Most remodelers will agree that if they had better control over labor costs, they would be more profitable. Materials and subcontractor costs are known quantities (punctuated occasionally by spectacular exceptions), but even the most conscientious estimator will admit that nailing labor costs is a hit-or-miss affair.
The typical remodeling company starts the job with a suspect labor price, and the situation proceeds downhill from there. What company owners usually notice first is that the job is behind schedule. It's only much later -- if ever -- that they realize that time is money in the most literal sense.
Plenty of factors contribute to this state of affairs, but much of the blame falls squarely on the shoulders of -- who else? -- the company owner. The central issue is how much of the owner's time is considered a direct cost of the job and how much is allocated to overhead. Owners of small companies typically don't include enough of their time in overhead, while owners of larger companies make the same mistake with their lead carpenters and production managers. In both cases, failure to measure labor productivity -- or failure to act on the information collected -- is the culprit. Let's look at the problem from both perspectives.
Standing on one leg
If you're the owner of a small remodeling company, you probably still spend time on the jobsite. But you probably don't spend as much time banging nails as you think you will. Even though you may actually put in your hours on the job, you're off-balance -- standing with one leg in the field and one leg in the office. The time you spend supervising subcontractors, directing and troubleshooting the work of employees, and dealing with the client eats into your productive time.
Chances are good that none of this essential but non-productive activity is anywhere to be found in your estimate. Worse, it's missing from your overhead as well. If you incorrectly assume that your time can be billed to specific jobs, then you are not allocating any of your salary (and possibly none of the associated labor burden) to overhead. Your prices may be competitive, but that's because you are essentially working for free.
The easiest solution is to allocate all of your time to overhead. If that's too much to bite off all at once, the next best thing is to allocate all of the time you spend doing anything other than direct production. To do that accurately, you need to measure how you actually spend your time. Ideally, you should fill out a time sheet every day, like everyone else in your company, but even doing a spot check for one month out of every six would be better than nothing. Tracking two categories -- productive and non-productive -- is enough, but if you're going to go to the trouble of tracking hours, it makes sense to find out how much time you spend designing, meeting with customers, working with suppliers and subs, doing payroll, and doing any of the other jobs you haven't yet delegated.
If you own a larger company, you've probably fully delegated production. But if you're still doing the estimating, you're like an amputee who still feels the missing limb. Even though you're no longer working in the field, you're estimating as if you were. Because owners always remember working faster and harder than any employee ever could, their labor estimates are always too low.
If you use lead carpenters, they probably have the same problem the small company owner has -- they don't spend as much time actually getting the work done as they think they will. Likewise, if you use a production manager, chances are that someone on the site who you assume is banging nails all day is losing time to sub supervision, client interaction, and other distractions.
The solution is the same -- a detailed time card filled out regularly by all employees. Once the data is collected, it's critical that you, the owner, analyze it regularly to see if the assumptions you make while estimating match up to what's actually taking place on your jobsites. Want to guess what you'll discover?