Building More: The Number Behind Jobsite Efficiency.

Words: Corey Adams
Words: Corey Adams 
Everyone agrees that the base labor rate is an important number to figure out and know. We must know what to charge, and our base labor rate is the fundamental building block of our labor estimates. There is, however, a flip side. After the job is completed, there is a number ignored by many, but has its place among one of the most telling metrics you can use to structure your company. I call it profit turned per hour. What is profit turned per hour? At the end of a project, we run our profit margins. Actual material, equipment, incidentals, subcontractor, and labor costs are added up and subtracted from the job total. This gives us our GROSS profit. Once we get there, we take our overhead expense, often figured as a percentage, off of the GROSS profit. Now we have arrived at the real bottom line, NET profit. After getting to NET profit, we divide the NET profit by the total number of labor hours worked on the project. This gives us a baseline, profit turned per hour figure.  I get the question often, “Why in the world do I need to know this? If we made money, we made money!” Well, there is a reason for wanting, and knowing the profit turned per hour number. Here are a couple of ways we use it. 
  • Efficiency. If we track this number from job to job, we can find out which jobs are working efficiently, and which ones are not. We then can find lose less efficient projects and have discussions on why. Did we underbid it? Did we have site issues? Labor issues? Really, anything that has an impact on the bottom line.
  • Profit-sharing. We know that the profit turned per hour is a metric of efficiency. What a perfect tie-in for profit sharing. If our numbers hit certain marks, then profit sharing can increase. This allows the job team to focus on efficiency more than just cutting corners to get done faster. It is a specific metric, so I caution to understand it fully before tying employee compensation to it. 
  • Advertising. Wait, what? Yes, we can use the profit turned per hour number to address what projects we should be targeting in our marketing efforts. Remember this is an efficiency metric. Focusing your company on the projects that your teams are most efficient on is key to maximizing return on effort, and time. Make the most you can per working hour. 
  • Historical estimating. Once we have the number, and the reasons why it fluctuates from job to job, we can start to see a trend in what typical issues affect profit turned per hour. Then we have an efficiency comparison for similar jobs and can help us bid accurately, and with more confidence. 
It is hard to believe that a number that can be used in multiple ways to track efficiency is ignored by a vast majority of contractors. I agree that NET profit is the proverbial bottom line, but there is great value in looking beyond the numbers and finding ways to track productivity and efficiency.  For small owner-operated companies, this number has another great use. Delegation. If you know how much profit per hour you are turning in when you are working, you will find that there is plenty of activities that you are self-performing that can be hired out for a fraction of what you are actually turning. If you are turning $100 per hour on your labor, why not hire out a part-time bookkeeper for $25 per hour? Years ago, someone told me, “Do what you do best; hire out the rest.”
About: Building More:
Meet GEORGE AI: The Tool Building Tomorrow's Foundation

George Miller helped get the MCAA started 75 years ago, and another GEORGE will help kick off the next 75. Our AI system, which we’ve worked on for almost three years now, is filled with purpose-built Assistants designed to make the masonry industry more

By: Dan Kamys
About: Featured
Read More
Embracing Software: A Game-Changer for Masonry Companies

With challenges such as labor shortages, rising costs, and increasing competition, masonry businesses must find ways to work smarter, not just harder. Fortunately, construction technology and software solutions tailored to field management and operations

By: Erin Laird
About: Featured
Read More
Bring Depth and Character to Any Space with Stone Accents

Transforming spaces with warmth, character and a touch of rustic charm doesn’t always require a complete overhaul, but can be quickly and efficiently achieved with manufactured stone veneer (MSV). Whether your customers are looking to elevate the look of

By: Sarah Lograsso
About: MAP Partner
Read More
2024 Gear of the Year

2024 was a year of innovation and advancement in the masonry industry. From tools, to materials, to technology, companies all across the trade are putting their foot forward to change masonry for the future. This year, we reached out to our MAP partners

About: Featured
Read More
Interested in working with us? Learn about and join the Masonry Alliance Program →