Project profitability and job costing

52% of construction companies use a job costing app or software

More than half (52%) of construction respondents said they’re with the times, using either a job costing app or accounting software that has a job costing feature. And of these same respondents, 100% are very confident or somewhat confident in their job costing estimates before a project. 98% are very or somewhat confident in their cost tracking during a project, and 97% are very or somewhat confident with job costing reports after projects.

67% of those who used job costing technology said their estimates are very close to the final cost, with 14% reporting an exact match. And 100% always create a cost estimate before starting a job.

Two to five bad estimates could put 48% of construction companies out of business

On average, construction companies surveyed take on 114.7 projects per year, meaning they average 9.5 projects per month. Even with that many projects, almost half (47%) of construction businesses said just 2-5 bad estimates could tank them.

The good news is the industry is very confident in its job costing. Of all the industries surveyed, construction felt most confident (65%) that their cost estimates are “very close” to final project costs.

Of the 67% of construction companies that said job costing is “very important” to overall business profitability, the No. 1 factor that affects job profitability is underestimating labor costs. Still, the majority of that same group (49%) is reviewing their expenses weekly and is confident their business will be more profitable this year (50%).

Construction relies heavily on project profitability when deciding on jobs

There are many things to consider when taking on a new job or project. But for the construction industry, two things reign supreme over others: overall profitability and the length of a job—perhaps a true testimony to that whole “time is money” concept.

24% of landscaping businesses say one bad estimate could put them out of business

Even though landscaping businesses tend to take on more projects in a year than the other six industries surveyed, one bad estimate could still put them at risk.

But nearly half of those landscapers (46%) are trying their best to avoid such a disaster by using either a job costing app or accounting software with job costing capabilities. Many (almost 40%) who are using that technology say they review costs daily, and 60% said their estimates are “very close” to the actual project cost. Meanwhile, 65% of that same group that uses job costing technology report it’s increased profitability.

72% of landscaping businesses say it’s difficult to correct when costs overrun

For 33% of landscapers surveyed, underestimating labor costs is usually what gets them in the hole. And when costs overrun, 72% said it’s either somewhat difficult or very difficult to get back on track.

As far as external factors that harm a project’s profitability, 56% said the availability of skilled laborers is at the top of that list. The next two in line? Tariffs (33%) and inflation (32%).

Majority of landscapers say job costing is important in overall profitability

Of the 64% of landscaping businesses that said job costing is very important to overall profitability, 68% said technology has helped increase profits, and 72% of the combined groups are optimistic for greater profits this year.

Legal firms: Most confident in cost tracking, most likely to tally project costs in their heads

Out of all seven industries surveyed, legal firms are the most likely to keep track of project costs in their heads—without digital or paper records. 76% of those people are reviewing costs on the daily, and nearly all of them are seeing profits less than expected.

But that doesn’t seem to shake their confidence. Those who rely on brainpower to keep track of everything are “very confident” in the costs throughout the entire life of a job: 88% are very confident in their estimates before a job, 84% are confident in their cost tracking during a job, and 84% are confident in their job cost reports after the project is done.

Interestingly enough, for those in the industry who rely on technology for job costing, confidence levels in their estimates are much lower before a job (67%) and during a job (61%), but 54% still said their estimates are very close to the final cost.

Project profitability: A top concern for legal firms surveyed

Like the other industries surveyed, those in the legal industry rank overall project profitability as their No. 1 concern when choosing to take on a project.

The same people who rated overall profitability as their No. 1 factor in choosing projects are also more likely to be put out of business if they have just one bad estimate (31%). Almost 50% of these respondents are checking costs daily, and 52% of those diligent people said that trying to get back on track after a project’s costs have gone over is “very difficult.” Typically, these folks ask to reduce the scope of the job when this happens.

24% of legal firms say one bad estimate could put them out of business

Much like the landscaping industry, almost a quarter of legal firms report one bad estimate could jeopardize their business. And another 25% said just 2-3 bad estimates could do the same.

38% of the legal respondents said that when a project isn’t profitable, the culprit is a poorly defined scope of work. A majority of that group (49%) says that when costs overrun, they’ll renegotiate the contract to get back on track.

Consultants most likely to use software with a job costing system

Like their friends in construction, those working in consulting are more likely than the other surveyed industries to use accounting software that includes job costing. Nearly 37% of consulting businesses are taking advantage of technology to track project profits and losses. Another 16% are using a job costing app.

Of those using job costing technology, 60% report their estimates are very close to the final project costs, and another 15% said they’re an exact match. And 70% of respondents who use job costing technology said it has increased their profitability.

Distance to a job is less of a concern for consultants choosing projects

Like the rest of the industries surveyed, overall profitability is the No. 1 factor in deciding which projects to take on. But unlike the rest, distance is less likely to affect their decision. Only 22% of consulting businesses worried about traveling for a project. Still, seasonality won out as the least likely factor to determine whether or not a project is worth it for consultants.

Consulting businesses are most likely to never review costs

Not many businesses never review expenditures or costs during projects, but consulting businesses are most likely to never review costs. And of that small percent that never reviews costs, 33% said 4-5 bad estimates could put them out of business.

Creative services are more likely to focus on job complexity

Like landscaping businesses, those who own creative businesses care about overall profitability, but it takes a back seat to the complexity of a job when it comes to selecting projects.

Of those who said complexity is a determining factor on whether or not to take a job, 28% also said that just one bad estimate could put them out of business.

Creative services least likely to know how many bad estimates could tank the biz

While 50% of creative businesses said 1-3 bad estimates could put them out, 16% said they have no idea how many bad estimates it would take—the highest percentage of all seven industries surveyed.

And of that 16%, almost 40% uses spreadsheets to keep track of costs, and 44% tracks costs weekly.

Underestimated labor costs leave creative services unprofitable

For creative businesses that don’t know how many bad estimates it would take to jeopardize the business, underestimated labor costs is the top reason they have unprofitable projects. Additionally, 41% of this group uses spreadsheets to keep track of costs.

Conversely, businesses that use job costing apps or accounting software that includes job costing say a poorly defined scope of work is the No. 1 reason a job doesn’t make money.

And those in the creative services who track costs daily are doing so either in their head or with a job costing app or accounting software. Those using spreadsheets or by hand with paper aren’t quite as diligent, just checking in on costs weekly.

Engineering businesses least concerned with contractor availability

Of all the surveyed industries, engineering has the least dependency on seasons and contractors when it comes to choosing projects. Following the trends in consulting, engineering’s top three factors when choosing a job are overall profitability, length of the project, and the client for which they’ll work.

46% of engineering businesses renegotiate contracts to cut costs

Even though 43% of engineering business say their estimates are very close to the final costs and another 24% say they’re exact, hiccups happen. And when they do, 35% of all engineers surveyed say it’s because the scope of work hasn’t been defined properly. And when that happens, most (46%) choose to renegotiate the contract.

Engineering businesses are least confident in project estimates and costs

Unlike the self-assured legal industry, engineers’ confidence levels in cost estimates are lacking. The industry has the highest percentages of “not confident” answers when it comes to cost estimates before a project, cost tracking during projects, and job cost reports after a project.

Nearly 1 in 4 remodeling businesses say profit is usually less than expected

It might not come as a surprise that nearly a quarter of remodeling businesses report their profit is usually less than expected, considering 31% of them are keeping track of project costs on paper, by hand. And while 82% of that group says their projected costs are very close to the actual costs, 47% of them say it’s impossible to get back on track when a project’s costs go over.

Typically, those in remodeling (40%) ask to reduce the scope of the job or renegotiate the contract when costs start to overrun.

Remodeling businesses most likely to review project costs daily

According to the survey, remodeling businesses seem to be the most diligent when it comes to reviewing project costs. More than half (56%) review project costs every day.