Not all jobs are created equal. A decent sized job may look attractive, but it may not necessarily be so. Jobs with a high labour component will keep you busy, but will limit your total gross profit achievable.
The following are 2 extreme examples to illustrate the point, courtesy of John Teder, consultant to the HVAC industry in the US:
| Job #1 | Job #2 | |
| Materials Cost | $2,000 | $1,500 |
| Labour Hours | 6 | 16 |
| Labour Cost ($30/hr.) | 180 | 480 |
| Total Cost | $2,180 | $1,980 |
| Materials Selling Price (45% GM) | $3,636 | $2,727 |
| Labour Selling Price ($90/hr.) | 540 | 1,440 |
| Total Job Selling Price | $4,176 | $4,167 |
| Selling Price | $4,176 | $4,167 |
| Less Cost | 2,180 | 1,980 |
| Gross Margin | $1,996 | $2,187 |
| = 48% | = 52% | |
| Total Hours | 6 | 16 |
| Gross Margin/hr. | $332.67 | $136.69 |
| Total margin for 1800 hrs | $598,806 | $246,042 |
Moral of the story….Calculate the Gross Profit(Margin) per Hour when looking at jobs. Focus on jobs with a higher per hour gross profit and you will much happier with your end of year results.