How To Prevent Losing Money On Projects and Jobs?

Project-Level KPIs for Service Contractors‍

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Sometimes, projects that look very prosperous turn out to drive loss. Usually, contractors spot the loss in the project aftermath. Let us examine the main reasons and key loss drivers:

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1. Material Cost and Increased Project Scope

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• Fluctuations in material costs can heavily impact profitability, especially for contractors who perform materials-intensive work, such as landscaping or HVAC installations.

• Increased costs for raw materials, equipment, or supplies mean higher job costs, particularly when prices cannot be immediately passed onto customers.

• Secure bulk purchases or establish relationships with multiple suppliers to get better rates. For larger projects, consider setting contract clauses that address price adjustments based on material cost changes.

• Scope creep occurs when a job expands beyond the original agreement, leading to more work without additional pay.

• Unplanned tasks and additional materials increase job costs, lowering profitability. Contractors often face scope creep in the form of customer requests or unforeseen job complexities.

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2. Labor Cost

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• Labor is often the most significant cost in home services. Rising wages, overtime, or inefficient use of staff can quickly eat into profit margins.

• When labor costs increase without a corresponding increase in job prices, profitability drops. Skilled labor, while necessary for complex jobs, can be expensive, and if not managed well, can lead to over-expenditure on routine tasks.

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3. Inedaquate Job Tracking

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• Without real-time job tracking, it’s challenging to know if a job is running over budget or taking longer than anticipated.

• A lack of visibility into job costs and progress can result in unchecked expenses, making it difficult to identify profit-draining issues early on.

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4. Poor Proposal

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• Underestimating the costs of labor, materials, or time needed for a job can lead to accepting jobs at prices that don’t cover actual expenses.

• Inaccurate estimates mean contractors might absorb extra costs, leading to lower profitability or, in some cases, loss on the job.

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How To Avoid Loss?

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Good software would allow contractor to have the latest prices within the pricebook, so each estimated item is just "drag and drop" from the price book. No mistake. No loss. Several software providers offer state-of-the-art proposal tools with itemized material costs, labor calls, blended options, etc. which enable your teams and sales representatives to send optimal proposals with the latest prices.

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The same thing is valid for Labor costs. With skills and grades, you can always know who is the right person for the job, never underservicing or overpaying. A good software will track and automate the whole workflow, enabling approvals, signatures, and quality control steps at each project/job milestone.

Even if you do not have good software, that provides an extensive project/job reporting dashboard, you should find a way to extract and follow key job/project business indicators, helping you to spot any issues with project financial health, a timely

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Key Indicators

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Here is our list of key project/job indicators to monitor and reasons why should you do it:

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1. Job Profitability: Your Bottom Line Per Job

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• Why It Matters: Job profitability tells you how much profit you’re making on each job. Think of it as a quick check to ensure you’re charging enough and that the project is worth your time.

• Industry Insight: Landscaping jobs often have high material and labor costs, so keeping a close eye on job profitability ensures these costs don’t eat away at your earnings. In HVAC and electrical services, where specialized work comes with higher rates, job profitability can be strong even if material costs are high.

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2. Labor Cost per Job: Are You Making the Most of Your Team?

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• Why It Matters: Labor is one of the biggest costs in contracting. Tracking this KPI helps you keep those costs in check. If labor costs are too high, profits shrink fast.

• Industry Insight: Electrical contractors often pay premium wages for skilled techs, which boosts labor costs. Landscaping and cleaning services, on the other hand, may rely more on hourly workers, providing more cost flexibility. Whatever the setup, keeping labor costs in line with the job scope is crucial

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3. Materials Cost per Job: Managing the Dollars and Cents

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• Why It Matters: From HVAC parts to landscaping supplies, every job has material costs. Monitoring these costs closely helps you understand exactly where your money is going.

• Industry Insight: In landscaping, materials like plants, soil, and mulch are consistent expenses, while HVAC contractors may only need materials occasionally (but they’re costly when needed). Cleaners generally have low material costs, making job pricing more straightforward.

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4. Time to Complete a Job: Efficiency is Everything

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• Why It Matters: Every extra hour on a job eats into profitability. Tracking completion time helps you manage schedules, deliver jobs faster, and keep customers happy.

• Industry Insight: Electrical contractors may have shorter job times due to quick diagnosis and repair, while landscaping can stretch over days, especially on larger projects. Cleaning services, with their predictable schedules, can typically complete jobs efficiently and on time, helping contractors stack jobs throughout the day.

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5. Job Completion Rate: Delivering on Your Promise

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• Why It Matters: This KPI measures the percentage of jobs you complete on time and on budget. A high rate means you’re consistently delivering, which keeps clients coming back.

• Industry Insight: For landscapers, job completion rates can be affected by weather. HVAC and electrical jobs tend to be more predictable, making it easier to maintain a high completion rate. Cleaners often have the advantage here, as their projects are usually completed in one go.

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6. First-Time Fix Rate: Fix It Right, the First Time

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• Why It Matters: First-time fix rate measures how often you complete a job without needing a second visit. It’s a sign of good work and happy customers.

• Industry Insight: In HVAC and electrical, where diagnosis is critical, the first-time fix rate can be lower. For landscaping and cleaning, the straightforward nature of tasks often means contractors can fix issues on the first visit, helping keep costs low and satisfaction high.

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7. Customer Satisfaction per Job (CSAT): Turning Clients into Fans

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• Why It Matters: Customer satisfaction scores show how happy clients are with each job. Satisfied clients mean repeat business and more referrals.

• Industry Insight: Landscapers and cleaners, often providing services to homeowners, may rely on high satisfaction to secure regular clients. HVAC and electrical services may be called upon less frequently, but they make up for it by earning clients’ trust with each job.

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Trade specifics

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There are variables across different trades. Separating KPIs by job type and trade ensures that profitability metrics are relevant to each service, allowing contractors to determine if maintenance jobs need volume adjustments or if new builds require tighter cost control.

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• HVAC and Electrical Services: Labor costs are high due to the technical skills required, but the specialized nature of the work also commands higher fees. Material costs, such as parts, are typically high but only needed for some jobs. With higher pricing flexibility, these trades often achieve strong job profitability, even if individual jobs cost more.

• Landscaping Services: Labor and material costs can be significant, especially on large jobs requiring plants, soil, and equipment (new builds). These projects are often seasonal, which adds scheduling challenges. Landscape contractors need to closely track job profitability to ensure they’re charging enough for the higher material and labor outlay.

• Cleaning Services: With generally lower material costs and predictable job timelines, cleaning services can keep project-level costs stable. However, as cleaning is highly labor-dependent, it’s essential to track labor costs closely and make sure they align with job revenue

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It may look complicated, but it really isn't.  Think about which KPI matter for you and set up a "system" or a dashboard in your business software to monitor and track KPI that are relevant for your business.