PRISM Jobcosting Strategy P R E S E N T A T I O N B U I L D E R - - PowerPoint PPT Presentation

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PRISM Jobcosting Strategy P R E S E N T A T I O N B U I L D E R - - PowerPoint PPT Presentation

Dec 25, 2022 159 likes •608 views

1 PRISM Jobcosting Strategy P R E S E N T A T I O N B U I L D E R Mike Lysecki B Y L O U I S T W E L V E CTO, LMN 2 Advanced Jobcosting Strategy Why do we Jobcost? How should we jobcost? How can we use Jobcosting to make better

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PRISM

P R E S E N T A T I O N B U I L D E R B Y L O U I S T W E L V E

Jobcosting Strategy

Mike Lysecki CTO, LMN

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  • Why do we Jobcost?
  • How should we jobcost?
  • How can we use Jobcosting to make better

decisions?

  • How can we use Jobcosting to assess our overall

performance?

Advanced Jobcosting Strategy

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www.menti.com 18 48 90

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ARE WE READY FOR JOBCOSTING?

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Stages of Company Development

Do we provide services that are in- demand? Are we able to perform said services? Can we perform these services with consistent excellence? Can we accurately measure successes + failures? Can we

  • bjectively

reward excellent performance?

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Keys to Mastering Consistency

  • Repeatable systems for staff to follow
  • Clear information and task assignment
  • What are we here to do?
  • When do we have to complete this task?
  • Who is responsible for what?
  • How do we communicate? How are we being measured?
  • Training
  • Accountability
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Keys to Mastering Measurement

  • What do we really need to measure?
  • How simple can we make it (while still being effective)?
  • “What can’t be made simple, can’t be made clear. What can’t be

made clear, won’t get done.”

  • Are these measurements going to drive the correct results?
  • Speed vs. quality?
  • Job Profit vs. Accurate Tracking?
  • Job Profit vs. Overall Profit?
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Accounting Setup

Chart of Accounts Departments, Classes? Service Items Standardized Cost Codes

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Tracking Labor

  • Ensure ALL labor is tracked and

accounted for

  • Find the right balance of

simplicity and information

  • Daily accountability
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Tracking Materials

  • Do you need to compare every

material est. vs. actual?

  • Will it be accurate?
  • Yard inventory?
  • How much time does that

consume?

  • Could we use totals to spot

exceptions?

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HOW CAN WE MAKE BETTER, MORE PROFITABLE DECISIONS?

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PEOPLE WHO SAVE MONEY PEOPLE WHO MAKE MONEY

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Mark’s ‘Non-Conventional’ Decisions

  • Highly paid foreman + key staff will improve profitability
  • More responsibility on foreman, less supervision + overhead
  • Incentive system based on Revenue/Labor Costs, not Net Profit or Gross

Profit

  • Skid steer + excavator dedicated to every install crew
  • Larger, more ‘expensive’ equipment
  • Short (3-4 yr) equipment life cycles to reduce downtime + repairs
  • Big investments in technology
  • Larger jobs, seemingly lower net profit margins in bid-build
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JOB A JOB B JOB C JOB D

Job Gross 51% 30% 40% 27% Job Net 26% 5% 15% 8% Sales $275K $436K $307K $480K Year Gross

41% 39% 31% 33%

Year Net

4% 16%

  • 1%

12%

Through/Hr

$67.14 $81.82 $63.00 $78.75 JOB COMPARISON (OVER A SEASON)

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Why Jobcosting?

To identify the constraints and obstacles to higher profits for the company.

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Typical Bottlenecks For Landscape Companies

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Design / Specs + Estimating Sales + Marketing Equipment Field Crews (Production) Admin, Billing, Mgmt Materials

200K 150K 80K 100K 200K 150K 80K

Identifying Your Bottleneck(s)

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Examples of Cost-Focused Decisions

Decision Actual Results

Keep wages low Reduced overall performance, more supervision required Reduce equipment costs Increases dependence on labor, reduces amount of work that can be completed. Less dependable equipment, more downtime, more overhead. Reduce software expenses Increases dependence on overhead staff. Increases data entry/manual work. Reduce material costs Increases labor/install time. Increases warranty risk.

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The Real Questions

What do we need to change? What do we change to? How do we change?

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Job-focused The Goal: Reduce costs to improve net profit.

Traditional Cost-Accounting

Company-focused The Goal: Increase throughput; maximize finite resources’ ability to generate revenue.

Throughput Accounting

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MAXIMIZING THROUGHPUT

THROUGHPUT LABOR EQUIP OVERHEAD

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THROUGHPUT

SALES

MINUS TOTALLY VARIABLE COSTS

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We must reduce or eliminate overtime to improve profit.

Traditional Cost-Accounting

Overtime is profitable if we can maintain a certain level of productivity.

Throughput Accounting

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No Overtime 5 Hrs OT 10 Hrs OT

Sales

$66.0K $74.3K $82.5K

Labor Hours

600h 675h 750h

Labor Costs

$12.0K $14.3K $16.5K

Equip Costs

$10.0K $10.0K $10.0K

Material Costs

$17.8K $20.0K $22.3K

Overhead Costs

$16.5K $16.5K $16.5K

Should We Work Overtime?

Assumes 15 person company at 100% productivity for all hours

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No Overtime 5 Hrs OT 10 Hrs OT

Sales

$66.0K $74.3K $82.5K

Labor Hours

600h 675h 750h

Labor Costs

$12.0K $14.3K $16.5K

Equip Costs

$10.0K $10.0K $10.0K

Material Costs

$17.8K $20.0K $22.3K

Overhead Costs

$16.5K $16.5K $16.5K

Net Profit

$9.7K $13.5K $17.2K

Net Profit %

15% 18% 21%

Should We Work Overtime?

Assumes 15 person company at 100% productivity for all hours

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No Overtime 5 Hrs OT 10 Hrs OT

Sales

$66.0K $72.2K $78.3K

Labor Hours

600h 675h 750h

Labor Costs

$12.0K $14.3K $16.5K

Equip Costs

$10.0K $10.0K $10.0K

Material Costs

$17.8K $19.5K $21.2K

Overhead Costs

$16.5K $16.5K $16.5K

Should We Work Overtime?

Assumes 15 person company at 70% productivity for overtime hours

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No Overtime 5 Hrs OT 10 Hrs OT

Sales

$66.0K $72.2K $78.3K

Labor Hours

600h 675h 750h

Labor Costs

$12.0K $14.3K $16.5K

Equip Costs

$10.0K $10.0K $10.0K

Material Costs

$17.8K $19.5K $21.2K

Overhead Costs

$16.5K $16.5K $16.5K

Net Profit

$9.7K $11.9K $14.2K

Net Profit %

15% 17% 18%

Should We Work Overtime?

Assumes 15 person company at 70% productivity for overtime hours

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No Overtime 5 Hrs OT 10 Hrs OT

Sales

$66.0K $72.2K $78.3K

Labor Hours

600h 675h 750h

Labor Costs

$12.0K $14.3K $16.5K

Equip Costs

$10.0K $10.0K $10.0K

Material Costs

$17.8K $19.5K $21.2K

Net Profit

15% 17% 18%

Throughput

$48.2K $52.7K $57.2K How Would Throughput View Overtime?

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Limit wages to keep labor costs low.

  • Hire cheap

Traditional Cost-Accounting

Skilled labor is worth the wages, if they drive more sales / productivity.

Throughput Accounting

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$20/hr + 0% $24/hr + 5% $28/hr + 10%

Sales

$66.0K $69.3K $72.6K

Labor Costs

$9.9K $10.8K $11.6K

Equip Costs

$10.0K $10.0K $10.0K

Material Costs

$17.8K $18.7K $19.6K

Overhead Costs

$16.5K $16.5K $16.5K

Should We Hire Expensive?

Assumes a higher paid foreman – laborers paid the same.

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$20/hr + 0% $24/hr + 5% $28/hr + 10%

Sales

$66.0K $69.3K $72.6K

Labor Costs

$9.9K $10.8K $11.6K

Equip Costs

$10.0K $10.0K $10.0K

Material Costs

$17.8K $18.7K $19.6K

Overhead Costs

$16.5K $16.5K $16.5K Net Profit

$11.7K $13.3K $14.9K

Throughput

$48.2K $50.6K $53.0K How Would Throughput View Hiring?

Assumes a higher paid foreman – laborers paid the same.

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Keeping equipment costs down improves net profit.

  • Less equipment
  • No payments

Traditional Cost-Accounting

Makes it simple to calculate whether we should invest in equipment based on expected increase in productivity.

Throughput Accounting

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Machine cost assumptions: Lease: $1,000/mo Fuel + Operating : $300/mo

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www.menti.com 18 48 90

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No Equipment Equip + 5% Productivity Equip + 10% Productivity Sales

$52.8K $55.4K $58.0K

Labor Costs

$9.6K $9.6K $9.6K

Equip Costs

$7.9K $9.2K $9.2K

Material Costs

$14.2K $15.0K $15.7K

Overhead Costs

$13.2K $13.2K $13.2K

Should We Invest In Equipment?

Assumes 1 crew month + machine @ $1000/mo lease + $300/mo fuel + maintenance

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No Equipment Equip + 5% Productivity Equip + 10% Productivity Sales

$52.8K $55.4K $58.0K

Labor Costs

$9.6K $9.6K $9.6K

Equip Costs

$7.9K $9.2K $9.2K

Material Costs

$14.2K $15.0K $15.7K

Overhead Costs

$13.2K $13.2K $13.2K

Net Profit

$7.8K $8.4K $10.3K

Should We Invest In Equipment?

Assumes 1 crew month + machine @ $1000/mo lease + $300/mo fuel + maintenance

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No Equipment Equip + 5% Productivity Equip + 10% Productivity Sales

$52.8K $55.4K $58.0K

Labor Costs

$9.6K $9.6K $9.6K

Equip Costs

$7.9K $9.2K $9.2K

Material Costs

$14.2K $15.0K $15.7K

Overhead Costs

$13.2K $13.2K $13.2K

Net Profit

$7.8K $8.4K $10.3K

Throughput

$38.5K $40.4K $42.4K

How Would Throughput View Equipment?

Assumes 1 crew month + machine @ $1000/mo lease + $300/mo fuel + maintenance

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%

If the machine drives an increase of 2.5% in productivity (sales), you should invest in the machine.

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Does the decision improve throughput?

Throughput

Will the decision decrease operating expenses? (labor, overhead, equipment)

Expenses

Will the decision increase our return

  • n investment?

(equipment, shop assets)

Investment

Priorities of Throughput-Focused Companies?

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HOW CAN THIS APPLY TO JOBCOSTING?

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Use throughput per hour to help evaluate the best jobs to take. ..and when to be aggressive with pricing Use throughput per hour to evaluate salesperson effectiveness. Use throughput and throughput per hour to jobcost completed jobs.

Priorities of Throughput-Focused Companies?

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Brainstorm 3 potential ideas to improve throughput next year? Discuss a big lesson learned from a job last year? What are you doing to fix it? What are your greatest obstacles to accurate jobcosting? Use 5 Why’s.

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PRISM

P R E S E N T A T I O N B U I L D E R B Y L O U I S T W E L V E

Jobcosting Strategy

Mike Lysecki CTO, LMN