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March 31, 2011 8:30 AM CDT

You Lose More on the Good Jobs Than on the Bad

Contractor tip of the month

By

I bet you’re thinking, “Wow, this guy is an idiot!” Before you go there, let me clarify this logic. We all know there are times we pick up the jobs we have good numbers on. Other times, we have to bid tightly and just want to get through it with the shirts on our backs. Maybe we got the good ones due to bidding when we were busy, or the tight ones when we needed work to keep our people busy. Whatever the case, once you have the project, where do you risk losing the most money? The good job, or the bad one?

Being both a mason contractor and equipment manufacturer, I have the distinct privilege of networking with mason contractors from all over the country as many are customers, and we work out business strategies together. The other day, I was talking with Ricky Howard of Pompano Masonry about the good, the bad and the ugly on past jobs both our companies have done, when Ricky said in his Southern accent, “You know, you lose more money on the good jobs than you do the bad ones.”

In disbelief, I prodded him to tell me more. Ricky went on, “Well, you just don’t pay attention to the jobs you got good money on like you do the tight ones. Therefore, on a tight job, you save a little bit as you watch it close to reduce your losses, all the while taking your eye off the ball on a job you have dripping with fat. Then, on the good job, instead of making all the extra money you should have, you only make a modest amount. Think about it, where did you lose the most money?”

After meditating on this, I thought about the best job our company was ever awarded. At least, that’s what we believed at the time of award. We expected to earn more than $1 million on a $5.7 million project over a two-year period. Half-way through the job, it appeared our dream would come true. A year into the project, we showed a $775,000 job-to-date profit. Wow, we were on top of the world. Thinking the fun would go on the rest of the project, we let that job glide along, and focused on other projects that were bid at much tighter margins. Then, due to taking our eye off the ball on this fantastic project, we finished it at a total job profit of $375,000. Imagine the ball in the pit of my stomach! That means that we showed a $400,000 loss on the second half of the project ($775,000 first half of the profit less the $375,000 total job profit equals a $400,000 loss the second year into the project).

Now, we had another problem: Our income statement the first year had the $775,000 as profit included; we paid taxes on that income. Then, after only showing profit of $375,000 on the total job, we had to report a loss of $400,000 the next year on this job alone – not a very good addition to our income statement. It sure would have been nice to learn Ricky’s theory of losing more money on the good jobs than on the bad before having to learn this the hard way on my own.

So, remember this tip the next time you get a terrific job and decide to let it glide along. Think again. Keep as much focus on that good job as you would on one that you are just trying to complete while keeping the shirt on your back. If you do, you can avoid proving the theory that we can lose more money on the good job than you do the bad one.


About the Author

Damian Lang is a mason contractor in southeast Ohio and inventor of many labor saving masonry systems and products. Lang has served as the Marketing Committee Chairman for the Mason Contractors Association of America. He is also author of the book Rewarding and Challenging Employees for Profits in Masonry. To network with Damian on contractor tips or tips you have and would like published, contact him at dlang@langmasonry.com or 740-749-3512.

 

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