Job Costing for Contractors: Simple Template + Workflow

Why Job Costing Matters

Many contractors set their prices based on "what feels right" or "what the market will bear." While this can work, it often leads to:

Losing money on jobs without realizing it
Not knowing which types of jobs are most profitable
Struggling to price jobs accurately for quotes
Having no idea where money leaks out of your business

Proper job costing transforms guesswork into data-driven decisions. You'll know exactly which jobs make money, which ones don't, and how to adjust your pricing for better margins.

The Three Components of Job Cost

Every job has three main cost categories. Understanding and tracking each one is the foundation of job costing.

1. Direct Labor

Time spent by you and your team directly on the job. This is usually your biggest cost.

2. Materials

Parts, supplies, and materials purchased specifically for this job.

3. Overhead

Share of business expenses: insurance, truck, tools, office, software, etc.

Step-by-Step Job Costing Workflow

Step 1: Calculate Your True Labor Cost

Your labor cost isn't just wages. Include all employee-related expenses:

Hourly Wage: $25/hour

+ Payroll taxes (7.65%): $1.91

+ Workers comp (5%): $1.25

+ Benefits allocation: $2.00

True Labor Cost: $30.16/hour

Many contractors underestimate labor costs by 20-30% by not accounting for these burden costs.

Step 2: Track Time on Every Job

This is where many contractors fall short. You need to track:

Travel time - driving to and from the job
Setup time - unloading, preparing the work area
Work time - actual time performing the service
Cleanup time - packing up, cleaning the site
Admin time - paperwork, customer communication

Use a time tracking app or software to make this easy. Manual tracking rarely gets done consistently.

Step 3: Track All Materials

Log every material used on the job with its cost. Don't forget:

Main parts and equipment
Consumables (tape, fittings, fasteners)
Shipping or delivery fees
Materials that had to be returned (include your time)

Step 4: Allocate Overhead

Calculate your monthly overhead and divide it across jobs. A simple method:

Monthly overhead: $5,000

Monthly billable hours: 160

Overhead per billable hour: $31.25

Add this overhead cost per hour to each job based on the hours worked.

Job Costing Template

Here's a simple template you can use for any job:

Category	Details	Amount
Revenue	Total invoiced amount	$2,500
Labor	8 hours x $30.16/hr (burdened)	-$241
Materials	Parts, supplies, equipment	-$650
Overhead	8 hours x $31.25/hr allocation	-$250
Gross Profit	Revenue - All Costs	$1,359
Profit Margin	Gross Profit / Revenue	54.4%

What Your Job Cost Data Tells You

After tracking job costs for a few months, you'll be able to answer critical questions:

Which job types are most profitable?

Compare margins across different service types. You might find that water heater installs at 55% margin are more profitable than drain cleaning at 35% margin. Focus marketing on your winners.

Are your estimates accurate?

Compare estimated costs vs. actual costs. If you're consistently underestimating labor by 20%, adjust your quote templates accordingly.

Which technicians are most efficient?

Track job costs by team member. If one tech consistently completes similar jobs in less time, learn what they're doing differently.

Where is money leaking?

Identify patterns in low-margin jobs. Is it travel time? Material waste? Underpriced services? Data reveals the problems.

Setting Profit Margin Targets

What's a good profit margin? It varies by trade and market, but here are typical ranges:

Service calls: 50-65% gross margin
Installations: 35-50% gross margin
Large projects: 25-40% gross margin

If your margins are below these ranges, you're likely underpricing or have cost leakage to address.

Automate Your Job Costing

Manual job costing with spreadsheets is time-consuming and error-prone. JobWright automatically tracks labor time, material costs, and calculates job profitability in real-time. You'll see margins on every job without the paperwork.