that many contractors underestimate.

So you’ve got job costing on one side and that simple little spreadsheet, and also that simple calendar. Some might think delays don’t affect the bottom line because “we’ll eventually get paid,” right? But that perspective overlooks a significant factor: your overhead costs do not take a break. You’ve got payroll every month. Rent. Fuel. These expenses keep coming, regardless of your project progress.

So even if you're getting paid later, your overhead costs remain the same. If you don’t complete a project within the budgeted timeframe, you risk eroding your profit margin. In fact, delays of just a few weeks or months can wipe out all your projected profits, essentially leaving you working for free.

This is why it’s vital to pay close attention to your schedule and manage it effectively. One way to stay laser-focused is by starting the project correctly. A simple yet powerful tool is what we call the project start sheet. Name it whatever you want, but the concept is the same. It helps you organize and plan your project from the beginning, setting you up for long-term success.

Most of the tools we build—including the project start sheet—are spreadsheet-based. We’ve found these straightforward tools work well without needing sophisticated software. Simple, effective tools can help you stay on top of your project timeline and expenses, ensuring you complete jobs on schedule and maintain profitability.

We always say: before you go buy the expensive software—which is usually really good—prove to yourself (and to us as coaches) that you can work a spreadsheet. By implementing basic practices like diligent job costing and managing your schedule, you can significantly improve your project outcomes.

The key is to start right and stay vigilant throughout the project’s duration. Have that job start sheet. Look at your calendar. Make sure your schedule values are laid out. All of this helps avoid costly delays and keeps your business thriving in a competitive landscape.

So remember: job costing is a super easy spreadsheet. Track materials, labor, and the overhead you apply to each job. How much of your rent is applied to that job? X percent, for example. Do that, and you’ll gain clarity. Again, it’s tedious—but it’s not hard. And I want to encourage you to do it.

You’ll find the layout of the job costing project start sheet in my brand new book, The Chaos Free Contractor. I wrote it specifically under 120 pages so you can get through it quickly and include your team. You can even get a copy for each team member so you can read it together and start discussing job costing, subdividing bank accounts, scheduling, and more—all in a safe space.

Go to Amazon and pick up a copy of The Chaos Free Contractor. While you’re at it, head to mybusinessonpurpose.com/healthy. Take the five-minute assessment. Your team can take it too, and you’ll get a numerical understanding of the health of the back end of your business.

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